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Study shows MonPower takeover of Harrison plant cost customers millions

Courtesy FirstEnergy
A study conducted by the Institute for Energy Economics and Financial Analysis has found that MonPower’s takeover of this Harrison County coal-fired power plant has cost West Virginia customers $164 million since 2013. The plant, located north of Clarksburg, cost $1.1 billion.

A new study by the Institute for Energy Economics and Financial Analysis, a liberal research group, has calculated that MonPower’s takeover of the Harrison coal-fired power plant has cost West Virginia electric customers $164 million since 2013.

At the time it was approved, MonPower’s purchase of the plant from its sister company, Allegheny Energy Supply, was said to be a good deal for MonPower and Potomac Edison’s more than 500,000 customers in northern half of West Virginia.

The electric utility company argued the $1.1 billion cost of the plant, which is north of Clarksburg, could be offset by selling a large amounts of energy into the regional electricity market — essentially allowing electric customers in other states to subsidize the purchase.

Those arguments were challenged in 2013 by numerous groups, and was openly questioned by Ryan Palmer, one of the three members of the state’s Public Service Commission at the time.

Those against the plan said it was a bailout for the stockholders of FirstEnergy, the parent company of MonPower, Potomac Edison and Allegheny Energy Supply, and was a detriment to West Virginia’s electric users.

The value of the plant has been a point of contention ever since, especially as customers in West Virginia continue to pay for the billion purchase and millions of dollars for new emission control upgrades that were announced in August.

The IEEFA study seeks to calculate the ongoing cost of the controversial purchase for West Virginia electricity users.

Todd Meyers, a spokesperson for MonPower, responded to questions about the study by saying the company believes the purchase benefits their customers and that it supports coal mining.

“It continues to provide reliable, low-cost power to our customers, and has preserved the opportunity to use more than 5 million tons of West Virginia produced coal annually, supporting hundreds of coal miners with solid, family-sustaining wages,” he said.

The release of the report also follows recent comments by FirstEnergy’s CEO Charles Jones, who told investment analysts that the company wanted to sell off another coal-fired power plant to West Virginia customers.

The Akron-based parent company and its shareholders have been suffering large losses because of the closure of uncompetitive coal-fired power plants. In response, Jones said the company would seek to use the same “model” to get the state’s PSC to approve MonPower’s purchase of the Pleasants plant, near St. Marys.

The study, which was conducted by Cathy Kunkel, a Charleston resident and analyst for IEEFA, suggests the cost of the Harrison plant is enough evidence for why the PSC should look carefully at FirstEnergy’s plans to sell the Pleasants plant.

“The poor financial performance of Harrison to date raises serious doubts about whether the Harrison acquisition provides a good ‘model’ for West Virginia to follow in evaluating FirstEnergy’s plan to have MonPower purchase the Pleasants power plant,” Kunkel said.

During the 2013 regulatory case, Kunkel was a witness for the West Virginia Citizen Action Group, which opposed the transfer of the Harrison plant.

While the 1,984-megawatt Harrison plant was supposed to sell enough power to offset costs for West Virginians, Kunkel’s analysis found the plant created a net cost for customers for 28 of the 33 months that MonPower has owned it.

That analysis compares the cost of Harrison to what MonPower and Potomac Edison customers would have paid if they would have relied on the regional market to fulfill their electricity supply needs.

It also showed that the plant wasn’t generating enough revenue from the regional energy market earlier this year to cover all of the fuel costs at the plant, let alone the operating and maintenance costs or planned upgrades.

“The bet has not panned out,” Kunkel wrote.

FirstEnergy, Meyers said, did not have a chance to review the IEEFA study, but said the company still believes the plant is a good deal for customers in West Virginia.

“We continue to believe that the Harrison transaction, over the long term, was and is the best option to provide reliable, low-cost electricity to our customers,” he said.

Last month, the PSC staff and the state’s Consumer Advocate Division called for the three-member PSC to require MonPower to solicit bids before it asks to buy any new power generating stations.

The groups were trying to preempt the company’s expected request to buy the 1,300-megawatt Pleasants plant by requiring them to seek estimates on other power sources like wind turbines, solar arrays and new natural gas plants.

On Wednesday, FirstEnergy’s attorneys filed a motion opposing the efforts to get the company to seek competitive bids for new sources of power, which the company says it will need in the coming years.

FirstEnergy’s lawyers argue that they shouldn’t have to seek other bids outside of Pleasants plant because it would “usurp reasoned management decision making.” They say the company can get a better deal for its customers by not seeking other offers.

“Solicitations and private negotiations with third parties often result in better prices,” FirstEnergy’s attorneys said.

Many groups involved in energy regulation in the state believe FirstEnergy is seeking to sell the Pleasants plant to West Virginia customers to save the company’s stockholders from eating any losses on the plant.

“Put simply, FirstEnergy is shifting risks from shareholders to ratepayers,” Kunkel wrote.

Reach Andrew Brown

at andrew.brown@wvgazettemail.com, 304-348-4814 or follow @andy_ed_brown on Twitter.

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