The Kentucky Public Service Commission (PSC) approved a proposal by Kentucky Utilities Co. (KU) and Louisville Gas & Electric Co. (LG&E) to build a 640 MW natural gas-fired power plant at LG&E’s Cane Run plant and to purchase the 495 MW Bluegrass natural gas-fired plant in Oldham County. The Bluegrass plant will be used as a peaking plant.

In their application, KU and LG&E said that the additional generating capacity is needed to replace coal-fired units at Cane Run and at KU’s Green River and Tyrone plants and to meet projected increases in demand for electricity by 2016. Those facilities are being retired by the end of 2015 as part of a broader plan to comply with new and stricter federal air quality regulations. Construction of the new plant at Cane Run will cost about $583 million, the companies said in their application, which includes a new natural gas pipeline to the site. The purchase price of the Bluegrass Generation plant is $110 million.

Both LG&E and KU are subsidiaries of PPL Corp (NYSE: PPL). Based on the need for replacement power, a majority of the cost and ownership of the new Cane Run plant would be allocated to KU. Most of the Bluegrass plant would be allocated to LG&E.

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