AEP Coal Dump – Rigged

There is a common theme running through expert testimony about AEP’s plan to transfer capacity from Ohio Power at the John Amos plant and the Mitchell plant to Appalachian power.  That theme can be summed up in one word: rigged.

Here’s how:

  • Like FirstEnergy with its coal dump plan, AEP used its Magic 8 Ball computer program, Strategist, to “prove” that its coal dump was the best option for meeting future capacity needs.  Like FirstEnergy, AEP rigged assumptions about future energy prices and competing sources of power to produced the results it wanted.  West Virginia Citizen Action expert witness David Schlissel provided the details in his testimony filed on June 18:

In fact, there are a number of critical flaws and biases in the Comparative
Analysis:
(a) The Comparative Analysis relies on extremely high PJM capacity
market prices which distort the analysis by (1) overstating the
capacity costs of the Market and Optimization alternatives and (2)
overstating the revenues that APCo would receive from the excess
capacity from the Amos and Mitchell units.
(b) APCo used an extremely high range of PJM energy market prices in the Comparative Analysis that overstate both the cost of the Market and
Optimization alternatives and the additional revenues that APCo would receive from selling the excess energy from Amos and Mitchell into the
PJM energy markets.
(c) APCo used extremely high natural gas prices that distorted the
Comparative Analysis by increasing the fuel costs of the natural
gas-fired generating alternatives. The high natural gas prices used
by APCo also led to the high energy market prices and increased
Amos and Mitchell annual generation and capacity factors.

11. The Company did not adequately evaluate alternatives to the proposed Asset Transfer. Several options were not evaluated in the economic modeling analyses presented in the Comparative Analysis of Resource Portfolios, including:
(a) Short-term and long-tem Power Purchase Agreements for capacity
and energy.
(b) Purchasing an existing natural gas-fired plant.
(c) Meeting a larger portion of its future capacity needs through
expanded energy efficiency and demand response.
Instead of considering a wide range of alternatives, the Company
essentially modeled a narrow set of alternatives that only included new
natural gas capacity, market purchases and acquisition of capacity from
Amos Unit 3 and/or Mitchell Unit 1 and 2.

  • Cathy Kunkel, an expert also testifying for WV CAG, pointed specifically to the fact that AEP deliberately avoided including an aggressive energy efficiency scenario in its analysis.  Using AEP’s own conclusions from a previous case, Ms. Kunkel shows that this aggressive energy efficiency investment was significantly less expensive than buying coal-fired power plants.  Here is a link to Ms. Kunkel’s testimony.
  • AEP voluntarily chose to exclude itself from PJM’s electricity and capacity markets by choosing “fixed resource requirement” (FRR) in PJM’s system.  Because of this voluntary action, AEP deliberately cut itself off from lower cost purchases, primarily of lower cost gas-fired electricity on the wholesale markets.  Mr. Schlissel calls this decision “imprudent” in his testimony.  I consider that a significant understatement.  AEP’s FRR decision was either (1) managerial incompetence or (2) a deliberate and duplicitous attempt to cut off less expensive alternatives so that the WV PSC would be forced to approve the coal plant transfers that AEP wants in WV.  I’m going with alternative 2.  Here’s Mr. Schlissel’s description:

Was the Company’s decision to elect FRR status prudent?
No. The choice of FRR status for the next few years was imprudent. The decision appears to have been based on the assumption that the proposed transfer of Amos Unit 3 and Mitchell Units 1 and 2 to APCo and Kentucky Power would be approved because APCo admits that the cost of procuring capacity under FRR would be more expensive than obtaining that capacity through the PJM auction process.

In particular, the Company is now precluded from participating in the PJM capacity auction at the very time that prices are low and may stay that way for the foreseeable future.

Pam Kasey did a good summary of the June 18 expert testimony over at Grounded.

Of course, as all the expert witnesses pointed out, if the WV PSC simply requires AEP to issue a request for proposals for companies to bid on providing the company’s future capacity, there is no need to dig through the rigged crap the company has filed at the PSC.

 

 

2 thoughts on “AEP Coal Dump – Rigged

  1. imprudent |imˈproōdnt| adjective: “APCo admits that the cost of procuring capacity under FRR would be more expensive than obtaining that capacity through the PJM auction process.

    In particular, the Company is now precluded from participating in the PJM capacity auction at the very time that prices are low and may stay that way for the foreseeable future.”

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