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American Electric Power has reached a settlement with consumer watchdogs and energy-efficiency advocates that would allow the transfer of partial ownership of its Mitchell Power Plant near Moundsville to the company’s West Virginia-based Wheeling Power subsidiary, according to a notice filed with the state Public Service Commission.

Wheeling Power would initially be paying for only 82.5 percent of a half-interest in the 1,600-megawatt plant, with that percentage increasing to 100 percent in 2020, according to the notice, which outlined the settlement terms for commissioners.

The proposal, which needs commission approval, would leave out any transfer of ownership of Mitchell’s Conner Run Fly Ash Impoundment, protecting Wheeling Power customers from potential costs of a toxic cleanup there.

The deal also includes increased spending by AEP on energy-efficiency programs, and requires the company to issue a “request for proposals” in the future if it needs additional long-term generation capacity to meet West Virginia customer needs.

“This settlement is the culmination of more than two years of regulatory proceedings and clearly demonstrates collaboration at its best,” said Jeri Matheney, a power company spokeswoman.

The settlement would resolve the last unfinished portion of two closely watched cases in which large power companies were seeking to transfer ownership of coal-fired power plants to their West Virginia affiliates.

In October 2013, the PSC approved the transfer by FirstEnergy of its Harrison power station near Shinnston to its Monongahela Power subsidiary. In December 2013, the commission approved AEP’s transfer of its John Amos plant near St. Albans to its Appalachian Power subsidiary.

Critics of the proposals, including environmental and consumer groups, worried about potential impacts on customer rates, said the utilities were ignoring potential gains from better energy-efficiency programs, and complained that the transactions locked West Virginia into a generation mix that is too narrowly focused on coal.

In the case involving John Amos, AEP had asked the PSC to also approve the transfer of partial ownership of Mitchell to Appalachian Power. But, utility regulators in Virginia had refused to approve that deal. So AEP instead proposed that Mitchell be transferred to Wheeling Power, which is not regulated by Virginia.

A proposed settlement of the Mitchell issue was apparently reached in mid-September, just as the commission was preparing to start a formal evidentiary hearing on the matter. But a description of the deal was not filed with the PSC until Thursday.

Under the proposed settlement, AEP will also increase energy efficiency program spending from about $1.8 million a year to $10 million a year in the state, said Emmett Pepper, executive director of the group Energy Efficiency West Virginia, which had intervened in the case.

Pepper, who also represents the West Virginia-Citizen Action Group, said that citizen groups continue to have concerns about ratepayers having to essentially buy old, coal-fired power plants, but is happy with some other provisions of the settlement.

“With the approval of this sale, West Virginia will have very little room for energy diversity, as electricity will come almost exclusively from coal,” Pepper said in a press release. “It is unclear what the impact will be from increasing reliance on a single source of energy, especially in the face of new regulations to address climate change.

“While we regret the fact that the political landscape in West Virginia is such that accepting this expensive power plant seems inevitable, we are still optimistic about the settlement provisions and are hopeful that the PSC will accept it.”

Reach Ken Ward Jr. at kward@wvgazette.com, 304-348-1702 or follow @kenwardjr on Twitter.