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Virginia regulators split on AEP plant transfers

CHARLESTON, W.Va. -- Regulators in Virginia have issued a split decision in a major case over Appalachian Power's proposal to take a greater ownership role in two coal-fired power plants.

The Virginia State Corporation Commission on Wednesday approved ApCo's plan to acquire the remaining portion of its John Amos plant near St. Albans.

But the commission also rejected the company's effort to take over half of the Mitchell plant near Moundsville from a sister American Electric Power subsidiary, Ohio Power.

Virginia regulators also approved ApCo's request to merge with another AEP subsidiary, Wheeling Power.

Similar proposals by ApCo are pending before the West Virginia Public Service Commission. The company needs approval from both states to move forward.

"If the [West Virginia] commission approves both transfers, ApCo still can't go forward," said Byron Harris, chief of the PSC Consumer Advocate Division. "They are one utility that operates in two states, and they need approval from both jurisdictions."

Appalachian Power officials could not immediately be reached for comment Wednesday afternoon.

The proposal is one of two cases in which the West Virginia PSC is considering proposals by power companies to shift ownership of coal-fired generation plants to West Virginia-based subsidiaries. In the other case, FirstEnergy wants to transfer ownership of its Harrison Power Station to its Monongahela Power subsidiary.

Consumer advocates and environmental groups question both proposals, which are worth more than $2 billion combined. The critics worry about the impact on customer rates, argue that the power companies ignore potential gains from better demand-side energy efficiency programs and complain that the plan locks West Virginia into a long-term electrical-generation mix that is too narrowly focused on coal.

In a 12-page ruling, the Virginia commission did reduce the price for ApCo's acquisition of the remaining interest in John Amos by $53.4 million to $565 million.

Virginia regulators ruled the risk associated with acquiring the Mitchell plant was greater than that associated with the Amos facility. They noted that ApCo currently owns none of the Mitchell plant and has no track record of operating or maintaining the facility.

"We consider it relevant and important that ApCo already owns [most of the Amos plant]... Virginia ratepayers have already made substantial investments in the Amos units," the commission said.

In denying the Mitchell acquisition, the commission also cited the risks associated with a lack of diversity in ApCo's generating fleet. Approving both plant acquisitions would raise the percentage of coal-fired electricity produce by the company to a projected 87 percent by 2017, the agency said in a press release.

"Eliminating the possibility for additional fuel diversity at this time unreasonably increases customers' risks related to coal," the commission ruling said. "Those risks include, for example, the price impacts on customers, decreases in the supply of coal, and -- as discussed before -- the likelihood of increased federal regulation of carbon dioxide emissions from existing coal plants."

The ruling also noted that ApCo proposed to assume "both known and unknown pre-purchase liabilities of the transferred units" and found the risks to be greater concerning Mitchell, specifically mentioning "potential unknown liabilities" associated with the facility's fly-ash impoundment.

Reach Ken Ward Jr. at kward@wvgazette.com or 304-348-1702.


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