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PSC Approves Rate Hike for WV First Energy Subsidaries, Requires Report on Potential Pleasants Plant Purchase



January 4, 2023 - West Virginia utility regulators have approved an agreement that will increase the average Mon Power and Potomac Edison residential customer’s monthly bill by more than $5 while allowing for further consideration of Mon Power buying the Pleasants Power Station.

The state Public Service Commission on Friday approved a joint stipulation that the companies and other stakeholders presented earlier this month under which the companies’ surcharge that customers pay to cover the companies’ fuel costs will increase by $91.8 million. That sum is half the increase the two FirstEnergy subsidiaries originally proposed in August.

The rate hike is effective Jan. 1. The increase for an average residential customer using 1,000 kilowatt-hours per month will be $5.53, raising the monthly bill from $115.05 to $120.58. That constitutes a 4.8% hike and half the originally proposed 9.6% climb.

The rate climb follows the Public Service Commission’s September approval of rate increases of 49 cents per month in 2024, $1.43 per month in 2025 and $1.97 per month in 2026 for the average Mon Power and Potomac Edison residential customer to cover environmental upgrades federally required for long-term operations at the companies’ two in-state coal-fired plants.

The Public Service Commission’s order Friday requires Mon Power and Potomac Edison to file a report with the commission evaluating a potential purchase of the 1,368-megawatt Pleasants Power Station in Willow Island, Pleasants County by March 31. After the report is filed, the commission may decide that a separate proceeding is appropriate to address the report, the agency said in its order.

The joint stipulation was presented last month to the commission by the two companies, the commission’s staff, the commission’s Consumer Advocate Division, the West Virginia Energy Users Group (a group of large industrial users), the West Virginia Coal Association, Longview Power LLC, the West Virginia Citizen Action Group, Solar United Neighbors and Energy Efficient West Virginia.

The parties couldn’t agree on how to evaluate the potential acquisition of the Pleasants Power Station.

“[That] essentially represents the one item that the parties simply could not agree to,” FirstEnergy Service Company rates and regulatory affairs director Raymond Valdes testified before the commission at a Dec. 8 evidentiary hearing. “There were a lot of divergent opinions during the settlement negotiations.”

In March, electric power producer Energy Harbor announced that it plans to sell or deactivate the 42-year-old plant in 2023. Energy Harbor, which was known as FirstEnergy Solutions prior to its emergence from Chapter 11 bankruptcy in 2020, said the closure is required as it transitions to carbon-free energy.

FirstEnergy Solutions was a generation subsidiary of FirstEnergy that ran coal and nuclear plants.

A witness for the Consumer Advocate Division, an independent arm of the commission charged with representing ratepayer interests, recommended that Mon Power pursue acquiring the Pleasants plant and then consider closing its coal-fired Fort Martin Power Station in Maidsville, Monongalia County.

The witness, coal procurement analyst Emily Medine of Virginia-based Energy Ventures Analysis Inc., argued in written testimony that the Pleasants plant is equipped with emissions control technology that the Fort Martin plant lacks and is in a better location for delivery of West Virginia coal.

Medine was the agent for Lexington Coal Company in the company’s sale of assets in Illinois and Indiana, and was an advisor to and on the board of the Elk Horn Coal Company until its 2011 sale to Rhino Resource Partners LP, a limited partnership formed to operate steam and metallurgical coal properties and other non-coal assets.

Opponents of the recommendation say it would be an irresponsible corporate bailout doubling down on coal in a state that has clung to it amid the state’s escalating electricity prices and scant energy efficiency options compared with other states that have embraced renewables much faster.

Emmett Pepper, policy director of Energy Efficient West Virginia, said in an email Friday that the group of energy efficiency advocates doesn’t believe an additional power plant the size of Pleasants is needed to meet the needs of Mon Power or Potomac Edison customers, regardless of whether the Fort Martin Power Station keeps operating.

