June 26, 2017 Read More →

More Questions on FirstEnergy Scheme in West Virginia

State Journal (West Virginia):

According to multiple sources, including West Virginians For Energy Freedom Coalition and the Institute for Energy Economic and Financial Analysis, Ohio-based FirstEnergy, owner of Potomac Edison and Mon Power, has applied to purchase a plant based upon a model purchase in 2013 that has cost consumers over $160 million.

FirstEnergy has filed its application with the West Virginia Public Service Commission to sell their Pleasants power plant to its subsidiaries Potomac Edison and Mon Power. The $195 million purchase is a pre-emptive reaction to a perceived shortage in power capacity in 2027 that will allegedly leave 1.4 million homes out of power, according to Todd Meyers, a spokesperson for FirstEnergy.

Organizations like West Virginians for Energy Freedom and the Institute for Energy Economic and Financial Analysis (IEEFA) say the deal is very similar to the 2013 acquisition of the Harrison plant from Allegheny Energy Supply, another subsidiary of FirstEnergy, to Mon Power and Potomac Edison that cost rate payers over $160 million.

According to Karan Ireland, director of WV Sun and the coalition, FirstEnergy operates out of Ohio, a deregulated state, and owns plants that cannot compete in Ohio, therefore the corporation is selling its plants to their own subsidiaries in West Virginia, a regulated state, in order to prevent losses for shareholders at the expense of rate payers.

According to IEEFA analyst Cathy Kunkel, a report in September 2013 by Fitch Ratings showed that FirstEnergy’s deregulated coal power plants lost 63 percent of their value from 2008 to 2013. The report said the depreciation was due to unfavorable market conditions. In addition, the deregulated subsidiary FirstEnergy Solutions was placed at “zero equity value,” according to a report by UBS Investment Research.

According to testimony in a 2013 Public Utilities Commission of Ohio case concerning FirstEnergy Solutions by FirstEnergy witness Donald Maul, the subsidiary was not viable in a deregulated market.

“The economic viability of the plants is in doubt,” Maul said. “Market-based revenues for energy and capacity have been at historic lows and are insufficient to permit (deregulated subsidiary) FES to continue operating the plants and to make necessary investments.”

Because of FirstEnergy’s struggle in the deregulated market of Ohio, the management implemented a strategy of “re-regulation” where the company would seek out its regulated subsidiaries to counteract losses for shareholders in uncompetitive plants, according to the IEEFA.

Pleasants power plant deal could hurt consumers, opponents say

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