New Report Shows Change Is Possible, But WV PSC Has Made It Very Expensive

Ken Ward had a story in yesterday’s Charleston Gazette titled “West Virginia could meet EPA plant standards, report says.”

West Virginia could meet proposed federal standards to reduce greenhouse gas emissions with a smart mix of energy efficiency programs, ramped up solar- and wind-power generation and moderate improvements at existing coal-fired power plants, according to a new report.

The U.S. Environmental Protection Agency proposal presents “a number of challenges” for West Virginia but also provides states with the ability to design their own plans for meeting the Obama administration’s objective of curbing heat-trapping carbon dioxide pollution.

“Given this flexibility, West Virginia can develop a state plan that puts the state on track to meet its emission limits while at the same time enhancing the social, economic, and environmental benefits of further integrating its energy efficiency, renewable energy, and natural gas resources into the state’s electricity sector,” says the report.

Here is a link to the report, published by the WVU Law School’s Center for Energy and Sustainable Development and Downstream Strategies.  The report is a good one.  It quantifies the impacts of implementing all of the strategies we have covered on The Power Line for years: energy efficiency, combined heat and power, turning WV’s fake standards into a real renewable portfolio standard, creating an energy efficiency standard and requiring real integrated resource planning (not the fake IRP that FirstEnergy pushed through the Legislature last year).  Keep in mind that none of these changes have even gotten out of committee in the WV Legislature over the last six years.

There’s another big problem.  This report (or, better yet, its implementation) is about three years too late for WV.

The WV PSC and the two Ohio-based holding companies that control the WV electric power industry have closed the door to these solutions, because the WV PSC has just made it much more expensive to make the changes we need to make.  In 2013, the PSC approved the dumping of FirstEnergy’s Harrison Power Station on WV rate payers.  In this deal, the PSC locked FirstEnergy customers into paying for much more electric capacity than they need for the next thirty years.

In the more recent AEP case, the parties have reached a settlement involving the same kind of transfer of units of the obsolete coal-fired Amos and Mitchell plants to WV rate payers.  In this case as well, the generating capacity for which AEP’s WV customers are stuck paying is also more than projected demand in our state for the next thirty years.  The PSC has not approved this AEP settlement yet, but Commissioners Albert and McKinney will no doubt approve the essential features of the transfer.  They have already approved the Amos transfer.  If the PSC approves the Mitchell deal, WV rate payers will also be paying for much more capacity than they will need for the next thirty years.

A number of us, including the Gazette’s Ken Ward and the State Journal’s Pam Kasey, warned that the Harrison and Mitchell deals would close the door for real energy change in WV for decades.  WV Citizens Action Group fought the Harrison settlement tooth and nail to block the Harrison boondoggle.  The Sierra Club, however, settled for a few crumbs on energy efficiency, and seemed to overlook the real impact of these power plant deals.

This situation illustrates clearly how many environmentalists miss the real issue.  Too often they isolate themselves on the fringes of the main argument and settle for small, short term victories that leave them powerless to effect real change.  Both AEP and FirstEnergy are masters at publicizing window dressing about renewable power and energy efficiency while operating behind the scenes at state legislatures and PSCs to lock in their corporate control.  FirstEnergy has even gone on the offensive in Ohio to roll back existing renewable power and energy efficiency standards.

Superficial company-run energy efficiency programs are valuable tools for power companies to ghettoize “environmentalists.”  These programs channel activism into advocating for energy efficiency as a painless panacea for carbon emissions and all the other problems associated with coal burning power plants.

Power companies in WV see energy efficiency programs only as a way to sidetrack public discussion.  The companies’ primary goal is PR.  They will never agree to so much reduction in demand that threatens to significantly displace their coal-fired generating plants.  AEP and FirstEnergy will have to be forced to make those kinds of efficiency investments, and, in the recent coal plant cases, the PSC has demonstrated that it is not willing to do that.  Chairman Albert seems to have a serious fetish about “steel in the ground.”

Improvements in energy efficiency have an important place in transforming our electrical system.  They have already proven that.  But there are limits to that impact.  The rebound effect plays some role in reducing efficiency improvements as people use some cost savings to use more electricity.  Also, as the cheap and easy efficiency investments are made, the marginal return of each succeeding improvement becomes a little more expensive to generate.  Some demand reductions attributed to energy efficiency improvements are actually the result of de-industrialization and the transfer of less efficient manufacturing to other countries, reducing the net effect on worldwide impacts.  The US is woefully behind other industrial countries when it comes to building energy efficiency into all of our generation and manufacturing processes, but energy efficiency advocates need to recognize that energy efficiency alone will not get us where we need to go.

That is why we need to go to the heart of the matter – how West Virginia regulates electrical generation capacity.  Unfortunately, that matter is now largely settled for a generation.  The WV PSC has made, or will soon make, in the case of AEP, a legal commitment to WV’s electrical holding companies that WV rate payers will bail out the companies’ obsolete coal burners.  If any alternatives to that generation are implemented, the WV PSC will likely require West Virginians to pay them for the Harrison, Amos and Mitchell plants if those plants are closed.  In its current 17.2% residential rate increase request, FirstEnergy wants rate payers to pay for the stranded capital costs of the Albright, Rivesville and Willow Island plants that it closed in 2012.  What happens in that case will be a good indication of what the PSC would do with stranded costs in the future.

So if, by some miracle, WV implemented a lot of new renewable generation or cut electricity demand further through CHP plants and energy efficiency investments, AEP and FirstEnergy would demand that we pay them for the idling of one or more of their existing coal plants.  It’s a zero sum game now.  Any new generation would have to displace those plants.  WV rate payers would likely be obligated to pay for them if they close.

Any new shift in generation away from coal in WV, as suggested in the new report, could result in WV rate payers paying twice for the same generation capacity: once for the new renewable sources and efficiency investments, and twice because the PSC will probably force them to pay back the Ohio power companies for the Harrison and Mitchell/Amos plants if they are forced to close.  You can bet FirstEnergy and AEP will be quick to blame “environmentalists” and the EPA for any rate increases that end up on West Virginians’ electric bills as a result.

With the recent power plant cases, FirstEnergy, AEP, Chairman Albert and Commissioner McKinney have doubled the costs of WV’s path to renewable power, and most of the state’s media and politicians didn’t even notice.  And now, it’s too late.

 

2 thoughts on “New Report Shows Change Is Possible, But WV PSC Has Made It Very Expensive

  1. Thank you Bill, great post!

    WV is similar to Arkansas with many old coal-fired plants and decades of political lobbying. Climate Change and coal have been taboo until recently.

    The Arkansas Electric Cooperative Corporation (AECC) provides power for more than 500,000 members of Arkansas’ 17 electric distribution cooperatives. AECC is a utility disguised as a cooperative, owning many coal and natural gas plants.

    AECC gives AR a choice of opposing EPA, or paying 40% more for natural gas. Solar power generation is not in the “mix”
    http://www.aecc.com/right-mix-still-right-answer

    Question: is WV using the EPA loophole of joining other states to meet CPP pollution standards?

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