Full story at: http://www.wvgazettemail.com/article/20151103/GZ01/151109834

Tuesday, November 3, 2015

Testimony highlights costs of Harrison Power Plant purchase

By Andrew Brown, Business Reporter

The full cost of the Public Service Commission’s decision to approve MonPower’s takeover of the Harrison Power Plant north of Clarksburg is now being revealed.

On Monday, testimony from the PSC staff, the state’s Consumer Advocate Division and the West Virginia Energy User’s Group was filed as part of MonPower and Potomac Edison’s ongoing expanded net energy case.

The testimony details the companies’ request for an additional $144.5 million to cover the cost of coal supplies, energy purchases and 17 months of operating expenses for the Harrison plant, which MonPower purchased for $1.1 billion in 2013 from FirstEnergy, its parent company.

As it stands, the proposal could increase the average residential customer’s monthly bill by more than $7 a month, and industrial electric customers in the state could see their rates increase by 19.6 percent on average.

All of the parties in the case offered up adjustments to the $144.5 million request, based on a number of factors.

The PSC staff suggested delaying some costs and reducing the current request by more than $17 million.

The consumer advocate’s office proposed a reduction of $30.9 million to account for pension costs and current coal purchase contracts.

And the West Virginia Energy User’s group proposed shrinking the request to a $65.7 million increase. According to the various testimony, a large part of the $144.5 million request stems either directly or indirectly from MonPower’s deal to take over the remaining 79 percent of the Harrison plant that it didn’t own in 2013 — an arrangement critics warned the commission not to approve.

More than $44 million — roughly 31 percent — of the proposed increase is the result of underestimated operating costs at the Harrison plant, including $22.6 million charged during an outage in December 2014.

Officials with the West Virginia Energy User’s Group questioned whether all of those under-recovered costs are fair and whether some of those operating expenses should have been handled before MonPower’s takeover.

“A significant portion of the under-recovery is associated with what appears to be deferred maintenance while the units were owned by Allegheny Generating Company,” the energy user group’s testimony states.

At the same time, testimony filed by the consumer advocate and FirstEnergy officials points out that the company’s choice to take over the roughly 1,983 megawatts of capacity at the Harrison plant has not paid off like the company expected in 2013.

FirstEnergy officials had hoped that the takeover would benefit their customers in West Virginia by selling excess electricity from their coal-fired power plants onto the regional market, which would have brought down costs for MonPower and Potomac Edison customers in West Virginia.

But because of lower-than-expected prices for wholesale electricity and increased competition from gas-fired power plants, MonPower has not been able to sell as much energy as it estimated.

The consumer advocate’s testimony points out that between July 2014 to June 2015 MonPower produced an additional 4,829 gigawatt-hours beyond what their customers in West Virginia needed, and throughout much of that time, the company was not netting as much profit from that excess electricity as it would have liked.

As an example, the company estimated it would make about $42 million from the regional markets in July and August of this year, but in reality, MonPower only netted $29 million in those two months, according to the consumer advocate’s testimony.

Company officials have said that they expect the purchase of the Harrison plant to benefit customers in the long run.

But that outcome is dependent on wholesale prices going back up, as a result of market conditions and new rules put in place by the PJM Interconnection, the company that controls the grid for West Virginia and 12 other states.

The consumer advocate division didn’t challenge the companies’ forecasts that show wholesale sales increasing for MonPower, but it did question if the company could accurately predict the regional market.

“If PJM energy prices recover, the company will be in a position to achieve additional net PJM energy revenues,” the consumer advocate’s testimony stated. “However, if PJM energy prices remain low, it is difficult to see how the company will be able to reap substantial revenues from the PJM market.”