Newly enacted legislation in Kentucky could make it more difficult for the state Public Service Commission to approve retirements of fossil fuel generators or replace them with renewables.

Senate Bill 4 — filed with the secretary of state’s office on March 24 without the signature of Gov. Andy Beshear — prohibits the PSC from approving applications to retire fossil fuel generators unless the unit will be replaced with capacity that is dispatchable, “maintains or improves” grid reliability and maintains the utility’s “minimum reserve capacity requirement.”

Generation operators are required to provide the commission with the costs of retiring the facility and demonstrate that its closing will result in cost savings for customers. It also stipulates that retirements cannot cause the utility to incur “any net incremental costs … that could be avoided by continuing to operate” the generator. The decision to retire cannot be based on financial incentives from the federal government.

The legislation states that coal generators are retiring at an “unprecedented rate,” creating an emergency that could impact employment rates, tax revenue and utility rates, while also reducing reliability. The emergency clause allows the bill to take effect immediately.

Supporters of the bill in the General Assembly pointed to a whitepaper published by PJM in May 2022 that found government policies were among the largest reason for generators retiring. Opponents said keeping aging facilities online would limit the ability of utilities to keep rates low.

The bill was opposed by utilities and environmental groups, who said it would increase ratepayer costs and could harm reliability by keeping aging facilities on the grid rather than replacing them with newer technologies.

“Senate Bill 4 jeopardizes the best interests of our customers — including safety, reliability and affordability,” utility group Kentuckians for Affordable & Reliable Energy said in a statement.

“For nearly 90 years, the Public Service Commission has applied principles of least-cost to approve fair, just and reasonable rates and services. SB 4 is a fundamental departure from this proven method of regulation that will only increase rates higher than necessary to achieve safe, reliable service. This change risks Kentucky’s current competitive advantage to attract and retain the manufacturing industries essential to our economy. A diverse generation portfolio is extremely important to meeting customers’ needs and allows utilities to enhance reliability, reduce risks, and keep costs down.”

The group was formed by investor-owned utilities and generators in opposition to the bill, including Duke Energy (NYSE:DUK) and PPL (NYSE:PPL) affiliates Louisville Gas and Electric Company (LG&E) and Kentucky Utilities Co. (KU).

In an announcement following the bill’s passage, PPL said it does not believe the legislation will affect its business outlook nor its projection to receive a PSC answer on its generation replacement filings by Nov. 6, 2023. LG&E and KU are retiring nearly one-third of their capacity by 2028, to be replaced by two 621-MW natural gas plants, nearly 1,000 MW of solar and a 125-MW battery storage facility.

“We followed a well-defined and rigorous process to ensure delivery of safe, reliable and affordable energy for our customers. We’re confident that our plan exceeds the standards set out by this new law and is the best path forward for our customers. We look forward to continuing to engage with stakeholders in Kentucky and completing the process before the KPSC to demonstrate why that is,” said Vince Sorgi, PPL President and CEO.

Chris Whelan, spokesperson for LG&E and KU, said she does not believe the bill will impact the companies’ ability to obtain certificates of public convenience and necessity for the new generators.

“We had opposed this bill because we felt it … had an impact on rates and reliability for our customers,” she said.

Lane Boldman, executive director of the KY Conservation Committee, said the December 2022 winter storm demonstrated that fossil fuel generation is not as reliable as its proponents have argued. She said the ability to import wind power from other regions was central to limiting the storm’s impact.

“If you’re going to focus on reliability then you need to be focused on the transmission and the storage issue, and this was not part of the conversation that I saw,” she said. “It’s a shame there’s not more focus on resiliency at a broader portfolio of solutions, rather than just to maintain older less efficient power plants as the only option. There are other options.”

Much of the discussion in the Senate’s Natural Resources and Energy Committee focused on maintaining the coal economy in the state. Boldman acknowledged that mining communities have suffered from the industry’s decline.

“But slowing down the retirement of these coal plants only serves to impact ratepayers more, and that’s already been a problem in some of these regions … Locking people into these older coal plants is actually making it harder on the economy in those coal field regions because they have higher power bills now,” she said.