As Appalachian coal production continues its drastic decline, West Virginia’s coal-producing counties are not only losing people as lifelong residents are forced to flee their homes in order to find work, but in many cases, they’re also relinquishing millions of dollars from their budgets.
FirstEnergy subsidiaries Mon Power and Potomac Edison have reached a settlement with most of the parties involved in their request to transfer ownership of the Harrison Power Station.
"Any settlement is by its nature a compromise from what you believe should happen," Byron Harris, director of the state Consumer Advocate Division. "There are what we believe are benefits in the settlement."
The parties have requested that the state Public Service Commission issue a final order approving the settlement agreement and the transaction no later than Aug. 30. The settlement agreement was announced the morning of Aug. 21.
In a statement announcing the settlement, FirstEnergy said the resolution of the case would reduce an average customer's electric bill by about $1.50 a month.
Mon Power supplies electricity to both its 385,500 customers in northern West Virginia and 132,000 Potomac Edison customers in the state's Eastern Panhandle. According to FirstEnergy, the parties signing the settlement agreement were the PSC staff; the Consumer Advocate Division; the West Virginia Energy Users Group; the Utilities Workers Union of America, AFL-CIO and its Local 304; the West Virginia State Building and Construction Trades Council, AFL-CIO; the West Virginia Coal Association; and Local Union 2357 of the International Brotherhood of Electrical Workers, AFL-CIO.
If the settlement is approved, Mon Power will purchase about 80 percent of the Harrison Power Station from FirstEnergy subsidiary Allegheny Energy Supply, adding to its approximate 20 percent share and giving it sole ownership of the 1,984-megawatt supercritical coal plant in Haywood. The plan would ensure that Mon Power has adequate resources to meet a slow but steady annual load growth rate of 1.4 percent, FirstEnergy said. As part of the transaction, Mon Power will transfer its approximate 8 percent interest in the Pleasants Power Station to Allegheny Energy Supply.
Mon Power will pay Allegheny Energy Supply $1.1 billion for its interest in the Harrison plant. Harrison produces electricity with locally mined coal, and the transaction would preserve the opportunity to continue to use such coal, sustaining employment levels and helping local economies, FirstEnergy said.
Harris said one part of the settlement is that West Virginia ratepayers will not bear the total $1.1 billion acquisition cost. FirstEnergy shareholders will have to bear about $200 million of the purchase price without being able to recover it from ratepayers, he said.
FirstEnergy has also agreed to issue requests for proposals to obtain additional generating capacity if it is needed. That was a provision the Consumer Advocate Division wanted, Harris said.
Other commitments from Mon Power and Potomac Edison that were part of the settlement are:
"We appreciate the support of the parties in reaching this agreement, and look forward to implementing our cost-effective plan to provide our customers with electricity generated in the heart of our service territory," Holly Kauffman, president of FirstEnergy's West Virginia operations, said in a news release. "Having 100 percent ownership of the Harrison 2Power Station will help shield our customers from unpredictable spot market prices and help provide greater rate stability for years to come."
Around noon, the West Virginia Citizen Action Group issued a statement opposing the settlement.
"Several parties in the case argued that the high price that Mon Power and Potomac Edison were proposing to pay for Harrison reflected Allegheny Energy Supply's undue advantage over the terms of the transaction. When Allegheny Power merged with FirstEnergy in 2011, FirstEnergy re-valued the Harrison plant. The Harrison plant was a $550 million asset on Allegheny Power's books before the merger, and it became a $1.2 billion asset on FirstEnergy's books. Mon Power and Potomac Edison originally proposed to recover all of this $589.5 million price mark-up from Mon Power and Potomac Edison customers; under the terms of the settlement, only a portion of the mark-up would be paid by customers," the WVCAG statement said.
"There is no reason that Mon Power and Potomac Edison customers should be stuck paying for any portion of this mark-up that is solely an artifact of the Allegheny/FirstEnergy merger," Gary Zuckett, executive director of WVCAG, said in the statement.
WVCAG also argues that acquiring Harrison will provide far more electric generating capacity than Mon Power and Potomac Edison actually need, and the overcapacity will come "at a significant cost to ratepayers," the statement said.