Appalachian Power dismisses calls to reduce energy needs

Appalachian Power has dismissed calls to spend more money on energy-efficiency programs, and has pushed for additional charges to be placed on rooftop solar, which would reduce future energy needs, according to documents and testimony provided to the West Virginia Public Service Commission earlier this year. The moves could help the utility meet the requirements of the pending Clean Power Plan, advocates say.

Jeri Matheney, Applachian Power’s communications director, said the utility is analyzing the possible impacts of the Clean Power Plan as information becomes available.

“We have been planning for the [clean power plan], analyzing how we might be able to meet its requirements and working with the government to explain the ramifications of the proposed rule,” Matheney said last week. “However, until the rule comes out, it is unclear what benefit there would be or what action should be taken.”

The Environmental Protection Agency was set to release the final draft of the rule today.

Matheney and other company officials argue that even after the rules to fight climate change are finalized, the company shouldn’t rush to implement changes until the state develops its own plan or until an anticipated lawsuit over the regulations is resolved.

“We would need something from a state level,” Jim Fawcett, Appalachian Power’s energy efficiency and alternative energy manager, said during a hearing in front of the PSC. “Federal, I don’t think has any jurisdiction that would require us on the state level to do that.”

But groups representing Appalachian Power customers in front of the PSC believe the company is doing a disservice to those customers by effectively opposing rooftop solar and refusing to take pre-emptive action by increasing the amount of money spent on energy-efficiency programs, like installing more efficient lighting, replacing outdated heating and cooling systems and retrofitting homes and business with better insulation.

“If you think there is any reasonable chance of the Clean Power Plan coming through, you would think you would want to be in the best position possible,” said Cathy Kunkel, who testified on behalf of West Virginia Citizen Action Group.

Last year, West Virginia lawmakers for the first time required electric utilities to file “integrated resource plans,” a kind of road map that helps companies and state regulators plan for future supply and demand needs. Other states have required such plans for decades, and West Virginia doesn’t require plans to be as detailed as other states do.

Those advocating for additional spending point out that efficiency improvements made now are expected to be taken into account when the EPA considers the company and state’s emission reductions, which could include a 20 percent drop in carbon emissions statewide from 2012 to 2030.

“I think it’s short-sighted of them to ignore regulations that in months will be on the books and will be very clear guidelines of what they are going to have to do,” said Emmett Pepper, who also represented WV-CAG in front of the PSC. “Like good investors, they should start planning ahead.”

“Energy efficiency is the most cost effective way of meeting these goals,” Pepper said. “Waiting for the last minute to put a new power plant online is detrimental to ratepayers. It seems like it’s a pretty big gamble that affects West Virginians.”

But Appalachian Power officials said if they make policy choices now that aren’t ultimately part of the Clean Power Plan, those decisions could end up costing customers.

“If we were to take action based on a guess of what the Clean Power Plan will include and we were wrong, we would be unlikely to be able to recover our expenses for any investments we made,” Matheney said.

According to an integrated resource plan filed with the Virginia State Corporation Commission, Appalachian Power will likely need to add hundreds of additional megawatts of electric capacity in the next 15 years, including new wind mills, commercial solar facilities and gas-fired power plants. And with much of Appalachian Power’s energy still expected to come from the John Amos and Mountaineer coal-fired power plants in West Virginia, it is still unknown to what extent that generating capacity will be affected by the new rules.

But while Appalachian Power is planning for all of this expansion in capacity, advocates argue the company is woefully behind other states in energy efficiency and even other American Electric Power subsidiaries like Ohio Power Company.

According to documents filed with the PSC, Appalachian Power reduced the company’s electricity sales by around 0.34 percent in 2014 directly because of energy efficiency programs. That reduction equals around 50 million kilowatt-hours, equal to the annual usage of 4,350 homes, according to PSC documents.

In comparison, top-performing states reduced electricity sales demand by more 1.5 percent because of energy efficiency efforts, and Ohio Power reduced sales by more than 1 percent this past year.

Company officials said the expansion of energy efficiency in other states can be attributed to higher power costs, which makes energy efficiency more attractive to customers that have to pay for part of the improvements. Matheney said that customer demand in energy efficiency is met by the current amount of spending by Appalachian Power.

According to the draft clean power plan rule, the EPA expects West Virginia utilities to reach an energy efficiency savings rate of 1.5 percent of sales by 2024. But the company is only planning to have energy efficiency improvements of around 1 percent of sales by 2029.

In Appalachian Power’s most recent energy efficiency case, in which the PSC approved around $10 million in spending, company officials argued that any additional spending above that level would not be as cost effective, even though they admitted there were no studies conducted evidencing that point.

“We didn’t do any research on that,” Fawcett testified. “That was pretty much intuitive.”

State politicians and policy analysts who have pushed for better electric utility planning see the company’s refusal to spend more on energy efficiency as larger institutional problem in West Virginia.

Delegate Stephen Skinner, D-Jefferson, who introduced an alternative integrated resource planning bill in 2014 that would have also established statewide targets for energy efficiency, noted that any policy that reduces electricity demand in West Virginia, even if it means customers pay less, is seen as an attack on the state’s coal industry.

In a 2012 policy paper that called for state officials to mandate integrated resource planning, James Van Nostrand, a West Virginia University law professor, pointed out that Appalachian Power and other state electric utilities never directly compared the cost of energy-efficiency programs to the price of constructing a new power generation source, like a coal- or gas-fired power plant. Because of that, he said, utilities haven’t had to adequately consider energy efficiency.

“Notwithstanding this striking admission that demand-side resources are cheaper for customers than generating resources, Appalachian Power refuses to allow demand-side resource to compete directly with supply-side measures, and proceeds with a resource plan that is almost exclusively devoted to more expensive supply-side measures,” Van Nostrand wrote.

While the 2014 integrated resource planning law (HB2803) requires companies to assess future electricity demand and supply every five years, it says nothing about choosing the policy that has the lowest cost, which Van Nostrand said is an essential piece to proper integrated planning.

According to the U.S. Energy Administration, electricity from a new gas-fired power plant in 2020 will cost more than $72 per megawatt hour and any type of coal power generation is expected to exceed $95 per megawatt hour.

With those numbers, efficiency advocates argue that additional funds to help customers reduce energy usage is the more likely cost-effective policy to meeting future energy needs.

Appalachian Power officials argue there is no way to accurately compare those costs.

“Energy efficiency is a means to reduce the demand for energy,” Matheney wrote. “It is not directly comparable to resources that can be readily dispatched to meet energy needs.”

Still, Matheney said, Appalachian Power has complied and will comply with state and federal laws whenever the time comes.

Reach Andrew Brown at andrew.brown@wvgazette.com, 304-348-4814 or follow @Andy_Ed_Brown on Twitter.

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