Opposition building to FirstEnergy power plant deal
CHARLESTON, W.Va. -- With a Public Service Commission hearing now less than two weeks away, critics are flooding the commission with arguments against Ohio-based-FirstEnergy's proposal to transfer its Harrison Power Station to a West Virginia subsidiary.
Prepared testimony questioning the deal has been filed by the PSC staff, the agency's consumer advocate, the West Virginia Citizen Action Group, the Sierra Club, and by the West Virginia Energy Users Group, a coalition of industrial power company customers.
Critics say that FirstEnergy is proposing excessive rate increases to fund an overvalued transaction, ignoring the potential gains from better demand-side energy efficiency programs, and locking its Monongahela Power subsidiary into a generation mix that is too narrowly focused on coal.
"The transaction, as currently proposed, is a bad deal for Mon Power customers," concluded West Virginia University law professor James VanNostrand, a utility expert who wrote about the issue on a blog hosted by the College of Law's Center for Energy and Sustainable Development.
"Mon Power would be substantially overpaying for a 40-year old coal plant that is in excess of its capacity needs, and the acquisition would preclude Mon Power from pursuing cheaper alternatives, such as natural gas-fired generation, wholesale market purchases, and energy efficiency," VanNostrand wrote.
The FirstEnergy proposal is one of two such cases pending at the PSC. American Electric Power wants to transfer its John Amos plant near St. Albans, and its Mitchell facility near Moundsville, to its Charleston-based Appalachian Power subsidiary.
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.
Hearings on the AEP case aren't scheduled until July. But the three-person PSC is set to take up the FirstEnergy case over the Harrison plant starting May 29.
In PSC cases, parties submit written testimony in advance of in-person hearings. FirstEnergy has submitted its initial testimony, and other parties have responded. FirstEnergy's reply testimony is due to the PSC by the end of the day Friday.
"We believe the proposed transaction is good for the state of West Virginia, as it is expected to help ensure reliable power for our West Virginia utility customers for many years to come," Leila Vespoli, FirstEnergy's executive vice president and general counsel, told industry analysts last week. "The proposed transaction is and remains very positive for the West Virginia economy and our customers of our utilities in West Virginia."
A key factor that has drawn much criticism for FirstEnergy's proposal is the company's effort to put the cost of the plant transfer at $1.2 billion, roughly double what critics say the facility is worth.
Stephen Baron, a consultant for the West Virginia Energy Users Group, said FirstEnergy's valuation is "unreasonable." Baron said the move violates the company's agreement -- in a case where the PSC approved its merger with Allegheny Power -- not to seek rate increases for the "premium" value for the Harrison plant used for the purposes of that merger.
Baron also joined other critics of the deal in questioning why FirstEnergy didn't issue a "request for proposal" to try to find the best way to make up any generation deficits the company faces.
Byron Harris, chief of the PSC's Consumer Advocate Division, said in his written testimony that 40 percent of the nation's utility regulatory bodies require or encourage companies to seek competitive bids when they need more power.
"The terms and conditions of resources procured under an RFP would be more likely to be reasonable because the terms are set by market forces," Harris said.
David Schlissel, an energy consultant testifying on behalf of the West Virginia Citizen Action Group and the Sierra Club, said the proposal "would lock West Virginia ratepayers into decades of paying for an expensive large central station generating facility for at least 10 years" and provide Mon Power with more capacity than it really needs.
Schlissel testified that Mon Power would end up relying on two 40-year-old coal plants for more than 90 percent of its internally generated power.
"There will be almost no fuel diversity," he said. "Nothing in the company's portfolio provides a hedge against the risks associated with this near total dependence on a single fuel source."
Catherine Kunkel, another energy consultant testifying for WV-CAG, said that Mon Power could save the equivalent of one-quarter of its stated generation shortfall by improving its programs for demand-side efficiency programs for customers.
"Although efficiency and demand response cannot meet all of the company's shortfall, the inclusion of energy efficiency and demand response would result in a lower cost and less risky portfolio," Kunkel testified.
Previously, FirstEnergy officials had touted their Harrison plant proposal as a way for the company to deal with ongoing debt problems. But last week, the company said other financial moves have helped with those problems, and that the Harrison deal is "no longer critical to the successful completion of our financial plan."
Reach Ken Ward Jr. at email@example.com or 304-348-1702.