September 5, 2017 Read More →

FirstEnergy, Failing on Its Own, Seeks a Multimillion Hand Up Now From Customers

Parkersburg (W.V.) News & Sentinel:

The first of three hearings in front of the West Virginia Public Service Commission is scheduled for this Wednesday at 6 p.m. in Parkersburg City Council Chambers. The power company is hoping you stay home. FirstEnergy is seeking approval for its MonPower and Potomac Edison subsidiaries to buy the Pleasants Power Station from out of state FirstEnergy subsidiary Allegheny Energy Supply for $195 million.

FirstEnergy’s rationale for the sale is a bunch of high-minded double talk about how it will benefit energy consumers. Once you understand the issues, however, it becomes clear it is actually a cynical ploy to bail out a non-competitive drag on their portfolio with a hefty subsidy forced onto their customers.

Approving the sale would move the plant from the competitive energy market in Ohio into West Virginia’s regulated environment. This outdated coal-fired plant can’t compete with newer, more efficient gas-fired, wind and solar sources in Ohio. It is losing money for FirstEnergy’s investors. In West Virginia’s regulated environment, utilities must be granted rate increases until they become profitable. A transfer would likely cost customers $470 million over the next 15 years, or $69/yr. for residential customers, according to testimony from energy consultant David Schlissel filed with the PSC Aug. 25.

FirstEnergy CEO Chuck Jones has described the proposed Pleasants transfer as being modeled on the sale of the Harrison Power Station from AES to Mon Power 3 years ago. If he’s right it doesn’t bode well for us. An Institute for Energy Economics and Financial Analysis (IEEFA) report concluded that this sale has cost customers more than $160 million in excess fees and deficits so far.

FirstEnergy dubiously claims that energy prices are going to rise. In this contrived scenario they say the acquisition would benefit ratepayers to the tune of $636 million over the next 15 years. If this plant will be such a spectacular performer why are they so desperate to unload it? The IEEFA explains the contradiction by undermining the power company’s rosy scenario in an Aug. 28 article, citing “the ongoing environment of low wholesale power prices… driven by cheap natural gas, relatively flat power demand, and increasing penetration of renewable energy and the growing uptake of energy efficiency.”

FirstEnergy knows its cost saving argument can’t withstand scrutiny. They’re hoping the PSC will swallow their assertion that they’re in the beginning of a capacity shortfall that will peak in 2027 and require Pleasants to shore it up. In filings with the PSC analyst Schlissel concluded that FirstEnergy overstates the projected shortfall by 400 MW and doesn’t need another plant. Their need for Pleasants is based on them having disingenuously sized a system to meet peak demand in West Virginia during the winter. This is not necessary or good policy. These temporary shortfalls are most economically provided for by purchases from the grid — not the purchase of an entire plant.

Energy companies are not guardians of the public interest. They exist to make a profit. And sometimes they shave the truth pretty closely. The responsibility to protect the public lies with the PSC. However, recent PSC decisions are cause for concern. The application of FirstEnergy to sell the Harrison Power Station to MonPower mirrored the current Pleasants Power request, yet the PSC granted the sale. An agreement from the Harrison sale triggered the PSC to issue a request for competitive proposals from FirstEnergy for additional capacity. This FirstEnergy did not want. So they dug up and resubmitted a different set of data that showed no shortfall. FirstEnergy’s projections seem highly conditional: There is a shortfall when it suits their purposes and it disappears when it doesn’t.

An IEEFA study “First Energy, A Major Utility Seeks A Subsidized Turnaround” describes the level of mismanagement that has landed FirstEnergy in the financial hole it is currently in. It is banking on being able to continually stay ahead of the consequences of its poor decisions by benefiting from equally poor decisions from our Public Service Commission.

This deal stinks. FirstEnergy is hoping this sale gets connected to “war on coal “ hysteria in enough people’s minds to obscure what’s really happening: A shameless, predatory corporate bailout.

More: Op-ed: Shedding light on FirstEnergy request

Comments are closed.