First Energy, the parent company of MonPower and Potomac Edison, is facing tough questions about the company’s future energy plan in West Virginia.
The Public Service Commission staff sent a request to First Energy officials last month asking them to explain why they believe buying another coal-fired power plant in the near future is the best way to provide electricity to its 520,000 customers in the Mountain State.
The line of questioning by the PSC staff comes two months after First Energy provided the commission with its integrated resource plan — a 15-year forecast that is meant to outline the lowest cost options for electricity in the future. It marked the first time electric utilities were required to disclose those planning documents in West Virginia.
While many electric utilities throughout the country have moved toward lower-priced natural gas and other renewable energy sources, MonPower’s and Potomac Edison’s resource plan suggests the companies would seek to buy another coal-fired power plant in the region.
In 2013, the PSC allowed the state’s largest electric utilities to buy large coal-fired power plants from their parent companies, which were capable of providing more electricity than their customers in West Virginia used. Opponents of those purchases criticized the plans as bailouts for the parent companies’ shareholders by electric users in West Virginia.
The utility companies had argued that they could sell excess electricity onto the regional grid, helping to cut the cost of those coal plants for West Virginia customers. But natural gas plants have largely become cheaper than coal power in recent years, meaning West Virginia’s power plants are called on less by the regional grid, known as the PJM Interconnection.
As the rest of the country is benefiting from low-priced natural gas, West Virginians are required to get the vast majority of their electricity from coal.
First Energy’s plan to further invest in coal power in West Virginia is being sharply analyzed by the PSC staff members.
The four-page inquiry sent to the company questions many of the most fundamental cost and market calculations that are laid out in First Energy’s report.
The PSC staff asks why coal-fired generation is the only option being considered, whether the company factored in possible regulations on carbon pollution and how First Energy actually came up with the estimated cost of other fuel sources like gas, solar and wind, all of which were priced substantially higher than coal in the company’s report.
The staff also asked company officials how they came up with the reported growth rate in customer electricity usage, which First Energy estimates to be around 2.2 percent annually between 2015 and 2020. As part of the questions, the PSC staff ordered the company to submit the data they relied on for their calculations.
In response, First Energy maintained that an exiting coal plant would be the cheapest energy option for customers, even compared to new combined cycle gas turbines.
Meanwhile, First Energy continues to idle some of its largest coal-fired plants in Ohio and Pennsylvania because of the low prices those electric generators were receiving in the market, and MonPower is considering retrofitting the Harrison Power plant near Clarksburg to burn natural gas.
First Energy officials stated they didn’t take into account carbon regulations, which would raise the price of the coal plant, because the federal rules “remain under litigation” and “have yet to be defined in the state implementation plans.”
Appalachian Power and other utilities across the country, however, have set up carbon pricing models to help them prepare for those possible scenarios in the future.
In its response, company officials also told PSC staff that they had miscalculated the price of renewable energy sources like wind turbines. They had estimated wind power to cost around $228 per megawatt hour. They now estimate it to be $124 per megawatt hour.
By comparison, Appalachian Power’s estimated price for wind was between $63 and $73 per megawatt hour.
Todd Meyers, a spokesman for MonPower and Potomac Edison, said the answers and data provided to the staff would allow them to fully understand the company’s planning and cost calculations.
“The staff is doing its due diligence, asking the necessary questions in its data request to ensure that we have fully evaluated all aspects of our integrated resource plan,” he said. “No different than in any other case.”
But James Van Nostrand, a West Virginia University law professor and the director of the Center for Energy and Sustainable Development, said the staff’s interest in First Energy’s resource plan seems to be narrowing in on the most basic underpinnings of the company’s report.
Van Nostrand, who pushed for resource planning in West Virginia, said the staff’s questions go straight to the heart of what he believes are the report’s failures.
He thinks the forecast for customer demand is over-inflated. He questions the company’s estimated cost for the take over of an existing coal plant, valued at $57 per megawatt hour. And he believes the resource plan is meant to set MonPower and Potomac Edison up for another takeover of a coal-fired power plant currently owned by First Energy, their parent company.
Meyers wouldn’t confirm whether First Energy would seek to transfer another coal plant from the parent company’s shareholders onto West Virginia customers, but he said any transaction would be taken up by the PSC in the future.
“As stated in the IRP, we are reviewing our options and may seek the commission’s approval for any specific transaction that may be selected in the future. We have no additional information to offer at this juncture.”
Van Nostrand isn’t convinced that the evidence supports West Virginia utility customers paying for another coal-fired power plant, especially with other coal plants in the state — including the Harrison Power Plant near Clarksburg — being out-priced in regional markets by natural gas plants throughout the eastern United States.
The PSC staff, Van Nostrand said, needs to take a hard look at what First Energy is presenting to the commission. If the staff had accepted the resource plan as it stands, he said it would have automatically given more legitimacy to First Energy’s findings in the planning document.
“I was very encouraged by this,” he said. “There needs to be a rigorous review process.”
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