Playing a Shell Game with a Power Plant: Ratepayers Lose

May 28, 2013
Jeremy Richardson
Senior Energy Analyst

Ever wonder how your utility company sets your electricity price? Most of us don’t think much about our electric bills; we just pay them and figure there isn’t much we can do about it if the rates increase. However, once in a while there’s an opportunity for ordinary citizens to speak up and make their voices heard. At the moment, that’s especially true if you get electricity from Mon Power or Potomac Edison, which together serve a large part of West Virginia.

Utility companies can’t just charge whatever they want to provide power; in most states, they must have their rates approved by state regulators. The state agency responsible for these decisions is usually called a public service commission or public utilities commission. When a power company wants to make a change that could affect the services it provides or the amount it charges its customers for power, it must win approval from the commission. The commission’s job is to protect consumers.

In West Virginia these decisions are handled by the West Virginia Public Service Commission (PSC). The WV PSC is tasked with making sure that utilities are keeping customers’ interests at heart, or in its words “ensuring that reasonably priced and reliable utility services are available to all customers.” An eyebrow-raising case is currently pending before the WV PSC, and it is one that Mon Power and Potomac Edison customers should be concerned about.

The case concerns a coal-fired power plant called the Harrison Power Station, near Haywood, WV (just north of Clarksburg). Mon Power already owns 20 percent of Harrison, and the other 80 percent is owned by Allegheny Energy Supply Company. The proposal would transfer full ownership of the power plant to Mon Power.

Sounds like a simple transfer of assets, so no big deal, right? The problem is the fact that a larger company called FirstEnergy owns both Mon Power and Allegheny Energy Supply, as well as Potomac Edison. That’s right, all these companies are owned by a single company. You might ask yourself, why is FirstEnergy trying to transfer ownership of a power plant to itself?

Harrison Power Station

Harrison Power Station, Photo: Courtesy of FirstEnergy

The answer has to do with how electricity markets work. Some states, like Ohio, are “deregulated,” meaning that utilities must compete in an open market to sell the power they produce. Others, like West Virginia, are “regulated,” meaning that the PSC essentially sets electricity prices. FirstEnergy, which is headquartered in Ohio, is proposing to transfer the power plant from a deregulated market to a regulated market.

The bottom line is that the shale gas boom and resulting low natural gas prices, along with renewable energy standards like Ohio’s, have made the 40-year-old Harrison coal plant less profitable for the company. It is proposing that Mon Power pay over double the actual value of the plant, as calculated by the PSC’s own analysts, and is clearly grossly overpriced compared to similar recent power plant transactions.

This misguided deal amounts to a bailout of FirstEnergy — paid for directly by Mon Power’s customers, and by extension, Potomac Edison customers, who are subject to the same rate decisions applied to Mon Power by the WV PSC. WVU’s James van Nostrand, director of the Center for Energy and Sustainable Development, explains in detail why this proposal is a bad deal for ratepayers.

Estimates suggest this deal would raise electricity rates for Mon Power and Potomac Edison customers by 6 percent. For its part, FirstEnergy recently responded to these criticisms, suggesting the plant is needed to meet projected capacity needs; but simply put, the company has not made any attempt to consider other options for meeting those needs. Instead of rushing this deal through, the WV PSC should insist that the company instead issue a request for proposals (RFP) to find the least costly alternative.

The WV PSC will hold public hearings on this case starting tomorrow, May 29. To find out more details on the case, you can go to the WV PSC’s database and look up Docket number 12-1571.

Make your opinions known! Submit comments to the WV PSC and share this information with your friends and family.