FirstEnergy ended 2020 promising the near future wouldn’t be “business as usual” for its fleet of coal plants.
It ended 2021 with its coal commitments strengthened, pointing toward coal-fired energy for West Virginia for decades to come.
“Mon Power is committed to achieving its climate goals and commitments and this will impact strategy production during the planning period, though this does not necessarily translate to lost economics for customers,” the company said in a regulatory filing at the end of 2020.
FirstEnergy announced a goal of achieving carbon neutrality by 2050 the month before, targeting a 30% reduction in greenhouse gas emissions by 2030 based on 2019 levels.
But at a hearing before the Public Service Commission on FirstEnergy’s request for a rate increase a year later, that climate-conscious commitment became a cudgel wielded against the company.
During the Dec. 3 hearing in Charleston, an attorney for the operator of a Monongalia County coal-fired electric generating facility handed a FirstEnergy executive a copy of the company’s press release announcing its 2050 carbon neutrality goal.
Robert B. Reeping, manager of the company’s energy supply portfolio for West Virginia, Ohio and Maryland retail electric customers, said he wasn’t familiar with or involved in drafting the press release. Reeping downplayed the press release, saying it was “talking about something approaching 30 years away” and denying the attorney’s assertion that entering into a power purchase agreement with a coal-fired plant would be inconsistent with the goal.
“Do you think this press release is a press release for something that’s going to commence in 2050?” Longview Power attorney Edward J. George asked Reeping.
“I think it’s a press release for something that they are giving a vision of where they anticipate to be in 2050,” Reeping replied. “I don’t see any particular plan.”
After the hearing, Longview Power filed a brief with the Public Service Commission asking that it require Mon Power to negotiate an agreement to buy power from Longview.
In comments filed in April, the West Virginia Coal Association concluded coal was “under assault.” Coal production declined 28% from 2011 to 2019. The industry group called FirstEnergy’s goal of reducing greenhouse gas emissions 30% by 2030 a “gratuitous commitment” and encouraged subsidiary Monongahela Power to sign a power purchase agreement with an existing West Virginia coal-fired plant.
Gov. Jim Justice, a coal magnate, has faced criticism for appointing former West Virginia Coal Association President Bill Raney to the commission in August.
In an order issued Wednesday, the Public Service Commission required Mon Power to enter into a power purchase agreement with Longview if certain conditions can be met. A year ago, Longview filed for Chapter 11 bankruptcy protection for the second time since 2013.
The agency declined to require Mon Power to pursue a buyout of a contract running through May 2036 with the Grant Town Power Plant in Marion County that FirstEnergy said has cost ratepayers $117 million over the past five years.
The commission also rejected a request from consumer and energy efficiency groups to direct the FirstEnergy subsidiaries to evaluate the potential for adding energy efficiency programs that serve the companies’ low-income ratepayers and provide customers prompt access to multi-year energy usage data.
The commission’s order came in response to Mon Power and Potomac Edison asking the panel to approve a $19.5 million annual increase in cost recovery for fuel, purchased power and transmission expenses, representing a 1.5% hike in total rates.
The commission approved that request effective Jan. 1 after FirstEnergy acknowledged a $55.6 million under-recovery of fuel costs from July to October.
“We are disappointed that the Commission was unwilling to consider energy efficiency in a case that was so focused on market volatility for fuel prices,” Emmett Pepper, policy director for Energy Efficient West Virginia, said in an email.
Energy Efficient West Virginia was one of three groups asking the agency to approve the energy efficiency-related requirements, along with the West Virginia Citizen Action Group and Solar United Neighbors.
Starting a separate case before the commission, the companies filed a request Dec. 17 requesting cost recovery for $142 million in environmental upgrades federally required to keep the Fort Martin Power Station in Maidsville and the Harrison Power Station in Haywood operating beyond a 2025 compliance deadline until their anticipated retirement dates of 2035 and 2040, respectively.
The improvements would be funded through a surcharge starting at a West Virginia residential customer average of 51 cents a month when the first projects are implemented in 2024.
The commission’s Wednesday order and the FirstEnergy subsidiaries’ request for coal-fired plant upgrades totaling $142 million show West Virginia utilities and their regulators still are relying on coal-fired power as the key to the state’s foreseeable energy future, eschewing aggressive steps toward a more diverse energy portfolio.
