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August 6, 2018



A utility that serves Eastern Kentucky and burns coal to produce electricity has sold $17.6 million worth of coal it didn’t need, offering yet another example of how the relatively low cost of natural gas has undermined the region’s economy.

The coal was to be used at a power plant in West Virginia co-owned by Kentucky Power, which has 168,000 customers in 20 Eastern Kentucky counties. The plant, though, could not generate electricity as cheaply as competing facilities fueled by natural gas, according to information filed with the Kentucky Public Service Commission.

As a result, the regional power-grid manager was not ordering electricity as often from Kentucky Power’s Mitchell plant. That meant coal the company had to buy under a long-term contract was piling up.

In late January, there was a 53-day stockpile of one type of coal at the plant, while the company’s target level was a 15-day supply, the PSC said in an order.

The PSC was considering a request from Kentucky Power to sell excess coal.

Kentucky Power received approval and recently notified the commission it had agreed to sell a total of 400,000 tons of coal to a Connecticut-based trading company for $44 a ton by the end of the year.

The sale comes amid a changing energy landscape in the country.

In 1990, coal-fired power plants generated about 52 percent of the electricity in the country, while natural gas produced about 12 percent,according to the U.S. Energy Information Administration.

By the end of 2017, coal’s share of national electricity generation had dropped to 30 percent and the share for natural gas had grown to 32 percent, while renewable sources such as wind energy had climbed to 17 percent.

The agency predicted the share of electricity generated using natural gas would edge even higher this summer, to 37 percent.

The switch has been hard on areas where coal traditionally underpinned the economy, particularly in Eastern Kentucky and nearby areas of Central Appalachia.

As coal-fired power plants have closed in the face of greater use of natural gas, the number of coal jobs in Eastern Kentucky dropped from 14,000 at one point in 2011 to just 3,835 in the first three months of this year, according to the state Energy and Environment Cabinet.

Floyd County Judge-Executive Ben Hale said it’s a conservative estimate that those 10,000-plus lost jobs had an average salary of at least $50,000.

That would mean the loss of $500 million in income in a cluster of about 15 counties.

“That’s a heck of a lot of money out of our economy,” said Hale, a Democrat.

The downturn has meant less money not only for families and businesses, but also local governments and schools because of a drop in revenue from a severance tax on mined coal and a lower property-tax assessment on unmined coal.

Hale said Floyd County used to get about $2 million annually — or $500,000 a quarter — from the mineral-severance tax, but with far less mining in the county these days, it received only $60,000 in the most recent quarter.

Local, state and federal officials, entrepreneurs, Kentucky Power and other businesses are working to create jobs in the region in manufacturing, energy, tourism, teleworks and other sectors, but so far nothing has come close to replacing the lost coal jobs.

“We’re struggling,” Hale said. “We are trying our best to diversify but that is such a slow process to diversify away from the coal industry.”

Natural gas began cutting quickly into coal’s dominance in electricity production within the last decade, after oil and gas producers were able to combine hydraulic fracturing — a process that breaks up rock formations underground — with horizontal drilling.

That unlocked access to vast new reserves of natural gas, and the spike in supply drove down the cost of gas.

In the three years from 2015 to 2017, the cost of natural gas delivered to generating facilities was less than half what it was between 2006 and 2008, according to the EIA.

Other factors have played a role in the decline of coal, including tougher rules put forth in the Obama Administration to protect air and water quality and increased use of renewable energy.

However, studies have pinpointed competition from cheap natural gas as the main reason for the downturn in the use of coal to generate electricity.

The administration of President Donald Trump has searched for ways to prop up coal and nuclear plants, citing a concern that loss of the plants hurts the reliability of the electricity grid, but several groups have pushed back against the ideas, including other energy producers.

The cost of power generation with fossil fuels — coal, gas and oil — is mostly based on the cost of the fuel and the efficiency of the generating unit, said Tyler Hodge, an EIA analyst.

Coal plants historically had the lowest cost, but the low cost of natural gas has helped change the order in which grid operators seek power, called the dispatch curve.

“Natural-gas units are now often on the lower end of the curve and relatively higher-cost coal plants are ‘pushed’ higher up the curve” to where they are not needed, Hodge said.

That dynamic has affected Kentucky Power’s Mitchell coal plant in West Virginia.

“The current market price of gas is setting the market right now and it is cheaper than coal,” said Allison Barker, spokeswoman for Kentucky Power.

The Mitchell plant burns a mix of low-sulfur coal, including about 325,000 tons annually from Eastern Kentucky, and high-sulfur coal from Northern Appalachia.

