AEP Coal Dump PSC Hearing Ends

Despite AEP’s earlier claims that the company is involved in settlement talks, the company’s WV PSC coal plant transfer case went to final hearing this week.  The three-day hearing concluded yesterday.  During the hearing, the parties to the case were able to ask all of the experts in the case to clarify points they had made earlier in their written testimony.

Ken Ward of the Charleston Gazette and Pam Kasey of the State Journal have done excellent jobs of covering the hearing.  I’ll provide links to some of their stories in my comments below.

I have not followed the case on the PSC Web cast (I actually have to make a living.)  but I did manage to attend most of Wednesday’s hearing in person.  I did not take any notes on Wednesday, but I did come away from the hearing several clear impressions on what is going on in the case.

Here are some of the new things I learned during the hearing process:

  • AEP is as determined to take away a rate refund due its customers as FirstEnergy was in the Harrison case.  AEP’s WV customers are supposed to get a refund of variable costs that were over-recovered in their electric bills over the last few years.  The PSC refers to this recovery of fuel and purchased power costs as its Extended Net Energy Cost process or ENEC.  AEP wants to add an immediate charge to its WV electric bills for purchasing the Amos and Mitchell plants by taking away a large part of the ENEC refund.  There is a problem with this, just as there was in FirstEnergy’s case.  Power plant purchases are not ENEC costs.  They are recovered in a different PSC process which sets the company’s base rates for fixed costs.  This was exactly the reason that the PSC rejected the refund takeaway scheme in the FirstEnergy case.
  • A couple of the PSC Commissioners seem determined to avoid the fact that rate payer investment in energy efficiency to reduce electricity use is cheaper than rate payer investment in more power plant capacity to increase generation.  In particular, on Wednesday, Chairman Albert asked efficiency expert Jeffry Loiter for specific efficiency suggestions in WV, when it was clear Mr. Loiter either didn’t know the answers or was not familiar with WV.  On Thursday morning, the day after Mr. Loiter’s testimony, expert Cathy Kunkel took the stand.  Ms. Kunkel lives in WV and has been working directly with both FirstEnergy and AEP on their energy efficiency programs in WV.  Ms. Kunkel has also filed extensive written testimony in both the FE and AEP power plant cases advocating for expanded efficiency programs in WV.  Did Chairman Albert ask Ms. Kunkel the same kinds of probing questions he asked Mr. Loiter, who was clearly unable to provide specifics?  No, Chairman Albert failed to ask Ms. Kunkel any questions at all about her work with energy efficiency policy or programs in WV.  That seems odd, unless Mr. Albert really didn’t want informed answers on the subject.
  • Most of the testimony I saw on Wednesday was from AEP witnesses.  All of them were spinning the tale that purchasing power in the PJM electricity markets was perilously risky.  Whenever anyone, including Commissioner Palmer, raised the issue of the inherent riskiness of depending on the coal markets for the next 25 years, AEP witnesses elided the issue or moved on to other topics.  Power plant expert and former WV Consumer Advocate Billy Jack Gregg pointed out on Thursday that the John Amos plant’s permanent dependence on buying low sulfur coal, despite the fact that the plant has installed expensive scrubber equipment.  Mr. Gregg testified, “I think we’re going to be condemned to riding a very scary price roller coaster for as long as we have to buy low-sulfur coal to supply these plants.”
  • Interesting information came out in the Thursday hearing about the 71-acre fly ash pond (lake?) which takes waste from AEP’s Mitchell plant near Moundsville.  AEP wants to “sell” one half of the Mitchell plant from its Ohio Power subsidiary to WV’s Appalachian Power.  In addition to selling half the plant, AEP would also be selling half (we presume) of the liabilities of that plant.  APCo’s CEO Charles Patton said as much in his testimony on Tuesday.  The problem is that about a year after AEP wants to “sell” Mitchell to APCo, the plant will switch to “dry” processing of stack waste and will no longer be using the waste pond (lake?).  Yet WV rate payers, who would then “own” half of the Mitchell plant, would have to pay if anything happened at the fly ash pond (lake?).  Almost all of the liability for that waste facility was incurred to serve AEP’s Ohio customers in the past, but APCo’s WV rate payers would be stuck with future costs to keep the pond safe, or to pay damages if it leaked or collapsed.  Even PSC staff engineers, who have generally been cheerleaders for the scheme, have balked at this very real problem.
  • There was a lot of discussion on Wednesday about AEP’s inaccurate forecasting that AEP witnesses claim establishes their power plant scheme as the best alternative.  I’ll cover issue in a post of its own later.

So now the case goes to the Commissioners for a decision.  As with the FirstEnergy case, there is no statutory deadline for a final order, as there is in a certificate of need case, but the PSC will probably issue another procedural order setting out future deadlines and maybe even a proposed date for a final order.

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