May 17, 2017 Read More →

Rising Opposition in West Virginia to FirstEnergy’s Scheme to Shift Risk to Ratepayers

Charleston Gazette:

Groups opposing the purchase of the FirstEnergy-owned Pleasants Power Station by subsidiaries Mon Power and Potomac Edison have made their case known to the Federal Energy Regulatory Commission, arguing the transfer would stifle competition and put customers at risk of higher utility bills.

Merchant generators and advocacy groups have said the purchase would hurt competition by shifting the coal-fired plant’s risk to customers in West Virginia’s regulated market, where it is guaranteed a profit. They add that the purchase shouldn’t be approved because the Federal Power Act prohibits transfers in which a public utility cross-subsidizes with a corporate affiliate.

Their arguments have been made in multiple filings this month with FERC, which is responsible for approving the purchase along with the state Public Service Commission.

“Faced with the Pleasants plant’s declining market competitiveness, FirstEnergy is seeking to offload the financial risks of that plant onto captive customers, who would ensure that FirstEnergy and its shareholders continue receiving a profit from the plant,” a protest submitted to FERC by WV SUN and West Virginia Citizen Action Group said. “That is an option that is not available to a merchant generator that does not have regulated affiliates and, therefore, skews the competitive Markets.”

Opponents say the $195 million deal would be similar to what occurred in 2013, when Mon Power purchased the Harrison power plant in Haywood from Allegheny Energy Supply. An IEEFA report said the transfer cost ratepayers more than $160 million.

Companies that could be affected from the transaction include Longview Power, a Maidsville-based merchant generator that also sells into the PJM Interconnection, the regional electric grid the companies are a part of. It argued in its FERC protest that it has to sell at competitive prices while the companies could avoid that with the purchase, and added that the aging plant is “likely to require substantial ongoing maintenance costs to Mon Power and its customers,” rendering FirstEnergy’s argument of a low purchase price void.

“The equipment has to wear out at some point,” said Longview CEO Jeff Keffer in an interview. “I compare [the plant] to a 1970s Chevrolet Vega. When Pleasants was built, it was all brand new, but technology has gone way beyond that.”

The protests submitted to FERC are geared more toward issues of competition in the regional energy market, as opposed to PSC filings, which focus more on the state-level impact and customer rate increases, according to Michael Soules, an attorney with EarthJustice.

Soules said if the purchase is approved, the companies would hold a distinct advantage over merchant generators by having a financial safety net in the regulated market. Merchant generators like Longview do not have that privilege and are on the hook if a purchase doesn’t work out, he added.

Opposition to Pleasants Power Station deal builds with FERC filings

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