The Kentucky legislature recently enacted Senate Bill (SB) 349, which creates a new agency, the Energy Planning and Inventory Commission (EPIC), and places new restrictions and obligations on the Kentucky Public Service Commission (PSC). SB 349 contains an emergency provision, making it effective immediately.
SB 349 Declared Public Purpose
SB 349 claims that electrification of the U.S. economy, combined with unprecedented federal regulatory pressures, have created an electric generation resource crisis, and that state and federal policies do not adequately address the Kentucky legislature's reliability and resource concerns. Additionally, SB 349 claims further retirement of fossil fuel-fired electric generating resources would harm Kentuckians, and that their health, happiness, and welfare will be promoted and protected by the continued operation of these legacy facilities.
EPIC Board Composition and Term
EPIC will be composed of an 18-member body ("Board") and a five-member Executive Committee ("Committee"). All members, except for ex officio nonvoting members and state government officials, will be appointed by the governor and confirmed by the Kentucky Senate. SB 349 directs some organizations to nominate EPIC members, though third-party nomination is not required for all members. Only the Kentucky legislature may reorganize or restructure EPIC via legislation. Tables charting the EPIC Board and Committee makeup are available in Figures 1 and 2 below. EPIC will be administratively attached to the University of Kentucky Center for Applied Energy Research but is otherwise independent from the University of Kentucky and any Kentucky executive branch agency.
EPIC's Powers
Per SB 349, EPIC is authorized to take all necessary measures to effectuate its declared public purposes. Specifically, EPIC will examine the impacts of continual retirement of legacy generation assets, resource adequacy and grid reliability concerns, effects of federal energy policy, new and emerging electricity generating technologies, and Kentucky's ability to finance energy producers and participate in energy markets.
Utility Impacts
SB 349 will add an extra layer of compliance for any planned retirement, post-enactment, of legacy generation assets by a utility. Specifically, SB 349 prohibits a utility from retiring an existing coal, oil, or natural gas-fired power plant, or a generating unit within the plant, prior to submitting notice to EPIC and receiving the Committee's findings on the proposed retirement. A utility must submit notice of the proposed retirement to EPIC at least 180 days prior to submitting an application to the PSC to retire the plant or unit. Any retirement application to the PSC will not be deemed administratively complete unless it includes either the Committee's final report or evidence that more than 180 days have passed since notice was submitted to the Committee and no Committee report or determination has been provided to the utility.
Within 90 days of the Committee receiving notice from the utility of a proposed retirement, EPIC will hold a public hearing in the county in which the proposed retirement will occur for the purpose of receiving public comment.
Within 135 days of the Committee receiving notice from the utility of a proposed retirement, but after EPIC holds its public hearing, the Committee will issue a final report containing written findings and recommendations about the proposed retirement. Notably, the Committee will have standing to intervene in any case or other proceeding before the PSC. SB 349 §1(8).
Building on Senate Bill 4
SB 349 contains supplementary language to the retirement provisions enacted as part of SB 4, passed during the 2023 regular legislative session. SB 4 amended KRS 278.264 by establishing a rebuttable presumption against the retirement of legacy electrical generating units unless the utility demonstrates in its retirement application to the PSC that generation capacity will not be impacted.
Specifically, SB 349 requires that a retirement application for an existing electric generating unit additionally show that the new generating unit has the "same or higher capacity value and net capability, unless the utility can demonstrate that such capacity value and net capability is not necessary to provide reliable service." SB 349 §4. In addition, SB 349 contains further provisions apparently intended to delay a utility's ability to retire or decommission an existing generating unit, based on the timing for completion of the replacement generating unit.
SB 349 also creates new statutory definitions for criteria required to rebut the presumption against the retirement of existing legacy generating units under KRS 278.264(2)(a). These newly defined terms are arguably aimed at curbing a utility's replacement of fossil-fueled generating units with generating units powered by renewable energy. Specifically, SB 349 defines "dispatchable" as "a source of electric power generation that is available on demand, that is not intermittent, and that can be adjusted to increase or decrease its power output upon request of a power grid operator or otherwise upon demand or request, or that can have its power output adjusted in responses to market or system needs." Id. For purposes of that "dispatchable" definition, "intermittent" is defined to include energy storage methods that are currently under development in support of renewable energy generation.
Conclusion
The Kentucky legislature's enactment of SB 349 seeks to impact a utility's ability to retire legacy electricity generation units through the creation of EPIC, with increased scrutiny toward renewable electricity generation sources. As Kentucky's utilities aim to retire their legacy generation fleets, EPIC will impose additional layers of regulatory compliance measures prior to the PSC approving those retirements.
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