Appalachian Power has added more wind energy to its portfolio, after the state Public Service Commission approved the utility’s request to buy additional power generation from an Indiana wind farm.
Appalachian Power will purchase 120 megawatts of wind power from energy company NextEra’s Bluff Point Wind Energy Center, which is projected to be in operation by 2018.
The PSC said “it is just, reasonable, and in the public interest” for Appalachian Power to enter into the purchase agreement in its order filed Tuesday.
The PSC said Appalachian Power can seek recovery of purchase costs through an expanded net energy cost proceeding, which could contribute to a customer rate increase.
However, Appalachian Power spokeswoman Jeri Matheney said the purchase is expected to save customers money because of tax credits and other benefits in using wind energy.
“Over the 20 years of the agreement, costs are forecasted to be lower than they would be without the agreement,” she said in an email.
The independent PSC staff backed Appalachian Power and recommended the PSC approve the purchase, primarily due to the tax credits Matheney cited and avoiding carbon regulations.
This is despite Randall Short, deputy director of the PSC utilities division, saying in testimony that there is a “very small” margin of error in the company’s confidential projections of wind energy market prices. If the market falters, customers would be 100 percent responsible for the costs in the 20-year agreement between Appalachian and NextEra.
The West Virginia Energy Users Group and the Consumer Advocate Division expressed similar concerns that customers could be locked into higher bills in testimony filed with the PSC earlier this year.
“I believe that this allocation of 100 percent of the risk [to customers] is at best questionable, if not unreasonable,” said Stephen Baron, a utility consultant representing the WVEUG, in testimony.
Baron said Appalachian Power should take on 20 percent of the purchase responsibility to alleviate these concerns.
John Scalzo, Appalachian Power’s director of regulatory services for West Virginia, said in rebuttal testimony that the 20 percent Baron proposed seemed arbitrary and “does not accord well with [Appalachian Power’s] obligations as a West Virginia public utility.”
The primary driver behind the purchase is the company experiencing an energy shortfall, according to Scalzo. He said it needs to make up the deficit accumulated by purchasing energy from the PJM Interconnection, an organization that monitors the regional energy marketplace.
Scalzo said although customers would bear the risk, the cost is likely to be less than purchasing power on the PJM marketplace. Wind energy production is particularly vital in the winter, when the marketplace is at its most volatile, he added.
The WVEUG said it doesn’t oppose this particular agreement, but may object to similar transactions in the future.
“Our concerns continue to be with the inability and unwillingness of [Appalachian Power] to accept any risks in projects such as this,” said Barry Naum, an attorney representing the WVEUG, in a PSC hearing.
The CAD shared similar sentiments in the hearing, adding that Appalachian Power’s market projections being confidential made evaluating the necessity of the purchase difficult.
“Certainly, we would ask and we would expect that our position in not opposing Staff’s position and the acceptance of the Bluff Point project not be accepted as any sort of precedent,” said Heather Osborn, an attorney representing the CAD.
Outside of Bluff Point, Appalachian Power has 376 megawatts of wind power through existing purchase agreements. The company is looking to add more capacity from solar and wind sources in the coming years, as indicated by its integrated resource plan filed in 2015.