Sales of coal power plants raise concerns
CHARLESTON, W.Va. -- FirstEnergy wants to transfer ownership of its huge coal-fired Harrison Power Station to a West Virginia-based subsidiary. American Electric Power wants to do the same thing with two of its coal plants, John Amos, near St. Albans, and Mitchell, near Moundsville.
On the surface, the proposals easily could be taken as just some corporate-property paper shuffling. They are anything but that.
West Virginians who get their electricity from FirstEnergy's Monongahela Power and AEP's Appalachian Power would have to fund the purchases from parent companies in Columbus and Akron -- through years of increased power rates.
FirstEnergy is seeking to put the cost of its Harrison plant transfer at $1.2 billion, roughly double what critics of the deal say the facility is worth. Cost estimates for the AEP proposals haven't been announced yet.
Public Service Commission staff members and the agency's consumer advocate already are raising serious questions about the proposals. Also, a growing number of various interest groups, from environmental organizations to gas industry lobby groups, have intervened in the two cases pending before the PSC.
A growing number of critics say the deals would lock West Virginia into relying on coal, a polluting fuel whose role in U.S. electricity production is in decline as world energy markets are in flux. The proposals are shaping up to be a major fight over the future of coal -- and over a variety of other important energy issues, from efficiency and reliability to global warming.
"We're at a turning point," said Bill Howley, a Calhoun County resident who follows energy issues and advocates changes to the system on a blog called The Power Line.
Formal hearings aren't scheduled until late May in the FirstEnergy case, and mid-July in the AEP case, and initial testimony -- laying out more facts and expert opinions from all sides -- hasn't been filed yet.
The power companies say their proposals will help them deal with upcoming deficits in electricity needed to serve Mon Power customers in Northern West Virginia and Appalachian Power customers in the southern part of the state.
FirstEnergy, for example, told the PSC that the company "has thoroughly investigated several alternatives to increase generation resources" and that officials "identified a unique opportunity to obtain full ownership of Harrison, one of the state's most modern, environmentally controlled baseload generation facilities."
The proposal "is the best solution among the various alternatives," the company argued in a 600-page petition filed with the PSC in November.
In the petition, AEP also touted potential economic benefits of its proposal, such as "jobs, taxes, and the consumption of Appalachian area coal [that] would be assured of continuation for many years to come."
In a letter submitted to the PSC, West Virginia Coal Association President Bill Raney agreed.
"The Harrison plant produces electricity with locally mined West Virginia coal, consuming more than 5 million tons each year," Raney wrote in the December 2012 letter. "Mon Power's plan would preserve the opportunity to use this vital resource, helping to support our hard-working miners and their families, as well as the many businesses that depend on the mines. Harrison also benefits governments, paying local and state taxes."
It's just that focus on coal that has some groups, such as the West Virginia Citizen-Action Group, concerned about the power company proposals.
"WVCAG is concerned that the transfer of outdated, coal-fired electric generating facilities to the petitioner from its affiliates in Ohio will burden West Virginia consumers with unreasonable costs for inefficiently generated electric power at a time when less costly and more environmentally sustainable alternatives are available," WVCAG lawyer William DePaulo said in a PSC filing.
The group Energy Efficient West Virginia noted that utilities around the country are moving to inexpensive and less-polluting natural gas, especially in deregulated electricity markets, while the FirstEnergy and AEP proposals would transfer coal-fired generation to West Virginia's captive, regulated market, where ratepayers would foot the bill.
Consumer advocates and environmental groups agree that FirstEnergy and AEP should be made to consider buying inexpensive gas-fired power or renewable energy on the open market to meet their future shortfalls in electricity.
Byron Harris, chief of the PSC's consumer advocate division, said his office believes the power companies should have issued requests for proposals to explore all possible alternatives for meeting any shortfalls in electricity generation for their customers.
"Companies must explore all options for satisfying their energy and capacity requirements, not just through the narrow view of affiliate transactions," the consumer advocate said in comments filed in a related PSC case.
Citizen groups and the consumer advocate also agree that the power companies wrongly did not consider efficiency efforts that would decrease the demand for electricity in the first place.
"The PSC needs to make energy-efficiency investment a priority when evaluating these kinds of projects," Energy Efficient West Virginia said. "It's just common sense that we should try to reduce our energy needs first, before we require West Virginia ratepayers to pay for any new power plant efficiency."
In an interview Friday, Appalachian Power President Charles Patton said his company wouldn't be able to fully respond to criticism of the company's proposal until organizations that intervened in the case filed formal testimony. Patton did say that, while he wants to expand Appalachian Power's efficiency programs, doing that isn't the answer to its upcoming power deficit.
"Using energy efficiency to replace 1,700 megawatts of coal capacity is absurd," Patton said. "It just doesn't work."
Patton also defended Appalachian Power's efforts to explore alternatives.
"We did a detailed analysis looking at new gas plants and at all of the options," Patton said. "The least-cost option for my company and for our customers is the transfer of these coal plants."
However, James Van Nostrand, director of the Center for Energy and Sustainable Development at the West Virginia University College of Law, said PSC rules don't really require complete long-term planning by utilities, and the power plant transfer cases are a perfect opportunity to start that process.
"West Virginians have not been well-served in recent years by the heavy dependence of local utilities on coal for electricity generation," Van Nostrand said in a December 2012 report.
As coal prices have gone up, electricity prices of the four major utilities serving West Virginia "have similarly soared," Van Nostrand wrote. From 2000 to 2011, AEP's residential electricity prices increased by 68 percent, he wrote, and FirstEnergy's by 39 percent.
The power companies' proposals would further tie West Virginia utilities to coal, Van Nostrand noted, "without a thorough evaluation of alternatives that may indeed be cheaper for West Virginians.
"The need for integrated resource planning cannot be made more clear than through the obvious inadequacies of the [FirstEnergy proposal], with its self-serving 'analysis' that concludes how 'fortunate' West Virginia ratepayers are to be able to take these uncompetitive plants off the hands of the FirstEnergy affiliates," Van Nostrand wrote.
Reach Ken Ward Jr. at email@example.com or 304-348-1702.