Who pays for First Energy’s coal plant bailout?


Who is First Energy?
First Energy, the parent company of Mon Power and Potomac Edison, is one of two major utility companies in West Virginia.
First Energy wants its West Virginia ratepayers to bail out one of its struggling coal-fired power plants. Currently owned by one of First Energy’s de-regulated Ohio subsidiaries, the Pleasants power plant is failing to compete against less expensive power sources in that market. The company’s CEO suggested to shareholders that FE would seek to transfer ownership of the Pleasants plant from Ohio’s Allegheny Energy Supply to Mon Power. The first step was taken on Dec. 16, 2016 when Mon Power submitted a request for proposals for exactly 1,300 megawatts of generation capacity. It is no coincidence that the Pleasants plant would uniquely qualify.
How would that benefit First Energy?
In West Virginia’s regulated utility market, Mon Power is guaranteed a positive rate of return. This means that West Virginia ratepayers would be forced to pay for more expensive power generation instead of cheaper alternatives.
Has First Energy done anything like this in the past?
Yes, in October 2013, the Public Service Commission approved a similar transfer, when Mon Power purchased a 79.46 percent share of the coal-fired, 1984-megawatt, Harrison Power Station from Allegheny Energy Supply. Mon Power argued this was in the public interest, but instead, estimates by the Institute for Energy Economics and Financial Analysis (IEEFA) show, “customers have lost more than $160 million relative to what they would have otherwise paid for electricity” (Kunkel, 2016).
How does First Energy justify forcing West Virginia ratepayers to pay for their bad investments?
FE submitted an integrated resource plan to the West Virginia PSC. Integrated resource planning is a process by which utilities determine the mix of resources they will use to meet projected demand for electricity at the lowest possible cost to consumers. The IRP submitted by FE predicts extensive demand growth and a shortfall of generation capacity within this year, but considers very few energy efficiency programs.
So, First Energy needs access to more power to meet growing demand for electricity?
Not necessarily. FE’s IRP justifies a power plant transfer based on a predicted, 850MW shortfall in generating capacity in the coming decade. But that shortfall only occurs if FE actually sees electricity demand grow by more than 2 percent each year.
Can FE minimize its projected demand growth?
Yes! There are many ways that FE can minimize demand growth: through energy efficiency programs; demand-response technology; and investments in renewables, like solar, wind and biomass.
For workable alternatives to more coal-fired power, look no further than West Virginia’s other major electric utility. In contrast to First Energy, American Electric Power and its subsidiary, Appalachian Power, are taking steps to diversify their power sources while reducing carbon emissions from existing coal-fired plants. According to its 2016 sustainability report, AEP expects to add around 3,400MW of solar and 6,300MW of wind power by 2034.
The report states, “Our strategy to diversify includes increasing use of natural gas and renewable generation and re-configuring the grid to support further integration of distributed energy resources, increased energy efficiency and demand-response and the growth of other customer-driven technologies. The expansion of renewable resources is a key driver of growth in our transmission business.”
Yet, First Energy refuses to consider any of these viable and necessary alternatives to its outdated and regressive business model. Instead, it wants a bailout from working West Virginia families.
These other options…are they cheaper than coal-fired power?
According to a 2012 analysis by Optimal Energy, an aggressive energy efficiency program could reduce power demand by 1.2 percent per year at a cost of $17-$40 per MW hour. In 2013, FE proposed a similar transfer of its Harrison power plant at a cost of $74/MWh. And if a “cost of carbon emissions” is included, as expected under the EPA’s Clean Power Plan, the cost of electricity from the Harrison plant will rise to $81/MWh. Rising generation costs make energy efficiency even more competitive.
Energy Efficiency sounds like a win-win!
Indeed, it is! Energy efficiency is the cheapest and simplest way to minimize energy demand growth. In addition to saving consumers money, energy efficiency creates new jobs and business opportunities, and reduces greenhouse gas emissions. So, it is especially concerning that energy efficiency does not play a larger role in FE’s resource planning. Rather than spending our hard-earned money on another dirty plant, FE should be working to build a more sustainable energy future and helping to secure West Virginia’s place in America’s booming clean energy economy.
What can I do to help?
The Sierra Club’s Energy Efficiency Campaign is planning activities, including petitions and formal comments to the PSC, and public rallies. Make your voice heard: Come to the hearing on Sept. 12 at 6 p.m. at the Mon County Justice Center, 75 High Street, Morgantown. For more information on this event, including ridesharing, contact the Sierra Club’s local Energy Efficiency campaign leader, Kevin Campbell: [email protected]
Reprinted with permission of Sierra Club W.Va.

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