Shall We Pay $470 Million for the Pleasants Power Plant?

by Duane Nichols on September 4, 2017

... to say nothing about air pollution, ash disposal, greenhouse gases, etc.

WV PSC testimony: Pleasants Plant deal could cost ratepayers $470 million

From an Article by Max Garland, Charleston Gazette-Mail, August 27, 2017

A proposed deal for FirstEnergy subsidiaries to acquire a coal-fired power plant would likely cost customers $470 million over the next 15 years, according to testimony from an energy and environmental consultant filed with the state Public Service Commission on August 25th.

David Schlissel, president of Schlissel Technical Consulting, submitted his prepared testimony on behalf of groups against the acquisition. He said Mon Power and Potomac Edison’s proposed Pleasants Power Station purchase from FirstEnergy should be rejected by the PSC because customers would be saddled with higher utility bills.

According to Schlissel, revenues earned from selling electricity generated by the Pleasants County plant wouldn’t be enough to cover the costs of maintaining it. The $470 million figure Schlissel reached is based on an economic analysis of energy market prices, Pleasants’ generation for the past year and generating capacity price estimates, he said in the filing.

“There is a high risk that the plant will not be profitable and will not produce a net benefit to ratepayers,” Schlissel said. “In fact, if there was not such a high risk, AE Supply and FirstEnergy would not be looking to offload the Pleasants plant to begin with.”

The groups Schlissel provided testimony for, WV SUN and West Virginia Citizen Action Group, have argued the $195 million deal would raise customer utility bills to benefit company shareholders and is similar to Mon Power’s Harrison power plant purchase, which an IEEFA report said cost customers more than $160 million.

If the purchase is approved by both the PSC and the Federal Energy Regulatory Commission, the plant would exit a competitive market and become a part of West Virginia’s regulated market, where it is guaranteed a profit.

FirstEnergy has made it clear it wants to exit the competitive energy services part of its operation, with CEO Charles Jones telling investors in earnings calls in 2016 that the company would either shut down coal plants or sell them so they are placed in regulated markets.

The companies have maintained in filings that the deal is expected to produce a 1.6 percent net decrease in rates, adding that acquiring the plant will prevent future capacity shortfalls the company projects will occur without adding additional power.

West Virginians for Energy Freedom, a group formed specifically to oppose the deal, said in a news release it delivered nearly 1,000 petitions to the PSC’s Charleston office asking for the commission to reject the deal. “West Virginians are counting on you to do the right thing,” says West Virginians for Energy Freedom’s petition. “Please don’t put Mon Power and Potomac Edison customers on the hook for bailing out FirstEnergy’s shareholders.”

Supporters of the move say the plant’s economic benefits are crucial to the area it resides in and that a deal is necessary to prevent the plant from closing. “While customers are expected to realize the transactions market hedging benefits, the state and surrounding communities should also gain the security of knowing that Pleasants is a reliable utility asset and a proven contributor to the economy and well-being of West Virginia for years to come,” Mon Power and Potomac Edison said in a March PSC filing.

Jody Murphy, director of the Pleasants Area Chamber of Commerce, said in a letter of support of the deal that the plant “pays millions in annual property and business taxes to fund local and state government and schools,” adding that the plant employs roughly 200 people.

“FirstEnergy … has stated repeatedly it will be leaving the competitive generation business sometime next year,” Murphy said in the letter. “That said, Pleasants County’s plant stands a good chance of being deactivated without the sale to Mon Power.” If the deal is approved, Schlissel said, the companies should be required to bear the plant’s market risks instead of their customers.

Schlissel’s testimony was filed Friday, the deadline for case filings by opposition parties. In September, three public comment hearings will be held in the companies’ service territory, along with a Sept. 18 deadline for Mon Power and Potomac Edison rebuttal testimony. At some point after the deadline for reply briefs Oct. 19, the PSC will decide whether to approve or reject the deal.

The deal also requires approval by the Federal Energy Regulatory Commission, which regained its quorum earlier this month.

The state Consumer Advocate Division recently submitted a protest asking for FERC to reject the deal. The CAD said the deal was intentionally structured so FirstEnergy “could avoid a further write off of its investment in an aging coal plant that is no longer economic” in wholesale markets.

The companies have said in filings they will have a projected capacity shortfall of more than 1,400 megawatts by 2027 and that Pleasants would satisfy the majority of that need with its 1,300 megawatts of power. But the CAD said Mon Power’s justification for the purchase is based on “overly aggressive assumptions” about the need for additional generating capacity, meaning customers would be paying for “significant stranded capacity costs.”

Additionally, comments submitted to FERC by WV SUN and West Virginia Citizen Action Group earlier this month said the transaction violates Section 203 of the Federal Power Act because it results in an inappropriate cross-subsidization involving captive customers. Mon Power and Potomac Edison contend they are shielded from Section 203 review by FERC because the PSC is reviewing the transaction.

“While Mon Power submits that the Transaction does not raise cross-subsidization concerns … the WVPSC will determine in that decision whether any further conditions on the Transaction are required,” the companies said in a July FERC filing.

But Monitoring Analytics, an independent market monitor of the PJM Interconnection, the regional electric grid the companies are part of, said in a filing that it is in fact within FERC’s power to deny the acquisition under Section 203 “if it finds that the proposed transfer does not meet the public interest standard, including the public interest in competition.”

See also: WV Ciitizens Action Group

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WDTV News 5 January 27, 2018 at 11:06 pm

Public Service Commission approves purchase of Pleasants Power Station

From WDTV, News 5, January 26, 2018

CHARLESTON, W.Va. (WDTV) — Monongahela Power Company and Potomac Edison (Mon Power/PE) was authorized by the Public Service Commission Thursday to purchase the Pleasants Power Station, under certain conditions.

The 1,300 MW power station is currently owned by Mon Power/PE’s affiliate, Allegheny Energy Supply Company (AE Supply).

The companies issued a request for proposals to solicit bids in order to reduce or eliminate a projected growing capacity deficit, with AE Supply submitting the most attractive bid.

The Public Service Commission did not approve the petition as it was filed, but approved it with conditions “requiring limitations on the costs to customers, limitations on the recovery of closing costs if the plant is retired early and protection against costs related to prior operations of the plant or problems with the McElroy’s Run Impoundment and Dam.”

The petition must also be approved by the Federal Energy Regulatory Commission. On January 12, the FERC rejected the petition without prejudice. The companies can still submit a Motion for Reconsideration.



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