Fueling the coal economy
The commission found in its order that Mon Power and Potomac Edison had not sufficiently pursued a power purchase agreement with Longview that could eliminate Mon Power’s capacity shortfall.
Capacity is the maximum amount of electricity a generator can produce under certain conditions.
The companies had reported that what had been an over-recovery of $28 million in fuel costs at the end of June became a $48 million under-recovery balance by the end of November, a turn for the worse threatening greater costs for ratepayers.
Higher coal burn and low deliveries in the first half of 2021 caused inventory levels to plunge below target levels later in the year, according to fuel procurement expert Emily S. Medine, a witness for the Public Service Commission Consumer Advocate Division, an independent arm of the commission that represents the interests of utility customers. That resulted in shortfalls.
The commission required the companies to file a petition either seeking approval of a power purchase agreement with Longview within six months or asking the commission to determine that, “after reasonable efforts,” it could not negotiate a contract with Longview.
The fuel cost rate recovery proposed by Mon Power and Potomac Edison would decrease residential customers’ monthly bills by an average of 0.2%.
FirstEnergy spokesman Will Boye said the company is reviewing the order. He declined to comment further. Longview Power did not respond to a request for comment.
The commission made clear in its order its decision was based on preserving a West Virginia economy still largely based on coal.
“[A power purchase agreement] with a West Virginia producer, using mostly West Virginia produced fuel, would provide the additional benefit of employment and tax revenues to enhance the economy of the state,” the commission said in its order.
Those who see coal as a viable part of West Virginia’s long-term energy future cite recent estimates by John Deskins, director of the West Virginia University Bureau of Business and Economic Research, finding coal-fired power generation supports $4.8 billion in state economic output, $725 million in employee compensation and $97.3 million in tax revenue.
But West Virginia’s power generation is an anachronism amid the nation’s energy transition.
Coal accounted for less than a fourth of the nation’s net electricity generation in 2019, compared to more than 90% in West Virginia. State ratepayers are paying for that imbalance. They faced a 90% increase in average residential electricity retail price nationwide from 2005 to 2020. Only Michigan had a greater increase by percentage.
The carbon intensity of West Virginia’s economy — metric tons of energy-related carbon dioxide per dollars of gross domestic product — was second-highest in the country in 2018, behind only Wyoming and nearly as much as Kentucky, Ohio and Pennsylvania combined.
Longview said a power purchase agreement between the company and Mon Power would benefit ratepayers. A Consumer Advocate Division brief said buying additional energy and capacity from a third party like Longview might not result in net cost savings for customers. The division emphasized it would have to see the actual terms and conditions of any offer.
An ‘uneconomic’ power source
The commission declined a request by the Grant Town Power Plant to require that Mon Power and Potomac Edison enter into negotiations to complete and present a buyout proposal to the commission by March 31.
Power-purchase agreement terms under which the Grant Town plant supplies energy to Mon Power resulted in a $117.1 million loss from 2016 through June, Reeping said.
The 80-megawatt coal-fired plant in Marion County supplies power to Mon Power in a deal that runs through May 2036. The pact was approved under a law crafted in response to a 1970s energy crisis.
The 1978 measure created a new class of electric generating facilities, giving small power producers like the Grant plant the right to sell energy or capacity to utilities.
Boye said the contract price Mon Power pays for generation output is greater than the price of selling the generation into the market. The difference, Boye noted, is a net cost to customers.
To avoid possible bankruptcy, Grant Town plant owner American Bituminous Power Partners, a limited partnership known as AmBit, partnered with Mon Power to petition the Public Service Commission in 2017 to increase the capacity rate paid to AmBit.
AmBit admitted defaulting from 2013 to 2016 on principal payments supporting revenue bonds issued by the Marion County Commission to support the plant project.
An expert witness for the West Virginia Consumer Advocate Division urged the commission at that time to reject the companies’ proposal.
Medine said closing Grant Town would result in lower rates for customers and increased generation from other West Virginia utility plants.