“[W]e need to harness the power of the free market to find the best option for ratepayers,” Pepper said. “If the PSC only considers one proposal in a vacuum, it will be impossible to know if that one proposal is the best one.”

Coal accounted for 91% of electricity generation in West Virginia in 2021 — 16 more percentage points than the state with the next-highest percentage, Missouri.

Valdes testified that Mon Power and Potomac Edison were looking to the Public Service Commission for “guidance in terms of what the next steps may be” regarding whether to pursue purchasing the Pleasants plant.

Valdes referred the commission to previously filed written testimony in which he said the companies had taken note of Medine’s recommendation and would evaluate it as part of its continued evaluation of generation resources. In his written testimony, Valdes said the companies also would have to buy an impoundment at Pleasants plant to dispose of the power station’s waste.

“In summary, there are many complicated and complex moving parts to consider and analyze for such a transaction, and the Companies believe this is not the appropriate proceeding to discuss,” Valdes said in his written testimony.

Energy Harbor did not respond to a request for comment.

The West Virginia Legislature bailed out the Pleasants Power Station in 2019 by approving an estimated $12.5 million in annual tax breaks for the financially struggling plant.

Mon Power sought regulatory approval in 2017 to acquire the Pleasants plant from FirstEnergy subsidiary Allegheny Energy Supply Company LLC for $195 million, touting an expected net increase in installed capacity of 1,300 megawatts that it said would cover a capacity deficit.

The Public Service Commission found in a January 2018 order that the case did not show the companies had a shortfall in meeting energy requirements with internal generation resources. The commission conditionally approved the Pleasants plant transfer with ratepayer protections that included limits on recovery of undepreciated Pleasants capital and closing costs.

But FirstEnergy deemed the proposed transfer unworkable the following month, citing the commission’s conditions and a Federal Energy Regulatory Commission rejection of the proposal.

The Consumer Advocate Division said in a filing in that case that the proposed Pleasants plant transaction would have been too risky for captive West Virginia ratepayers, forcing them to become buyers of significant surplus capacity.

“As the legal representative of ratepayers, no thank you,” the Consumer Advocate Division said in an October 2017 filing.

“It comes down to this: we should be considering all other options before requiring ratepayers to pay extra to buy another power plant,” Pepper said Friday.

A 2020 analysis from the financial advisory firm Lazard estimated the ongoing cost of a new solar energy project is $24 to $32 per megawatt hour, $10 to $16 less per megawatt hour than the cost to operate an existing coal-fired power plant.

Nearly two-thirds of total renewable power generation added last year had lower costs than the cheapest fossil fuel option, according to a report last year from the International Renewable Energy Agency, a global intergovernmental agency that supports countries in energy transitions.

Public Service Commission Chairwoman Charlotte Lane and Commissioner Bill Raney, longtime former West Virginia Coal Association president, focused largely on Mon Power and Potomac Edison coal supply management during the Dec. 8 evidentiary hearing for their rate hike request.

The Public Service Commission has been alarmed by rising fuel costs and persistently low capacity factors reported by the state’s electric utilities.

Capacity factor, or use rate, is the ratio of electrical energy produced by a generating unit for a given time to the electrical energy that could have been produced at full power during the same span.

The panel has contended that operating at higher capacity factors would lower costs recoverable from customers, encouraging self-generation over paying rising PJM market prices for purchased power. PJM is the regional transmission organization that coordinates electricity movement through West Virginia and all or parts of 12 other states.

The companies’ fuel cost under-recovery was $182.9 million as of October, according to a monthly report they filed for December as required by the commission.

The anticipated retirement dates for the Fort Martin and Harrison plants are 2035 and 2040, respectively. In November 2020, FirstEnergy pledged to achieve carbon neutrality by 2050 in an effort to combat climate change.

But FirstEnergy representatives have downplayed the company’s climate goals in hearings before the coal-friendly Public Service Commission, emphasizing their commitment to securing ample coal supplies.