FirstEnergy purchasing coal fired power plants; Poor decision for ratepayers

FirstEnergy's West Virginia subsidiaries (Mon Power and Potomac Edison) are seeking Public Service Commission approval to purchase 80% of the Harrison power plant from another FirstEnergy subsidiary (Mon Power and PE already own the other 20% of Harrison). Harrison was constructed in the early 1970s and the 80% interest in the plant to be transferred is currently owned by Allegheny Energy Supply Company, which is also owned by FirstEnergy. FirstEnergy is seeking fast-tracked regulatory approval, giving the PSC less time to scrutinize a deal that will impact electric rates for the next 20-plus years that the plant is in operation. EEWV believes that the Harrison plant will turn out to be a long-term liability to ratepayers as this aging plant becomes more costly to run and faces more environmental controls. 

Purchasing this plant at FirstEnergy's proposed price would raise residential electric rates by about 2% in 2013, in addition to eliminating what would otherwise have been about a 5% rate decrease. Yet the price that FirstEnergy is proposing to charge is roughly double what the plant is actually worth. Back in 2010 when FirstEnergy merged with Allegheny Energy to acquire Mon Power and Potomac Edison, the value of the Harrison plant on Mon Power's books was about $550 million. During the merger, FirstEnergy revalued the 80% share of the plant that they transferred to their subsidiary Allegheny Energy Supply at more than $1 billion (based on the assumed future value of its electricity output). They now plan to sell the plant back to Mon Power, forcing Mon Power's customers to pay roughly double what they would otherwise have been paying for the plant if they'd just kept it in the first place. 

FirstEnergy is presenting this proposal as a means for meeting its long-term electricity needs. Yet, their application to the PSC for approval of this sale fails to adequately consider alternatives. Despite the fact that West Virginia ranks 49th in the country in terms of energy efficiency, and FirstEnergy's energy efficiency programs in WV are incredibly weak, the company completely dismissed the idea of ramping up energy efficiency efforts, saying that energy efficiency and demand response "were not considered as a viable, long-term solution." 

In the News: 

The State Journal: FirstEnergy: Keep rates the same, use extra to buy coal plants 

The State Journal: FirstEnergy wants to transfer coal-fired generation to Mon Power 
Comments