Kentucky Power Wants to Build a New Gas Plant for a Data Center That's Still Just a Filing. It's Already Promising $100 Million Back to Everyone Else's Heating Bill.

Lawrence County, Kentucky has spent decades next to Kentucky Power's Big Sandy plant, which has run first on coal, then on gas, as the utility's needs changed. On October 12th, Kentucky Power asked the state Public Service Commission to let it build something new there: a 760-megawatt gas-fired combined-cycle plant, replacing a smaller, 450-megawatt combustion-turbine plan the utility is withdrawing in favor of the bigger one. The company behind the demand for it isn't a factory or a hospital system. It's TeraWulf, a company that started out mining bitcoin and has spent the past year turning itself into one of the largest electricity customers in the state, through a site it calls the Muskie Data Campus.

TeraWulf isn't moving slowly. On October 1st, the company and Kentucky Power executed an amended electric service agreement that doubles Muskie's contracted power from 500 megawatts to a full gigawatt, and pulls the second 500-megawatt phase of that buildout forward a year, from 2030 into 2029. TeraWulf's chief executive, Paul Prager, described the pace plainly in the company's own announcement: "Customer interest in Muskie has been tremendous, and power availability is central to those conversations." TeraWulf has told investors it's increasingly optimistic the campus could eventually grow to as much as 2 gigawatts, twice what's currently under contract, which would make it larger than Kentucky Power's entire current generating fleet.

Muskie isn't TeraWulf's only Kentucky campus, either. The company also runs the Justified Data Campus in Hancock County, served by a different utility, Big Rivers Electric, where the state commission approved a retail electric service agreement for up to 482 megawatts on August 21st. TeraWulf says the cost and risk terms there protect existing ratepayers by making the company responsible for the market, transmission, delivery, and customer-specific infrastructure costs tied to its own load, along with substantial credit-support obligations. That's the same basic shape every large-load tariff is supposed to take: the new customer pays its own way, and the risk of a buildout that doesn't pan out stays with the company that promised it, not the utility's existing customers.

That kind of growth doesn't run on an existing wire. Kentucky Power is separately building a new 345-kilovolt substation, tied into its existing 765-kilovolt transmission backbone, specifically to carry power to the full gigawatt-plus campus. The utility's own timeline has it filing the substation application with the Public Service Commission this month, with a transmission-line application to follow in January. Residents got a real chance to weigh in before any of that: an October 15th open house let people review proposed routes, with written comments due to the commission by October 29th. Substation construction is targeted to start in February 2027, with the transmission line following in November of that year and the system reaching full service around October 2028.

The math behind a bill credit that predates the plant

Here's the part of the filing that actually reaches people who have nothing to do with TeraWulf. Kentucky Power says the arrangement has TeraWulf covering the financing costs of the new 760-megawatt plant itself, plus the cost of the transmission infrastructure built to serve its own load. In exchange, the company is offering residential customers a direct credit: $25 off the winter heating bill, for three months a year, for ten years, starting in the winter of 2029. By Kentucky Power's own count, that adds up to roughly $100 million flowing back to ordinary ratepayers over the life of the deal. It's a specific, dated, real number the company has put on paper, not a vague promise about future savings somewhere down the line.

It's also a number that arrives before the thing funding it exists. The new gas plant isn't targeted to come online until 2031, two years after the bill credits are supposed to start landing in winter 2029. That gap only makes sense if the credit is tied to the tariff structure and the revenue TeraWulf is already paying under its service agreement, not to power the plant hasn't generated yet. Kentucky Power hasn't published an independent audit of either the $100 million figure or the savings math behind it, and the whole package, gas plant, transmission, and bill credit alike, still needs the commission's sign-off before any of it is binding on anyone.

This isn't Kentucky's first data-center fight over who pays

Kentucky Power and TeraWulf aren't negotiating in a vacuum. In July, the state's own Public Service Commission described a related Kentucky Power project as "unpopular" with electricity customers, in the commission's own words, not an advocacy group's. That same month, a public hearing on TeraWulf's separate Hawesville campus in Hancock County, served by a different utility, Big Rivers Electric, drew opposition that was close to unanimous, over rate impacts, noise, and environmental effects. Gary Elder, a retiree who spoke at that hearing, said his electric bills were already high and that he worried the data center would push them higher still. Mary Cromer, an attorney with the Appalachian Citizens' Law Center, has made a broader point that applies well beyond any single project: many Kentucky Power customers already feel they have little real say over bills that keep climbing, regardless of which company's load is driving the next rate case.

Kentucky Power's answer to that is a real argument, not just a talking point. A company executive has said that without large new customers like data centers, keeping rates stable would otherwise require signing up roughly 175,000 new residential customers, a number eastern Kentucky's shrinking, aging population has no realistic path to producing on its own. Spreading the utility's fixed costs across a gigawatt-scale customer, the argument goes, is what keeps everyone else's rate from climbing as fast as it otherwise would. That's the same beneficiary-pays logic regulators in Virginia, Indiana, and Michigan have leaned on approving other large-load tariffs this year, and it isn't dishonest just because the company making it stands to benefit from a bigger customer base.

What a large-load tariff is supposed to do in a deal like this is settle exactly who's on the hook if TeraWulf's own business doesn't follow through, the same question we've flagged in Indiana's NiSource deal, where a ratepayer-protection promise outran the county's own ordinance. TeraWulf is a young company whose core business model has already shifted once, from bitcoin mining to AI infrastructure, inside the last two years. If Muskie's buildout slows, or TeraWulf's own financing changes, the commission's order is what will determine whether Kentucky Power's other customers are protected from the cost of a gas plant sized for a gigawatt of demand that didn't fully show up, or exposed to it.

I think the $25-a-month number is a genuinely good sign, as these things go: it's specific, it's dated, and it's a real company putting a real figure on paper rather than a vague promise about future benefits. But a bill credit only means something once a regulator makes it an enforceable condition of approval, not a voluntary pledge Kentucky Power can quietly revisit if TeraWulf's growth plans change again, the way they already have twice this year. Right now, every piece of this, the plant, the substation, the bill credit, is still a filing in front of the Public Service Commission, not a ruling. The question worth watching isn't whether the number sounds good today. It's whether the commission writes it into the record as something Kentucky Power can't walk away from in 2029, no matter what TeraWulf's business looks like by then.