“The Grant Town plant would be shuttered and have no value, but for the Commission’s prior intervention to prop up an uneconomic source of supply,” Consumer Advocate Division Director Robert F. Williams wrote in a Dec. 10 reply brief filed with the commission. “Ratepayers have been asked to subsidize and support this venture for decades already.”
A key figure in helping shape American energy policy in the past decade was profiting while his constituents paid.
U.S. Sen. Joe Manchin, D-W.Va., owns stock in Enersystems Inc., the Fairmont-based brokerage he founded in 1988 that has supplied most of the waste coal burned at Grant Town in recent years.
Manchin has made $4.35 million since 2012 from stock he owns in Enersystems, according to his U.S. Senate financial disclosures.
He has denied his vested coal interests have influenced his policymaking. But he has declined to divest his holdings, saying his ownership is held in a blind trust and, therefore, avoids a conflict of interest.
Manchin has been a member of the Senate Energy and Natural Resources Committee throughout his 11-year tenure as senator and now chairs the panel. The Marion County native has used his position as a swing vote in the evenly divided Senate to kill a proposed clean energy incentive program opposed by the coal industry and utilities. Experts say the program would have benefited West Virginia ratepayers by encouraging utilities to transition more quickly to cleaner and more efficient electricity.
AmBit aims to invest the buyout money in what Grant Town Holdings Corp. President Richard J. Halloran acknowledged in testimony filed with the commission are capital-intensive, “high risk” ventures: concrete block manufacturing and cryptocurrency mining.
The West Virginia Energy Users Group, representing large, industrial users, argued the commission should order the companies to negotiate a buyout, an option Williams cautioned “should not be designed to allow AmBit to unfairly profit and essentially use ratepayers as a bank.”
The commission declined Grant Town’s request. The three-member panel noted that the FirstEnergy subsidiaries had already met with Grant Town owners to discuss a buyout as required by a previous case stipulation and contended that any buyout likely would require a substantial upfront cost that the companies would expect customers to pay.
Mon Power representatives have said they and AmBit are far apart in buyout talks.
“Historical evidence that the cost of Grant Town purchased power exceeded other purchased power alternatives is not dispositive of future relationships between such purchased power alternatives,” the commission ruled. “The Commission will not order the Companies to negotiate against their better judgment to reduce their capacity.”
The energy affordability gapThe Public Service Commission argued that the energy efficiency-related requirements it was asked to consider fell outside the scope of the fuel cost case. The commission rejected the argument that programs would reduce fuel costs because customers would be using less energy.
The West Virginia Citizen Action Group, Solar United Neighbors and Energy Efficient West Virginia had argued that the companies’ failure to assess and support energy efficiency resources saddled customers with fuel costs that were higher than necessary.
“Disregarding these demand-side solutions is particularly disappointing given that FirstEnergy has been directed to consider a potentially costly power purchase agreement with the oft-bankrupt Longview Power Plant near Morgantown,” Pepper said. “While Longview has a track record of being unable to compete economically, energy efficiency programs have been proven to be cost-effective and beneficial to utility customers.”
Longview cited low power demand as a reason for its April 2020 bankruptcy protection filing. Three months later, the company reported extinguishing more than $350 million of loans during the expedited bankruptcy.
The energy efficiency advocate groups also asked the commission to direct the companies to ensure customers easy, timely access to at least three years of their past energy usage data.
The groups filed testimony from energy consultant Jim Grevatt last month citing a county-by-county analytical model released in April showing a “staggering” number of households facing unaffordable home energy burdens in West Virginia.
Nearly 56,000 West Virginia households with incomes of less than 50% of the federal poverty level spend 31% of their annual income on home energy bills. An additional 73,000 state households with incomes from 50% to 100% of the federal poverty level spent 17% of their annual income on home energy bills, according to the analysis by the Massachusetts-based Fisher, Sheehan & Colton.
The study concludes that existing sources of energy assistance in West Virginia don’t sufficiently address what the group calls the home energy affordability gap.
FirstEnergy offers West Virginia customers a tool on the company’s website allowing them to analyze their major sources of energy use and identify potential steps to save energy, such as improved weatherization and more energy-efficient lighting, according to Boye.
