FirstEnergy Settlement – Smoke and Mirrors

The proposed settlement of the FirstEnergy Harrison case is up on the PSC docket database at this link.

I will be out of town for the next few days, so I won’t be able to post in depth on the smoke and mirrors that the Consumer Advocate, the PSC staff and the Sierra Club cooked up.

Keryn has a good first look at the settlement offer here at StopPATH WV.  As Keryn points out, Consumer Advocate Byron Harris essentially split the difference between FE’s pumped up “value” for Harrison and the plant’s real book value of about $580 million.  Mr. Harris got the price tag down to $858 million which is just about exactly halfway between FE’s $1.2 billion and the plant’s real value.

Then the company cooked up a $129 million reduction in variable costs which will create a rate decrease, at least until the next PSC cast on variable cost rates some time in 2014.  This little accounting trick allows FE and the CAD and the PSC to claim that this is a great deal for rate payers, but FirstEnergy rate payers in West Virginia are now more dependent than ever on the ups and downs of the coal market, so don’t look for this little reduction to stick around.

The Sierra Club got a doubling of FirstEnergy’s energy efficiency target to 1% reduction of their recent sales by 2018.  That’s 1% over five years.  FirstEnergy currently has targets, which it is meeting reluctantly in OH.  In 2014, FE’s OH target will be 1% reductions every year.  So doubling an absurdly low WV target still leaves you with an absurdly low target.

The important part of the settlement is what it didn’t do.  The settlement did nothing to change the fact that WV rate payers will be paying a lot of money for surplus generating capacity that they don’t need.  That surplus won’t disappear until after 2020.

Also, the Fitch Ratings agency has concluded that capacity prices in PJM will remain low for the foreseeable future.  Energy prices will likely remain low as well.  This is exactly why we have been saying that paying lots of money for a coal fired power plant made no sense, and that buying capacity and electricity on PJM’s markets was going to be much less expensive for West Virginians.  This settlement makes exactly the wrong choice.

FirstEnergy very generously committed to issuing a request for proposals if they ever need to acquire additional capacity in the future.  Of course, they knew full well, as did everyone else involved in the settlement, that with the Harrison plant, Mon Power will have far more capacity than it needs for the next eight years.

The Citizen Action Group very wisely refused to sign on to this stinking mess.  Good for them.

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