Charting a course for supplying future power generation needs is a complex undertaking that requires Appalachian Power to weigh a variety of factors. We must forecast future usage, the impact of energy efficiency programs and the cost, both now and in the future, of a variety of fuel sources and the accompanying construction costs.
For years, Appalachian Power has not generated enough electricity to serve its customers and has purchased power to help meet customer demand. That gap between what we produce and what we need for customers will grow even wider in 2015, when we close several of our older coal-fired plants without modern environmental controls.
To close the gap, Appalachian proposes to transfer from Ohio Power 50 percent of the capacity of Mitchell Plant in Moundsville and the remaining two-thirds of one unit at Amos Plant in Winfield, the only portion of that plant not already owned by Appalachian. This will provide an additional 1,647 megawatts of generation capacity. Hundreds of millions of dollars have been invested in these plants to ensure they are fully EPA compliant and ready to provide reliable, low-cost energy for decades to come.
Appalachian has purchased power from these plants for many years. The cost of purchasing power is roughly the same as the annual cost of purchasing the plants. In effect, this transfer allows us to move from being a renter to an owner without increasing customer rates.
In the end, after weighing all options, the data based on reasonable forecasts of future fuel and EPA requirements indicates that transferring the West Virginia plants to Appalachian is the least-expensive, lowest-risk option for our customers.
Even while recommending this course of action to the state Public Service Commission, we continue to aggressively pursue energy efficiency. Energy efficiency programs can be a cost-effective way to decrease growth in future demand, but while we work to expand participation in our energy efficiency programs, we know that there are practical limitations that we must accept.
Our successful energy efficiency program last year produced a savings of 5.1 megawatt hours, an amount equal to the annual usage of 4,350 average homes. Good results, but even the best program can't replace power plants that generate enough electricity for a million homes, as these two plants do.
We are also diversifying our generation fleet by expanding our use of natural gas-fired electricity generation. In just a four-year span, Appalachian Power's generation plan reduces the amount of coal-based generation by around 11 percent, from nearly 80 percent down to 69 percent, and increases the percentage of natural gas generation by more than 13 percent, from 7.5 percent up to 21 percent.
Make no mistake, Appalachian Power is committed not only to enhancing energy efficiency, but to diversifying our fuel sources. We are today and intend to continue making investments on both those fronts. However, neither of those goals should deter us from pursuing the best short- and long-term interests of our customers. Appalachian Power has a responsibility to provide power to customers in the most reliable manner at the best possible cost. The proposed transfer of Mitchell and Amos plants does just that.
Patton is president and CEO of Appalachian Power.