December 31, 2025 - Kentucky state regulators have “reluctantly” signed off on Kentucky Power’s request to reinvest in an aging West Virginia coal-fired power plant, citing the Eastern Kentucky utility’s failure to plan for and acquire alternative resources.

The Kentucky Public Service Commission granted the Ashland-based company’s request to extend a joint ownership agreement to keep the West Virginia’s Mitchell Plant operating after 2028, reversing a 2021 order requiring the company to terminate its interest in the plant.

Tuesday’s order will result in a $2.33 increase on the average customer’s bill and comes as Kentucky Power’s 165,000 customers in 20 counties are facing a proposed 14.9% rate hike.

The utility says it needs to raise rates to recover upgraded infrastructure costs and make up for a dwindling customer base.

Eastern Kentucky residents already pay the highest rates for electricity in the state, and Kentucky Power is the region’s sole provider.

Combined with a bond purchase surcharge that hit bills in July, the average residential bill could increase by about $40 a month by this time next year.

Tuesday’s PSC order berates Kentucky Power for promulgating a “flawed” request and relying on an analysis that “was not conducted with the level of rigor that the Commission would expect to see for a decision of this magnitude.

"Yet the PSC was “forced to either permit continued investment in a 54-year-old plant in another state or allow Kentucky Power customers to be at the mercy of a volatile market,” PSC Chair Angie Hatton said in a written statement.

“Neither option is good for customers, and we are forced to choose the least bad.

"Kentucky Power “will have access to reliable baseload generation for the foreseeable future,” a spokesperson told the Herald-Leader via email late Tuesday.

The order permits Kentucky Power to spread out the $138 million cost of preserving the company’s stake in Mitchell, but limits investments only to those specifically identified in the company’s proposal and requires officials to track spending and file annual reports with the PSC until 2031.

Tougher U.S. Environmental Protection Agency standards on polluted wastewater means the plant’s spent coal ash ponds need major renovations.

In the years since the three-member utility board denied Kentucky Power’s first request to continue to invest in the West Virginia plant, the company failed to propose a feasible plan for new generation or firm capacity contracts that would meet capacity requirements, Hatton said.

“We respectfully disagree,” Kentucky Power communications manager Sarah Nusbaum said.

A 15-year planning roadmap the company filed in 2023 studied different generation resources and compared bids against the company’s interest in the Mitchell Plant.

The plan determined investment in the plant was the “least-cost option” for customers, Nusbaum said.

The company has said long-term investment in the 1,560 megawatt-producing plant it co-owns with West Virginia-based Wheeling Power is in the best interest of its customers.

It offers the market flexibility it needs, employees said.

Kentucky Power reached an agreement with Kentucky Industrial Utility Customers in November that formed the basis for Tuesday’s order.

Attorney General Russell Coleman, who intervened in the reinvestment proposal, did not object to the agreement.

The Sierra Club, another intervening party, has called for the Mitchell Plant to be converted to natural gas, much like Kentucky Power’s Big Sandy Power Plant did in 2016.

The group has said necessary repairs to a cooling tower at the Mitchell Plant will add more strain on the company’s ratepayers.

Kentucky Power has applied for a U.S. Department of Energy grant to help cover the cost of repairs to that tower, part of a $625 million investment President Donald Trump’s administration unveiled in September to prop up the nation’s coal industry.

Former Attorney General Daniel Cameron sided with the PSC when it denied the company’s request for continued capital investments at Mitchell in 2021.

Cameron urged the company to retire the plant, in part because it did little to boost the Kentucky economy.

The PSC regulates investor-owned electric, natural gas, water, sewer and telecommunications companies in Kentucky. 

The governor appoints members to protect customers and ensure companies are operating safely.