Kentucky’s attorney general and largest electric utility provider agreed to a proposed settlement this week in a case before state regulators, which would scrap plans for a battery storage facility and instead extend the life of its coal-fired power plant in Louisville.
Louisville Gas and Electric and Kentucky Utilities had already sought permission from the Kentucky Public Service Commission to build out $3.7 billion of new and upgraded power plants, saying the additional power generation is needed to serve future data centers they expect to be built in the coming years.
If this request — now amended by the proposed settlement — is approved by the PSC, a future case would likely determine how the companies recover the funds used to build the plants through rates paid by energy customers.
The attorney general issued a press release praising the settlement as a potential win for ratepayers and a reinvestment in the state’s coal industry.
Environmental groups countered that it was a major risk to both ratepayers and the environment, noting their continuing belief that forecasted data center demand is speculative and likely exaggerated.
The utility companies’ February filing with the PSC indicated the new plants would be needed almost entirely due to the forecasted power demands of future data centers — the energy-guzzling facilities housing computer servers that store and process data for services like cloud storage, streaming platforms and artificial intelligence.
Originally, LG&E and KU petitioned the PSC to build two new 645 megawatt natural gas power plants — one in Louisville, one in Mercer County — in addition to a new 400 megawatt battery storage system in Louisville and upgrades to keep an old coal-fired power plant operating in Carroll County.
The proposed settlement agreement reached this week between LG&E/KU and Kentucky Attorney General Russell Coleman keeps much of that request in place, but scraps the battery storage system and replaces it with upgrades to extend the life of a coal-fired unit at the Mill Creek plant in Louisville. The coal-powered unit is currently slated to be retired in 2027, but would operate past 2031 if approved by the PSC.
The proposed settlement would also require that any new data center customer of the new Mill Creek gas power plant pay a new “Extremely High Load Factor” rate for the energy it uses.
The filing did not go into specific details on what percentage of costs from the new Mill Creek gas plant would be borne by the data center, as opposed to current ratepayers, nor how much it would cost to extend the life of the Mill Creek coal unit.
The other intervening parties that joined the settlement included the Kentucky Coal Association and Kentucky Industrial Utility Customers, Inc.
Coleman, environmentalists disagree on what’s best for ratepayers
Attorney General Coleman’s release stated that the $775 million cost of building the battery storage facility was “uneconomical” for ratepayers, with the life extension of an additional coal plant being “consistent with President Trump’s efforts to unleash American energy.”
The office also stated that the special data center rate would protect ratepayers from costs of building the new Louisville gas plant and “has additional safeguards to protect consumers, even if there is less need for commercial power.”
“In sharp contrast to the nonsensical green agenda of the Biden Administration, this agreement reinvests in affordable and reliable fossil fuel energy to power Kentucky’s future,” Coleman’s release stated.
Nearly 70% of Kentucky's electric utility generation comes from coal-fired power plants, which ranks the fourth-highest among states. Coal is the most polluting fossil fuel, contributing to air and water pollution in the region, as well as fueling climate change that makes Kentucky warmer, wetter and more prone to extreme weather events. The decline of the coal industry has coincided with the rise of natural gas as a more affordable alternative for power generation.
Coleman opposed environmental regulation affecting the state’s coal industry during the Biden administration and has praised Trump’s efforts to reverse them, including his executive order in April to prevent the closure of coal-fired plants.
Several environmental and housing advocacy groups that have intervened in the PSC case issued a statement blasting the proposed settlement, stating it would “greenlight billions of dollars in fossil fuel infrastructure to serve speculative future data center developments.”
These interveners include the Metropolitan Housing Coalition, Kentucky Solar Energy Society, Kentuckians for the Commonwealth and the Mountain Association, who are represented in the case by attorneys for the Kentucky Resources Council.
“By all realistic measurements, the risk and cost of building new generation capacity
based upon speculative need is not in the best interest of ratepayers, especially low and fixed-income residents,” said Tony Curtis of the Metropolitan Housing Coalition. “The burden is being placed squarely on the backs of each of our families, friends, and neighbors; and the highest impact will be felt by the lowest income households struggling to afford utility and housing costs.”
The interveners opposing the LG&E’s request to build new power plants and extend the life of coal plants have highlighted utilities in other states dramatically scaling back their forecasts on how much power data centers will use in coming years. Some experts say that data centers will become much more efficient with technological advances, while also pointing out that estimates can be inflated by the market race of developers attempting to land multiple sites for them across the country.
Byron Gary, an attorney for Kentucky Resources Council, has pointed to the experience of Oldham County this year, where a developer announced plans to build two different data centers. Locals rose up in opposition to the proposals, pushing the county government to pass a moratorium on new data centers and the company to abandon all projects there.
In the press release of the opposing interveners, Gary also noted that the city governments of both Louisville and Lexington signed the settlement agreement, with both stating they would take no position on it and not oppose it at the PSC hearing. The agreement is at odds with Louisville Metro’s stated goals of reaching 100% clean electricity for government operations by 2030 and clean energy communitywide by 2040.
“We’re also disappointed to see our elected city governments declining to advocate for their climate commitments,” Gary said.
A spokesperson for Louisville Mayor Craig Greenberg did not immediately respond to a request for comment on why the city agreed not to oppose the settlement in the hearing.
The only large data center project that has been publicly announced this year and is still pending is the 525 megawatt project in southwest Louisville by PowerHouse Data Centers and Louisville-based Poe Companies. The latter is run by Steve Poe, a former business partner of Greenberg.
In PSC filings and testimony over the past several months, LG&E and KU have indicated they expect energy demand of new data centers to reach 1,750 megawatts — or 1.75 gigawatts — by 2032. That is nearly a third of the utilities’ current seasonal peak demand and considerably more than the second phase of the massive electric vehicle battery plant In Glendale that’s expected to use 120 megawatts when it comes online in 2028.
The PSC has already held public comment sessions for the case in Louisville and Lexington, and its first hearing for the parties in the case is August 4, on Monday.
State government and politics reporting is supported in part by the Corporation for Public Broadcasting.
