FirstEnergy’s “Audacious” Plan to Dump More Expensive Coal-Fired Power on WV Ratepayers

I had heard about this plan last week, but I was waiting for a good reporter to pick up the story and flesh it out.  Pam Kasey, over at the State Journal’s Grounded, did not disappoint.  She provides a thorough, well researched and easy to read explanation of FirstEnergy’s plan to sell 80% of the coal fired Harrison Power Station to Mon Power and more than double power plant capital charges on the electric bills of Mon Power and Potomac Edison.  To the shock of everyone last week’s meeting, FirstEnergy representatives had the nerve to tell the WV PSC that they wanted an immediate surcharge placed on their customers, instead of going through the legally mandated base rate process.  As Pam quotes state Consumer Advocate Byron Harris, this attempt to break WV law is “audacious” to put it mildly.

Here is Kasey’s account taken from statements by a FirstEnergy PR guy:

In the transfer, Mon Power would buy the 80 percent or so of the coal-fired Harrison Power Station capacity it does not own from FirstEnergy generation subsidiary Allegheny Energy Supply, he said.

Along with the sale of about 8 percent it owns of the Pleasants Power Station and a transfer of about 186 megawatts of “participation rights” to power generation capacity in Ohio, the total generation resource transfer would amount to a net gain of coal-fired capacity to Mon Power of around 1,600 megawatts, he said.

There’s a problem with this plan, and another shifting of coal-fired generation in the works by AEP and its WV subsidiary APCo.  Here Kasey gets to the real motivations behind these shifts:

FirstEnergy’s presentation follows by a just a couple months AEP’s stated similar intention to have subsidiary Appalachian Power buy about 2,100 megawatts of coal-fired generation capacity at the John Amos plant and the Mitchell Power Station from sister company Ohio Power.

The two utilities’ plans come as economic forces move against coal and as price competition in Ohio’s deregulated power market becomes more intense.

In a deregulated power market like the one Ohio is increasingly moving into, utilities bear the outcomes of their investment decisions in rate competition with other utilities — while in West Virginia’s regulated market, the PSC reviews each utility’s accounting of its costs and approves rates accordingly, with guaranteed rates of return on investments.

“Clearly both FirstEnergy and AEP want to put the risk of future environmental costs associated with coal into states where they can recover those costs from captive ratepayers,” Harris said.

“Captive ratepayers.” That’s us.  Which translates as “chumps” to AEP and FirstEnergy.  FirstEnergy also has the nerve to claim that this dumping of risky and expensive coal fired power on its customers is needed to insure “price stability” and to meet a generating capacity shortfall that is the result of FirstEnergy’s poor planning in the past.

Consumer Advocate Harris advocates that all of the AEP and FirstEnergy subsidiaries should be required to seek any needed capacity through a request for proposals process where power from a wide range of sources, including renewable power and efficiency savings, should be allowed to compete with coal fired power plants.  This is the kind of least cost competition that the Coalition for Reliable Power and Energy Efficient West Virginia have been advocating for over the past two years.

FirstEnergy and AEP claim that their coal plants are the lowest cost way of providing new power generation.  And we are going to take their word for it?  After all, that has worked out so well in the past.  If it is the lowest cost solution, let them prove it.

Of course, without a formal integrated resource planning process run by the PSC itself, the power companies will still be able to rig the RFP process.  AEP’s failure to plan ahead has led to a deadline of 2014 for their capacity solutions.  By controlling the timing of their capacity needs, both Ohio-based power companies can rig the RFP process to rush decision making and favor some bidders over others.  With a regularly scheduled least cost planning process, the WV PSC would have the information they need to set the timing and specification for a capacity bidding process.  So an RFP process, as proposed by Harris, is better than nothing, it still leaves the bidding process in the hands of the Ohio power companies.

One thing is for certain, if the WV PSC allows FirstEnergy to dump its coal-fired plants on its WV rate payers, however the rate making is done, Mon Power and Potomac Edison customers are facing a huge rate increase in the next year or so. And that will be on top of the 2012 blackout charges that FirstEnergy and the WV PSC add to customers’ bills.  That means that home and business based power generation using solar panels will become even more price competitive in WV.

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