It buys the low-sulfur coal under short-term contracts, but has a long-term contract to buy the high-sulfur coal from a Consolidation Coal Company mine near the power plant.

The contract calls for Kentucky Power to buy 666,500 tons of the high-sulfur coal this year and 500,000 tons a year from 2019 through 2022, according to an application it filed with the state PSC.

Kentucky Power said it didn’t need all the high-sulfur coal this year because the Mitchell plant could not meet the price to supply power that was being set by natural-gas plants, and that as a result the regional grid operator, Pennsylvania-based PJM Interconnection, was not calling on Mitchell for power as often as in the past, according to a PSC memo.

PJM draws a lot of its power from coal plants — more than 27 percent of the load at midday Thursday, for instance — but some plants are more competitive than others and can offer to supply electricity at a lower cost, said spokesman Jeff Shields.

Kentucky Power agreed to sell the excess high-sulfur coal for about 17 cents a ton more than it pays to buy it.

That was a requirement of the deal. The company had pledged not to sell the coal at a loss.

Kentucky Power said the deal would benefit customers because the gain would bring down the average cost of future shipments of Consol coal.

Kentucky Power’s portion of the coal sale was 200,000 tons because it operates the Mitchell plant with another company, Wheeling Power Company. Both are subsidiaries of American Electric Power Company.

Kentucky Power bought a 50 percent interest in the Mitchell plant to replace generating capacity lost at its Big Sandy power plant at Louisa, where it converted one aging coal-burning unit to gas and tore down the other unit.

The Big Sandy plant was once one of the largest buyers of coal from Eastern Kentucky, taking shipments totaling 1.67 million tons in 2011, for instance, but the changes ended that market.

“We obviously lost at the Big Sandy plant one of our biggest users,” Hale said.

By Bill Estep
Lexington Herald-Leader



August 3, 2018


ASHLAND, Ky., Aug. 3, 2018 – Kentucky Power summer internships give recent high school graduates work experience and allows Kentucky Power to show newcomers what goes into effectively operating an electric utility.

For the second year in a row, two recent graduates of Morehead State University’s Craft Academy for Excellence in Science and Mathematics joined Kentucky Power as summer interns. Brooke Hall of Paintsville was assigned to work at the Pikeville service center and Brandon Stanton of Flatwoods worked at the Ashland service center.

Their last day was Friday.

Kentucky Power intern Brooke Hall of Paintsville works with Customer Services Engineer Shaun Sumner. A recent Craft Academy graduate, she plans to attend the University of Louisville.Kentucky Power intern Brooke Hall of Paintsville works with Customer Services Engineer Shaun Sumner. A recent Craft Academy graduate, she plans to attend the University of Louisville.

“I did so much this summer,” Hall said. “I called on customers, went out with technicians to job sites, watched a new pole being put up and did a lot on the computer. The people here at Kentucky Power are the nicest people I’ve met in my life. They really took care of me and I learned something every day whether it was about electricity or being a good person.”

Both Hall and Stanton plan to become engineers. Hall plans to study electrical and computer science engineering at the University of Louisville and become a robotics engineer. Stanton will attend the University of Alabama at Huntsville and study aerospace engineering.

Carolyn Thacker, Pikeville District manager, said Hall had a “great work ethic and attitude.”

“Having Brooke here this summer has been such an asset,” Thacker said. “She is a joy to work with. It doesn’t matter if it’s working at the computer or grabbing a pair of boots and heading to the field, she is ready.”

Shelia Hall, distribution projects manager in Ashland, said Stanton helped her group solve a complicated database issue and helped create a pool vehicle reservation app to track pool vehicles at the Ashland Service Center.

“Brandon is very impressive and so intelligent,” Shelia Hall said. “He definitely is going to do great things.”

The Craft Academy is a dual-credit program for academically exceptional Kentucky students. The program allows high school juniors and seniors to finish school while also completing up to two years of university coursework. The Craft Academy provides tuition, housing and meal plans at no cost to select students and allows them to live on campus for the fall and spring semesters of their final two years of high school.

Kentucky Power President Matt Satterwhite acknowledged it is unusual to have high school-age students as summer interns. Most interns employed by American Electric Power companies are college students. However, he said he wanted to show Kentucky Power’s support of education and encourage young people in eastern Kentucky to build upon their experience at the Craft Academy and pursue careers in the STEM fields of science, technology, engineering and math.

