Winchester — WINCHESTER — East Kentucky Power Cooperative will drop plans for a new coal-fired generating plant near the Kentucky River in Clark County, giving into long-sought demands by several environmental groups.

EKPC also cited reduced energy demand, brought on by the recession, as a reason for its decision.

The electrical-generating co-op, owned by 16 member distributor co-ops, made the announcement along with the Berea-based Kentucky Sierra Club, Kentucky Environmental Foundation and Kentuckians for the Commonwealth.

Two distribution co-ops, Bluegrass Energy and Clark Energy, serve members in Madison County.

Three individual co-op members, author Wendell Berry, Father John Rausch and Dr. John A. Patterson, also were parties to the agreement.

East Kentucky Power called the concession not to construct a new plant for at least two years a “prudent business decision,” while a spokesman for KFTC termed it a victory for clean energy and green jobs.

Doug Doerrfeld, past chairman of KFTC, said the agreement allows EKPC to “turn its attention to aggressively pursuing energy efficiency and renewable energy options.”

EKPC spokesman Nick Comer said the co-op already is heavily involved in working to ensure greater energy efficiency through its member co-ops and uses natural gas for some peak-demand generation.

He said the poor economy has diminished demand for electricity while natural gas prices and the cost of electricity on the open market have fallen.

Comer also said the co-op does not see the need for a new coal-fired plant — estimated to cost about $819 million to construct and bring on line — in the near future.

“This settlement is a win-win for EKPC co-op members and thousands of Kentuckians,” said Elizabeth Crowe, executive director of the Kentucky Environmental Foundation.

“We can all breathe a little easier and steer our time and attention towards energy solutions that better address our common concerns for the health, economic and environmental benefit of co-op members and others in EKPC's service area.”

Doerrfeld, a Grayson Rural Electric member, said KFTC members have spent the last year talking to board members of their individual cooperatives to persuade them energy efficiency measures and renewable forms of energy offered a less-costly and more environmentally friendly solution to EKPC’s power needs.

He said the distribution co-op directors are “quite open to clean energy and wanting to work collaboratively with us to move in that direction.”

However, the decision does not mean a move away from coal, Doerrfeld said.

“Kentucky is still 90 percent dependent on coal for electricity, and coal will be part of the energy mix for decades to come.”

But, the decision allows distributing co-ops and EKPC to move toward energy efficiency and renewable sources of energy.

The agreement calls for establishing a collaborative group to study the deployment of renewable energy resources and power demand management programs.

The group will have representatives from EKPC, member co-ops, the parties to the settlement, and other stakeholders.

It calls for the environmental groups not to oppose a rate request by EKPC to recover costs already incurred for the coal-fired plant.

EKPC has a pending request before the Public Service Commission for a $50 million rate increase, part of a longer term schedule of increases to pay for the plant’s construction. It was unclear how that request will be affected.

The environmental groups also agreed to drop ongoing litigation and regulatory challenges against EKPC regarding the now canceled Smith plant.

“This collaborative will help EKPC gather ideas and feedback to explore the realistic potential of renewables and demand side management here in Kentucky,” said Mike McNalley, EKPC’s Chief Financial Officer.

The agreement follows a harsh management audit of the co-op required by the PSC and released in June. The report criticized the inherent conflict for board members who also sit on local distributor co-op boards which depend on EKPC power, but whose costs affect the rates charged by the local co-ops. It also was critical of the debt load incurred by EKPC.

Comer said one business benefit of the decision to forego the Smith plant is “obviously avoiding quite a bit of debt.”

Doerrfeld said the move to more energy efficiency and renewable forms of energy can also generate jobs, such as efficiency auditors at local co-ops who devise ways for rate payers to reduce their energy demand. That in turn, he said, creates “local jobs to retro-fit” those structures.

Mark Konty, a Bluegrass Energy member who lives near Berea, was pleased with the announcement.

“It’s something I and some other co-op members have for many months been asking for,” Konty said. He said some of the co-ops have operated less as a co-op and more independently of members’ interests in the past.

“Now that some co-op members and rate payers have stepped up and asked to be heard, it’s important that (EKPC) recognized that and responded,” he said.

Bill Robinson of the Richmond Register contributed to this story. Ronnie Ellis writes for CNHI News Service and is based in Frankfort. The Register is a CNHI newspaper.