FirstEnergy Offers WV Rate Payers a Pig in a Poke

So now we have a lot of values for the forty year old Harrison Power Station.  Here’s a quick summary:

  • FirstEnergy claims the plant is now worth $1.68 billion, based on current market value and that there are no comparable transactions of similar plants on which they can base this claim.
  • Exelon just sold three coal burners with a total of 1/3 more capacity than Harrison for $400 million with $480 million in tax write offs allowed to make up for the fact that they were forced to sell these plants by FERC.  That totals a value of $880 million for these three plants.  Even if we ignore the fact that Harrison is a smaller plant than these three plants combined, $880 million is still about half of what FirstEnergy is claiming for Harrison’s value.
  • In 2010, FirstEnergy and Allegheny were required by FERC (thanks, Keryn) to put a “market value” of $1.1 billion on the Harrison plant for purposes of FERC merger regulations.
  • Before the merger, in 2010, Allegheny was carrying the value of the Harrison plant as $550 million for purposes of calculating WV electric rates.  Considering that this is book value, and book value is calculated by deducting annual depreciation from the asset value of the plant, two years later, the Harrison plant should be worth even less than $550 million.

So we have four different values for the Harrison Power Station.  FirstEnergy has told the PSC in its recent 650 page obfuscatory filing that even though their appraiser says the magical market value of the plant is $1.68 billion, FirstEnergy will cut WV rate payers a break and only use the $1.1 billion merger valuation for calculating how much Mon Power and Potomac Edison rate payers would be forced to pay.   And FirstEnergy thinks that WV rate payers should pay this price (which is still pretty magical compared with the Exelon deal and the Harrison plant’s real book value) for the plant without any discussion or study at the PSC.  If, for some crazy reason, the WV PSC allows this deal to happen, the value of the Harrison plant matters, because its value will go into Mon Power rate payers rate base, and Mon Power will also be allowed to add about a 10 7.5% rate of return to our electric bills on top of that amount.

I think the common sense term for this kind of deal is a pig in a poke.  This is especially true, because even at $550 million or even $400 million, the Harrison plant is too expensive.  FirstEnergy claims that the 40 year old Harrison plant can be run economically for 27 more years.  That’s a total of 67 years.  What is happening to 60 year old coal burners right now?  They have been closed down by FirstEnergy because they cannot be operated economically if they have to compete in the open electricity market.

The WV PSC shouldn’t allow this pig in a poke deal at any price, because WV doesn’t need more coal-fired electricity.  We need to start solving any future power capacity problems with aggressive investment in efficiency improvements, which reduce the need for any kind of new generation.  We should be evening out our peak energy use by investing in demand management systems, as have most other states in PJM.  And, after reducing our power needs significantly, we should be investing in power generation that is locally owned, that is located in our communities, and that is safe.

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