Key Findings
FirstEnergy’s transfer of the Harrison power plant in 2013 from one subsidiary, Allegheny Energy Supply, to another, Mon Power, appears to have been driven by FirstEnergy’s desire to shift the risk of low wholesale electricity prices from FirstEnergy shareholders to Mon Power ratepayers.
In implementing its re-regulation strategy, FirstEnergy subsidiary Mon Power needed to persuade the West Virginia Public Service Commission that transferring the Harrison power plant to Mon Power was in the public interest.
Now, FirstEnergy is planning to transfer all or a portion of another deregulated coal plant, the 1,300 MW Pleasants Power Station, to Mon Power, a move that would result in the reregulation of the Pleasants plant, ensuring that ratepayers would cover all of the plants’ costs, regardless of whether it is competitive in the wholesale market.
Executive Summary
Ohio-based FirstEnergy Corp. has announced plans to seek approval from the West Virginia Public Service Commission to sell all or a portion of its 1,300 megawatt (MW) Pleasants Power Station to FirstEnergy’s West Virginia-regulated subsidiary Mon Power. The coal-fired plant is currently owned by a FirstEnergy deregulated subsidiary, Allegheny Energy Supply.
Mon Power made a similar acquisition three years ago when it purchased a 79.46% share of the 1,984 MW coal-fired Harrison Power Station from Allegheny Energy Supply (Mon Power already owned the other 20.54% of the plant). In seeking Public Service Commission approval for that transaction, Mon Power argued that ownership of the additional share of Harrison would provide a net benefit to Mon Power and Potomac Edison’s customers (Potomac Edison is another FirstEnergy subsidiary and its rates in West Virginia are set to be identical to Mon Power’s). In October 2013, the West Virginia Public Service Commission, in a 2-1 decision, approved the purchase.
FirstEnergy CEO Chuck Jones has described the Harrison transfer as a “model” for what it seeks to do with the Pleasants plant.
IEEFA has evaluated the operating performance of the Harrison plant and found that the transaction thus far has not produced benefits to Mon Power and Potomac Edison electricity customers. Instead, IEEFA estimates that customers have lost more than $160 million relative to what they would have otherwise paid for electricity. The deal has shielded FirstEnergy from suffering a similar loss had the plant continued to be owned by Allegheny Energy Supply. This analysis only looks at one aspect of the deal, whether the revenues from owning Harrison outweigh the costs, and does not consider other criticisms made at the time of the purchase, such as the failure to diversify Mon Power’s fuel mix.
The Pleasants transfer plan is part of a larger strategy by FirstEnergy to re-regulate unprofitable assets in deregulated markets as a way to ensure ratepayer subsidies. The company has pursued similar schemes previously in West Virginia and also in Ohio.
The FirstEnergy/Pleasants scheme will likely cost ratepayers dearly, much as these other deals either have or will if they are allowed to proceed.
Put simply, FirstEnergy is shifting risks from shareholders to ratepayers.
Please view full report PDF for references and sources.
Press release: IEEFA Report: FirstEnergy Strategy of Re-Regulating Plants in West Virginia a ‘Boon’ to Company and a ‘Burden’ to Ratepayers
