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Smart, Successful Energy Policy

The moratorium on power-plant permits Governor Patton
imposed in June highlights Kentucky’s intelligent approach to energy policy-an
approach that provides the state with the lowest electric rates in the nation.

When the nation’s rapidly changing electricity market
produced 24 proposals for power plants in Kentucky, Patton stopped accepting applications
until the state could prepare for so many projects. The goal of getting prepared
began with studies by the Public Service Commission and the Department of Natural
Resources. With the completion of those studies, the legislature will now use
the information to pass laws that keep power plant growth under control.

There are two reasons for this careful approach. Both
result from the fact that most of the proposals don’t come from utilities wanting
to serve their customers. Instead, these plans to build "merchant plants"
come from entrepreneurs hoping to make money selling power to the highest bidder.

One of the reasons to be careful is that merchant plants
are not regulated for rates, siting, or impact on transmission lines the way utilities
are regulated. The other reason is that merchant plants would probably sell most
of their electricity out of state. That raises the question of how much Kentuckians
should suffer from the negative impacts of the plants.

The Public Service Commission and Natural Resources
reports each run more than 150 pages, but make a few essential points:

  • The environmental impacts of the merchant plants will likely be manageable,
    partly because many of them will be "peaking plants" that operate
    mainly during times of highest electricity use.
  • Steps should be taken to avoid overloading the electric transmission system
    in the state. Existing high-power transmission lines can handle moving electricity
    to Kentuckians, but are not designed to ship lots of electricity from merchant
    plants in Kentucky to customers outside Kentucky.
  • Since most of the benefits of the electricity from merchant plants will
    be to customers out of state, Kentuckians should not have to pay to reduce
    environmental and other effects.

The legislature is now taking the next step-considering
legislation to make sure Kentucky preserves its admirable low-cost position. It
all adds up to a process that continues to benefit Kentuckians with reliable and
affordable energy.

Paul Wesslund


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