FirstEnergy is also engaging in some basic accounting flimflam to sweeten the Harrison deal for the media. In addition to playing games with ENEC rate projections, FirstEnergy is doing a rapid payoff of Mon Power’s sale of 8% of the Pleasants Power Station to front load the rate payer credits in the deal.
The Harrison plant purchase also involves the sale of a little less than 8% of FirstEnergy’s Pleasants Power Station near St. Marys, WV from Mon Power to Allegheny Energy Supply. As a result of that sale, Mon Power rate payers are to receive a $25 million credit to reduce their rates. According to accounting rules and earlier testimony in the Harrison case, this $25 million credit was to be refunded to rate payers over the 32 year remaining life of the Pleasants Power Station.
But the settlement flimflam proposed by FirstEnergy, the WV Consumer Advocate, the PSC staff and the Sierra Club, that $25 million will be to WV rate payers over the 16 months after the deal was finalized. At the end of that 16 months, all rate benefits from that credit is gone. This front end loaded credit artificially bumps up the possibility of an immediate projected rate decrease from the overall Harrison deal dramatically.
Cathy Kunkel helped us all out in her comment to my previous post:
Let’s also look at the stipulation a bit more closely. Mon Power is also selling their share of Pleasants, for a gain to ratepayers of $25 million. In their original proposal in the case, Mon Power proposed to amortize that gain (give it back to ratepayers in rates) over the remaining life of Pleasants, 32 years. Now, in the stipulation, they’re going to give that back over 16 months.
That fact alone reduces the surcharge from $132 million to $113 million. Without that, there would be no rate decrease.
But 16 months from now, ratepayers will see no more benefits from the Pleasants sale.
So, according to Cathy’s calculation, this little flimflam of the Pleasants Power Station credit knocked $19 million off the total Harrison deal. Even if FirstEnergy’s unlikely ENEC cost adjustment does come true, this $19 million dollar credit turned the first year’s rate impact from an increase into a decrease. In another four months, the remaining $6 million of the original $25 million credit would have vanished.
After 16 months, the Pleasants credit will be completely gone. When the first new coal bills hit the big ENEC cost increases in 2015, there will be no more Pleasants Power Station credit to help out rate payers. Just like the sidewalk flimflam artist with the pea under the walnut shells, FirstEnergy and its friends at the Consumer Advocate Division, the PSC staff and the Sierra Club will have pulled the old switcheroo and the little pea will have disappeared.