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Mon Power’s Billion Dollar Boondoggle
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by Jim Kotcon, WV Chapter Energy Committee | 2013

Here they go again! And you get to pay for the results!

Mon Power apparently did not learn any lessons with the defeat of the PATH trans-mission line last year. Mon Power now proposes to have West Virginia electric con-sumers pay over $1.1 billion to purchase an additional 80-percent share of the Harrison Power Plant in Harrison County from another First Energy affiliate, Allegheny Energy Services.
 
This request was first described in a rate case before the WV Public Service Com-mission. Because fuel costs have dropped in recent months, Mon Power electric rates should come down as well. But Mon Power proposes to keep them at record high levels to charge WV customers for the Harrison plant purchase.
 
That 80 percent owned by Allegheny Energy Services has actually been mostly paid off by Ohio customers, but now First Energy wants to shield their Ohio affiliate, because the Ohio electricity market is de-regulated, and they expect that coal-fired power plants will not be economically com-petitive, especially if carbon taxes or other limits on carbon emissions become man-datory. If First Energy can dump the plant on a regulated utility (Mon Power), First Energy stockholders would be protected from market losses.
 
A key argument for Mon Power is that they need the Harrison plant to meet future generation shortfalls. But at the same time, they are proposing to sell their share of the Pleasants power station, and argue that both transactions are interdependent. If Mon Power really needs the increased generation capacity, it makes no sense to sell their generation capacity at Pleasants. This dem-onstrates that the transactions are mostly for the convenience of Mon Power, and, con-trary to their claims, are not an effort to meet customer needs.
 
Mon Power’s claim (that this transac-tion is needed to meet needs of Mon Power customers) implies that the Harrison plant’s generation is sitting around unused and waiting to be put to work. But in fact, the Harrison plant already has customers, so transferring it to meet Mon Power customer needs means a comparable decrease in generation available for customers in Ohio and elsewhere. The transaction does noth-ing to increase the total generation going to the grid and is simply “robbing Peter to pay Paul.”

Mon Power also claims that the trans-action will enhance their ability to generate Alternative and Renewable Energy Credits. But the company’s own filings indicate that they already have enough credits and the same is true for Appalachian Power Com-pany (the only other major utility in WV). Plus, WV rules require that credits from coal facili-ties such as Harrison can be used to meet no more than 10 percent of the Alternative and Renewable Energy Credits needed, so there really is no market to sell the credits from Harrison even if they acquire them. 
 
Mon Power’s projected future electricity demand estimates assume 1.4 percent an-nual increase in electricity demand, suggesting no significant Energy Efficiency (EE) or Demand Response (DR) reductions beyond their current miniscule programs.
 
The real issue is buried in one of the filings from Mon Power’s expert witnesses. “The companies believe that a carbon tax is likely to eventually be promulgated.” (Mon Power/PE 2012 Resource Plan, page 13). But the costs of such a carbon tax are not included in any cost estimates. Mon Power says they believe it is coming, but instead of planning for it, their idea is simply to dump an out-dated, dirty plant on WV consumers.
 
Alternatives Ignored

If nothing is done, it is likely that electricity demand could continue to rise, and new generation would be needed. But why as-sume that “nothing can be done!”? Electricity demand does NOT have to always go up. Many states (including Ohio and Maryland) already require EE and DR standards from First Energy.
 
Mon Power says that EE and DR were not recommended because: 1) “they are not a practical solution,” 2) DR can result in higher costs (they describe some problems in Maryland), 3) EE resources are not dispatchable, nor can they be metered, 4) load curtailment is not under direct control of Mon Power, and 5) DR rules at PJM (a regional transmission organization) are in flux, and therefore it is difficult to plan for them long-term. 
 
None of these arguments justify adding over a billion dollars to WV ratepayers. Ac-tual costs per kilowatt-hour for EE are less than half the cost of the proposed purchase.
 
Coal Ash Impoundments
 
As part of the deal, Mon Power will also assume the “solid waste disposal facilities” associated with Harrison. New rules on coal ash impoundments are expected soon and will likely require expensive upgrades and increased disposal costs for coal ash. Will additional regulations for coal ash disposal also impact the projected costs, and if so, by how much? This does not appear to be in the proposed rate increase package. It is not clear, but I suspect that First Energy (dba Allegheny Energy Supply) is also dumping onto Mon Power customers the costs of a major future liability for the coal ash disposal.
 
What You Can Do

Filings in the transfer case (case # 12-1571-E-PC) continue, and the Sierra Club plans to be involved. Send comments ask-ing the PSC to 1) reduce your electric rates, 2) block the transfer of the Harrison power plant to Mon Power, and 3) order Mon Power to adopt aggressive Energy Efficiency and Demand Response programs.
 
Letters of Protest can be sent to the PSC at their new web-based comment page, at: http://www.psc.state.wv.us/scripts/onlinecomments/default.cfm
 
For more information, contact Jim Kotcon at 304-594-3322.

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