But FirstEnergy customers in West Virginia don’t have access to incentive programs available to the company’s ratepayers in other states. Low-income Pennsylvania customers can access appliance rebates, and ratepayers have options for a residential energy audit program; heating, ventilation and air conditioning rebates; and a financial incentive program for more energy-efficient single- and multifamily homes.
The nonprofit American Council for an Energy-Efficient Economy ranked West Virginia 48th in its 2020 State Energy Efficiency Scorecard, observing that electric utilities in the state deliver some of the lowest levels of savings of any state in the country.
“[W]e view this decision as a missed opportunity to reduce fuel costs and help customers lower their energy bills by reducing energy waste and improving home efficiency,” Pepper said.
Into the next decade
In their request for $142 million in cost recovery for environmental upgrades at the Fort Martin and Harrison power stations, Mon Power and Potomac Edison cited a cost analysis holding that operating the two plants beyond 2028 would be cost-beneficial for customers.
The companies have proposed to recover costs from the federally mandated wastewater treatment upgrades through mechanisms provided in a 2016 state law that allowed for expedited cost recovery for coal-fired boiler modernization and improvement projects.
The companies’ filing suggests the burden on ratepayers to support the aging power stations could increase as they near the end of their lifespans.
The filing includes a new depreciation rate for the planned wastewater treatment investments to synchronize with the projected remaining lives of the power plants.
“In addition, the current generation depreciation rates for the generation plants are going to need to be adjusted upward in the near future so that they comport with the expected remaining lives of those plants,” Mark J. Valach, FirstEnergy Service Company fuels and generation commercial operations director, warned in testimony filed with the companies’ rate hike request.
Not adjusting depreciation rates upward will result in a large undepreciated balance left to be collected from customers at the end of the power stations’ useful lives at the same time new generation assets will enter service, Valach said.
If Fort Martin and Harrison were to close in 2028 or earlier, the roughly 3,000 megawatts of capacity and energy provided by the two plants would have to be replaced by buying or building new combined-cycle gas plants; development of wind, solar or battery generation; power purchase agreements with third-party power sources; or increased reliance on PJM market purchases.
PJM is the regional transmission organization that coordinates wholesale electricity movement in all or parts of 13 states, including West Virginia, and the District of Columbia.
FirstEnergy sought approval from the Public Service Commission last month to build five utility-scale solar energy projects throughout its state service territory, the company’s first such solar projects.
If the commission approves FirstEnergy’s request, procurement, groundbreaking and permitting would start on the first phase of solar facilities as early as this year, with all five expected to be completed before the end of 2025.
An October 2020 analysis from the financial advisory firm Lazard estimated the ongoing cost of a new solar energy project is $24 to $32 per megawatt hour, $10 to $16 less per megawatt hour than the cost to operate an existing coal-fired power plant.
For customers, the best net present value would be retiring the Fort Martin plant in 2035 and the Harrison plant in 2040, but only marginally so, according to a company analysis.
The net present value of customer cost of deactivating Fort Martin in 2035 and running Harrison through 2040 would be $10.533 billion, while the same cost of deactivating both units in 2028 would be $10.604 billion, according to the company.
The Fort Martin and Harrison power stations combined to emit more than 19.6 million tons of carbon dioxide in 2019, resulting in health impacts that included 178 deaths and 9,089 lost work days, according to a Clean Air Task Force analysis of state data derived from a federal screening model.
A United Nations Intergovernmental Panel on Climate Change report released in August urged immediate and large-scale reductions in greenhouse gas emissions to stave off the worst effects of climate change.
The Mon Power and Potomac Edison environmental compliance cost recovery request comes two months after the Public Service Commission approved a rate hike request from Appalachian Power and Wheeling Power to make federally required environmental upgrades at three in-state coal-fired plants . Kentucky and Virginia regulators deemed the upgrades uneconomic.
In a Dec. 17 press release, Jim Myers, president of West Virginia operations for FirstEnergy, pledged that the wastewater treatment upgrades would minimize the plants’ environmental impact.
A year after FirstEnergy’s press release looking ahead to achieving carbon neutrality by 2050, Myers sounded a note of continuity.
“The proposed upgrades will create local jobs and allow us to continue to operate our plants into the next decade for the benefit of our customers in West Virginia,” Myers said.
