November 19, 2017

Opposition to Pleasants Power Station deal builds with FERC filings

May 18, 2017

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 was approved, FirstEnergy would hold a distinct advantage over merchant generators by having a financial safety net through its West Virginia utilities. Merchant generators like Longview do not have that privilege and must rely on its market revenues to earn a profit, he added.

The companies have defended the purchase following the bid process, saying it is necessary since they will have a projected capacity shortfall of more than 1,400 megawatts by 2027. Acquiring Pleasants and its 1,300 megawatts of power would fill most of that void, they say.

John Deskins, director of the Bureau of Business and Economic Research at West Virginia University, backed the shortfall argument with prepared testimony. He said the companies' coverage areas "will be buoyed by segments of the state's economy that should see sustained growth during the next 15 years."

The low cost and potential area economic benefits also strengthen the case for the Pleasants acquisition, the companies have said in PSC filings.

"While customers are expected to realize the transaction's market hedging benefits, the state and surrounding communities should also gain the security of knowing that Pleasants is a reliable utility asset and a proven contributor to the economy and well-being of West Virginia for years to come," the companies said in a March filing.

The protest from WV SUN and WVCAG said FirstEnergy's argument that the decision to purchase the plant occurred through a fair and open bid process doesn't hold much ground.

FirstEnergy CEO Charles Jones said in earnings calls last year that the company was looking to transfer Pleasants ownership to its West Virginia utilities in an era where coal-fired plants are a costly option in competitive markets.

It's unknown when FERC will make its decision, according to Soules, because it lost its quorum in February. President Donald Trump nominated two officials to FERC earlier this month, but the nominations will likely be opposed by the Senate.

The PSC is expected to hold public hearings regarding the potential purchase at some point in August or September. These hearings typically happen in Charleston, where the PSC headquarters are located, if they are not related to a rate case.

However, with Mon Power and Potomac Edison's coverage encompassing the northern half of the state, ratepayers have requested hearings to be held in its service territory.

"I think it is only fair that public in meetings be held near the homes of those who will bear the brunt of the rate increases," said Susan Shaw Sailer, a Morgantown customer, in a letter filed to the PSC May 10. "It would take me a long time to drive to Charleston, and I'm old enough that even making the drive would be hard for me."

The PSC is considering holding hearings outside of Charleston but hasn't made a final decision on that yet, according to spokeswoman Susan Small.

By : Max Garland | Source : Charleston Gazette-Mail

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