Sorting Out the FirstEnergy/Harrison Power Station Mess

There has been more and more discussion here on The Power Line and over at Grounded about FirstEnergy’s plan to wipe out a rate cut that is due its WV customers on Jan. 1, 2013 with a liability that will be part of the sale of 80% of the Harrison Power Station to Mon Power.  FirstEnergy made the case in a report filed back in September that because they closed a number of obsolete coal-burners in WV, they are short some generation capacity that will be needed to serve their WV customers.

There are three cases at the WV PSC that intersect at this situation, and I wanted to spell out the connections clearly in this post.  I am also giving you direct links to the relevant documents so you can track this scam yourself.

The “Resource Plan”

FirstEnergy filed what they called a “resource plan” in August 2012 in PSC case 11-1274-E-P, which was initiated by Energy Efficient WV to push FirstEnergy into initiating efficiency programs in WV.  That plan was the first articulation of FirstEnergy’s plan to dump the Harrison coal-burner on Mon Power rate payers.  Here is a link to that resource plan.  What FirstEnergy calls a “resource plan” in this case has nothing to do with real integrated resource planning as practiced by PSCs in other states.  Here is a link to the full list of filings in the case docket for case 11-1274-E-P.  At this link, you can find responses to the resource plan that were filed by EEWV and the WV Consumer Advocate.

First Energy then filed two separate cases at the PSC.

The Eliminate the Rate Cut Plan

One case involved the request to eliminate the ENEC rate cut scheduled for January 1, 2013.  This was PSC case 12-1238-E-GI.  This case is technically a review of the current status of FirstEnergy’s Enhanced Net Energy Cost (ENEC) rate structure, and it includes an update on the elimination of about $66 million in electric rate charges that is due to take effect on January 1, 2013.   Here is a link to FirstEnergy’s filing requesting the elimination of the coming rate cut, substituting what FirstEnergy claims is a liability for costs associated with the Harrison Power Station purchase, although that purchase hasn’t even been approved yet.  Here is a link to the entire case docket.

The ENEC filing is really pretty funny.  It is presented in the form of testimony by Kevin Wise, a FirstEnergy employee.  Mr. Wise states that by taking away our rate cut, FirstEnergy has our best interests at heart.  FirstEnergy is trying to save us from the mental health whiplash caused by rate reductions.  Yeah.  Really.

Customers will avoid experiencing the down and up effect of the anticipated outcomes of this proceeding and the generation resource transaction proceeding. This should reduce customer confusion or frustration with frequent changes in rate levels, and may assist larger customers with planning budgets for their electricity costs. Further, customers will be refunded if the generation resource transaction does not go into effect. Therefore,whether the transaction goes forward or not, customers’ interests will be protected.

Actually, Mr. Wise, I’m not “confused” at all.  I know exactly what you are doing.  And it’s wrong.

The Coal Plant Dump Plan

The other case that FirstEnergy filed deals specifically with the Harrison plant dump on Mon Power rate payers.  Here is a link to their 600 page filing on the deal.  Here is a link to a power point summary of the deal that FirstEnergy presented to the PSC in November.  You will note that FirstEnergy is claiming that as of 2013, Mon Power will be short a little over 900 megawatts of generating capacity in WV, and that shortage will grow to about 1400 megawatts by 2026.  In the larger report, FirstEnergy says that this capacity shortage is primarily peak load, which means that there is no capacity shortage at normal operating load.  This case has been designated as PSC case 12-1571-E-PC.  Here is a link to the full case docket where you can see responses by other parties to power company filings.

The power point also claims that they want to sell us the Harrison plant at “the lower of book or market.” As you have seen from previous posts, that statement is a deception.  FirstEnergy has stated that they want to sell the Harrison plant to Mon Power at about $1.2 billion, which they claim is the lower of “book or market.” They make this generous offer after claiming (with no real basis in reality) that the current market value of the plant is a wildly inflated $1.68 billion.  We know that the previous book value of the plant, published just two years ago in WV PSC records was about $550 million.  FirstEnergy gets its $1.2 billion “book” value from a value that FirstEnergy and Allegheny Energy assigned to the plant in their merger negotiations.  This value is neither a market value nor a book value for the plant.  It is, to put it politely, a deliberate misrepresentation of the facts.  The real book value for the plant is about $550 million and a reasonable market value, based on a recent comparable coal plant sale by Exelon might be about $800 million.  In any event, the whole sale price issue is an accountant’s shell game designed to flimflam the PSC and rate payers.

A Real Plan

In the end, though, the whole situation is not just about rates or the cost of the plant.  It is about whether WV’s electrical system will be locked into even more obsolete and expensive coal-fired generation for the next twenty years or more.  Investment is a zero sum game.  Money spent on one thing is money that cannot be spent on something else.  Why would the WV PSC want to lock WV rate payers into getting electricity from a 40 year old plant that faces the uncertainties of the world coal market for the next 20 years?

The capacity shortage is just in times of peak load.  Investing rate payer money in demand management to reduce peak load would be less expensive and have no fuel cost risk.  The PSC could also require FirstEnergy to adopt more aggressive energy efficiency programs to cut demand further and eliminate future fuel price risk.   In its August “resource plan” we have seen that FirstEnergy rigged the comparison of the Harrison plant’s levelized cost of producing power to the cost of building a new combined cycle natural gas plant by claiming that the natural gas plant would only run 25% of the time.  Using a more realistic capacity factor for the gas plant, creates a much lower levelized cost for gas over the Harrison plant deal.  As Billy Jack Gregg pointed out in his testimony in the ENEC case, there is time to invest in the optimal combination of all of these alternatives, because both electricity and capacity on PJM’s open markets are currently so cheap, and are expected to remain cheap for the next several years.  Put simply, there is plenty of time to figure out the best solution to Mon Power which doesn’t involve buying the Harrison plant at all.

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