“There is an urgent need across the country and here in eastern Kentucky to increase student achievement and interest in STEM fields because they play an increasingly critical role in ensuring our collective economic growth,” Satterwhite said. “As a community partner and president of a business that depends upon employees with a good understanding of math and science, I want Kentucky Power to encourage students in this area. Our internships can help do that.”


Kentucky Power, with headquarters in Ashland, provides service to about 168,000 customers in 20 eastern Kentucky counties, including Boyd, Breathitt, Carter, Clay, Elliott, Floyd, Greenup, Johnson, Knott, Lawrence, Leslie, Letcher, Lewis, Magoffin, Martin, Morgan, Owsley, Perry, Pike and Rowan. Kentucky Power is an operating company in the AEP system, one of the largest electric utilities in the U.S., delivering electricity and custom energy solutions to 5.4 million regulated customers in 11 states.



August 3, 2018

Thanks to telehealth services, high-tech monitoring and traveling doctors, home health is thriving, expected to increase

Different stages of aging are requiring different kind of interactions


Humana CEO Bruce Broussard said he expects ever more patients to get treated in their homes for ever more conditions, thanks to telehealth services, high-tech monitoring and traveling doctors.

Bruce BroussardBruce BroussardThat trend, he said, aligns with the company’s recently announced pilot program with Walgreens to establish senior-focused neighborhood clinics and the acquisition of a stake in the home health care provider Kindred.

Both of those steps reflect the company’s desire to keep its Medicare patients out of hospitals — which saves costs and allows people to stay at home longer — while at the same time enabling the insurer to tailor its response to patient needs.

“We’re seeing there are different stages of aging, and those different stages are requiring different kind of interactions,” Broussard said in a second-quarter earnings call with investors Wednesday.

In early stages, the company can help patients more through telehealth and preventive services and by providing easier access points to those services outside of the traditional health care system, he said.

As patients age and they require more intense intervention at more frequent intervals, the company can take care of patients with a combination of remote monitoring, in-home care and specialty care services, whether provided at home or at hospitals.

The company is developing multiple capabilities to accommodate people’s needs now and as they get older and their conditions worsen, Broussard said.

Prevention, the CEO said, remains a key component to keep costs under control. With its recent acquisitions of a stake in both Kindred Healthcare and Curo Health Services, Humana is focusing on helping patients prevent chronic conditions such as diabetes and chronic obstructive pulmonary disease, or to slow their progression.

People with chronic conditions account for nearly 90 percent of health care expenditures in the U.S., according to insurance executives and government agencies. At its Investor Day last year, Humana leaders said that the company’s monthly costs for diabetes patients, for example, range from $613 for low-severity cases to $4,059 for high-severity patients. Keeping patients in a lower severity category can save the insurer tens of thousands of dollars per patient every year.

Patients increasingly will get treated for conditions at home that used to require a trip to a physician office, clinic or hospital, Broussard said Wednesday. High-tech tools can keep track of patient conditions, and patients can talk to their doctors via their computer. If needed, traveling nurses and physicians can visit patient homes. All of those capabilities will keep patients in their homes longer, and keep them out of more costly clinics and hospitals, the CEO said.

Second-quarter results

Humana said that second-quarter net income fell by 70 percent compared to a year earlier, primarily because the company recorded a pretax loss of $790 million related to the sale of its long-term care insurance subsidiary KMG America Corp.

Excluding the impact of the KMG loss and other items, net income fell 13.8 percent, Humana said.

Earnings per share, excluding the KMG loss, were $3.96, ahead of expectations, CFO Brian Kane said during the earnings call.

Revenue, at $14.3 billion, rose 5.4 percent, in part because the insurer reported gaining nearly 250,000 Medicare Advantage customers in its individual and group segments in the last year — though it also lost 228,000 members for its stand-alone prescription drug plan. The company’s total medical membership, at nearly 16.6 million, was up 18.6 percent from a year ago.

Kane said Humana saw a notable decline in hospital admissions in the second quarter, in part because the company has focused on making sure that hospital visits are classified correctly. A patient who goes to a hospital for observation — rather than for treatment — costs the insurer thousands of dollars less.

In addition, Kane said, Humana also has been working hard to make sure that care is delivered in the most appropriate setting, which means that some patients, such as those who need a knee replacement, are receiving care in clinics, rather than hospitals, where care is generally more expensive.

Based on the second-quarter results, Kane said the company is raising its earnings forecast for the year to $14.15 per share, up from the previous range of $13.70 to $14.10.

Humana shares were up 2 percent late Wednesday afternoon, trading for $320.69. The S&P 500 was down slightly.

By Boris Ladwig
Insider Louisville