Longview Power is asking the Federal Energy Regulatory Commission to intercede in Mon Power’s proposed $195 million acquisition of an aging coal-fired plant.
Mon Power wants to buy the nearly 40-year-old Pleasants power station at Willow Island from its sister company, Ohio-based Allegheny Energy Supply Co. Both companies are owned by FirstEnergy, which also is Ohio-based. The company says it needs the additional capacity to plug a 1,300 megawatt shortfall it anticipates over the next 10 years in Northern and North Central West Virginia.
FirstEnergy insists the deal would be a win for West Virginia: preserving coal-related jobs and providing other economic benefits. FirstEnergy says Pleasants “employs about 200 people, consumes more than 3.4 million tons of coal per year and pays millions of dollars in annual property taxes.” It predicts the average residential bill will drop about $1 a month as a result of the transaction.
But Longview Power CEO Jeff Keffer sees the Pleasants deal as a thinly disguised bailout. He wants FERC to either schedule a hearing before an administrative law judge or request additional information from Mon Power. The Maidsville-based utility’s protest also asks FERC to delay acting on Mon Power’s application “pending the conclusion of discovery in the ongoing proceedings before the (West Virginia Public Service Commission), which may give (us) an opportunity to obtain at least some of the missing information.”
Keffer said the proposed sale would allow FirstEnergy to shift an under-performing asset out of its portfolio in Ohio, where the energy market is deregulated, into West Virginia’s still-regulated market, so shareholders would be guaranteed a return on their investment no matter how it performs. He believes FirstEnergy “grossly exaggerated” the need for additional capacity to justify the acquisition.
“But the much bigger issue is that FirstEnergy, throughout its service territory, wherever it has old, antiquated power plants, is trying desperately to either get them regulated or subsidized,” he said. “Their unregulated plants are losing tremendous amounts of money and going broke, (without relief) they’ll have to file bankruptcy and they’re admitting that.”
Pleasants, he said, “is a small piece of a much bigger effort, but it’s the piece playing out in West Virginia.”
Longview’s 37-page protest suggests Mon Power issued a “flawed and biased” request for proposals in mid-December, with technical requirements designed to ensure only Pleasants could achieve 100-percent compliance.
The RFP gave sellers in Mon Power’s current service area a competitive edge. It stipulated the energy source must be dispatchable — meaning it had to be able to generate power at any time, so proposals involving renewable energy wouldn’t be entertained. It also required a three-day power supply be on site at all times, a stipulation that could exclude natural gas plants. The RFP also had a short turnaround, with preliminary expressions of interest due within a week of the Dec. 16 notice.
Keffer contends the utility’s projected shortfall nearly doubled year-to-year: Documents the company filed with PSC in 2015 had identified a 100-megawatt capacity shortfall starting in 2016, projected to reach 700 megawatts by the year 2020 and 850 megawatts by 2027. This year, Mon Power predicted a 1,300-megawatt capacity need, plus up to 100 megawatts of demand-response resources, which are “temporary reductions of electrical usage,” much of it sparked by growth in the oil and gas industry.
Keffer said FERC prefers “arms-length dealings between subsidiaries,” and said there’s “plenty of evidence here to suggest that’s not been the case and FERC needs to look at it carefully.”
“Should Mon Power be allowed to proceed with this there’s a huge conflict of interest,” he said, “because clearly, they’re beholden to a holding company that has a different agenda and is not looking out for the interests of the ratepayers of Monongahela Power.”
Keffer maintains the $195 million asking price is much too high for a 40-year-old plant FirstEnergy CEO Chuck Jones has said is a money loser in Ohio’s competition-driven market. Pushing it into a regulated market like West Virginia means other consumers would face higher rates because of that and, in the long run, it would be a deterrent to new business development.
“If they’re moved into a regulated base they’ll continue to operate, but they’ll be subsidized,” he said. “They’ll continue to sell electric even though they’re selling at prices that don’t (require them) to have to manage their business. Longview has to try every day and sell into the power grid and make sure our costs are lower than revenues — we compete. They will be in a position where they don’t have to anymore.”
Keffer said it’s essential that competitive markets be allowed to actually compete, and not rely on subsidies to preserve money-losing power plants like Pleasants. “If they get to continue to operate when they shouldn’t … it causes serious problems for companies like Longview that are trying to play by the rules of the market,” he said.
Mon Power had filed its proposal with the PSC in March. A spokesman, Todd Meyers, could not be reached for comment. However, he’d said previously “the RFP process is open and transparent.” He said updated energy usage forecasts determined Mon Power would need additional capacity this year, “with a steadily increasing shortfall to reach about 1,400 megawatts by 2030.” He also said Mon Power is doing its best to “help identify possible resources necessary to meet future generation supply obligations in a cost-effective, prudent and reliable manner.”