CHARLESTON, W.Va. -- Why should Mon Power and Potomac Edison customers have to pay an extra 6 percent on their electric bills to bail out these utilities' out-of-state parent company?
That is exactly what they are proposing with a plan to purchase 80 percent of the Harrison power plant (near Clarksburg) from their sister company, Allegheny Energy Supply (the remaining 20 percent is already owned by Mon Power). All of these utilities are owned by FirstEnergy, a regional electric power conglomerate.
Allegheny Energy Supply is a Pennsylvania-based deregulated company that sells power into the regional market. Due to low natural gas prices, coal-fired power plants have become less competitive in recent years. Thus FirstEnergy can shore up its profits and credit ratings by selling the Harrison plant into West Virginia's regulated system. If approved by our Public Service Commission (PSC), Mon Power and Potomac Edison's customers will then have to pay for the plant's costs plus profit for the remainder of its useful life -- estimated by the utility at 27 years.
To add insult to injury, FirstEnergy wants Mon Power/Potomac Edison customers to pay more than twice the Harrison plant's former value. When Allegheny Power merged with FirstEnergy in 2011, FirstEnergy re-valued Allegheny Energy Supply's share of the Harrison plant. What was a $550 million asset on Allegheny Power's books before the merger is now a $1.2 billion asset on FirstEnergy's books. How's that for "creative accounting"? Of course, FirstEnergy wants West Virginia consumers to pay for the plant at the inflated price. If that happens, Mon Power will be in the ridiculous situation of fully owning a power plant, 20 percent of which is valued at the original value of $319/kW and the remaining 80 percent of which is valued at the inflated price of $767/kW.
In the original Allegheny Power/FirstEnergy merger settlement filed with the PSC, the company promised that this "acquisition premium" (inflated value) from the merger transaction would never be "recovered" from (paid for by) Mon Power and Potomac Edison customers. It has only taken FirstEnergy two years to go back on their word.
If approved by our PSC, this purchase would lock Mon Power and Potomac Edison into decades of higher energy price risk and preclude investment in less expensive alternatives. Mon Power and Potomac Edison have failed to seriously consider alternatives, such as purchasing power generated from natural gas, buying a smaller share of the Harrison plant, relying more heavily on open-market purchases, and investing in energy efficiency. Even though energy efficiency cannot make up the utility's entire projected energy needs shortfall, any scenario that includes efficiency will be less expensive and expose customers to less commodity price volatility. Yet Mon Power and Potomac Edison currently have one of the weakest energy efficiency programs in the country.
At present, open-market electricity prices are very low, because of cheap natural gas prices. Mon Power and Potomac Edison should take advantage of the opportunity to buy cheaply from the market for the next few years, while they ramp up their energy efficiency programs and design a better, long-term plan to meet their customers' needs at the lowest cost and risk.
The Public Service Commission should protect West Virginia consumers from yet another electric rate hike by rejecting FirstEnergy's transparent attempt to sell us an overpriced, used power plant.Zuckett is executive director for West Virginia Citizen Action Group.