AEP Reaches Settlement in Mitchell Case at the WV PSC

Ken Ward reported in the Charleston Gazette yesterday that parties to the Mitchell power plant case at the WV PSC have come to an agreement about dumping the power plant onto rate payers in WV.  Half of Ohio-based AEP’s Mitchell plant, near Moundsville, WV, was dumped on KY rate payers last year, when the KY PSC approved the transfer of that half of the plant to Kentucky Power, the regulated AEP subsidiary in KY.  As Ward reports, and I reported earlier on The Power Line, the East VA State Corporation Commission prevented AEP from dumping the Mitchell plant on APCo, which is also operates in East VA and is subject to regulation in East VA.

So AEP opted to dump the other half of the Mitchell plant on its WV rate payers by transferring that part of the plant to its WV-only subsidiary Wheeling Power.  Through a special formula, APCo’s WV customers will also share the cost of Wheeling Power’s share of the Mitchell plant.

Ken points out what AEP appears to have agreed to a number of apparent concessions in the settlement.

The proposal, which needs commission approval, would leave out any transfer of ownership of Mitchell’s Conner Run Fly Ash Impoundment, protecting Wheeling Power customers from potential costs of a toxic cleanup there.

The deal also includes increased spending by AEP on energy-efficiency programs, and requires the company to issue a “request for proposals” in the future if it needs additional long-term generation capacity to meet West Virginia customer needs.

The Conner Run slurry pond exclusion is important, but it should never have been part of the deal in the first place.  Although AEP had insisted that the impoundment, which represents a significant financial liability in the near future, would be dumped on WV rate payers along with the obsolete Mitchell plant, all of the waste in that pond had been created to serve only AEP’s Ohio Power customers in years past.  Some of that past electricity had been purchased by Wheeling Power, but this was only a fraction of what went to AEP’s Ohio customers.

AEP is not as thuggish as FirstEnergy, so the concessions on energy efficiency and soliciting competitive proposals for future capacity are somewhat more generous than those in the FE’s Harrison plant dump.  However, the agreement on future capacity is essentially meaningless here, as it was in the Harrison case, because the Mitchell plant transfer will already provide more capacity than AEP needs to serve WV for the next thirty years.

The efficiency concession is just that, a concession.  Energy efficiency investment is a direct substitute for power plant capacity, at less than half the cost to rate payers.  Both the Mitchell and Harrison settlements treat efficiency investment as a sideshow.  The WV PSC Commissioners, excluding the now departed Ryan Palmer, have made it clear that they agree with their corporate friends who run WV’s electrical system that they support the much more expensive “steel in the ground” approach that puts higher profits in the pockets of AEP and FirstEnergy shareholders.

More and more US states have moved to rigorous integrated resource planning which requires power companies to integrate demand management and efficiency investments into their capacity portfolios on an equal footing with generation capacity.  The so-called integrated resource plan bill passed by the WV Legislature last year fails in this important regard.

Ken Ward quotes Energy Efficient West Virginia’s Emmett Pepper regarding the settlement:

Pepper, who also represents the West Virginia-Citizen Action Group, said that citizen groups continue to have concerns about ratepayers having to essentially buy old, coal-fired power plants, but is happy with some other provisions of the settlement.

“With the approval of this sale, West Virginia will have very little room for energy diversity, as electricity will come almost exclusively from coal,” Pepper said in a press release. “It is unclear what the impact will be from increasing reliance on a single source of energy, especially in the face of new regulations to address climate change.

“While we regret the fact that the political landscape in West Virginia is such that accepting this expensive power plant seems inevitable, we are still optimistic about the settlement provisions and are hopeful that the PSC will accept it.”

Mr. Pepper’s resigned acceptance of the settlement appears to indicate that WV CAG will not challenge the AEP Mitchell settlement as they challenged the FirstEnergy Harrison settlement.  This is understandable, particularly because Ryan Palmer is no longer on the Commission, but it is also disappointing.  At least Mr. Pepper is not trying to claim the settlement as a victory for energy efficiency as the Sierra Club did after the Harrison settlement.

Mr. Pepper puts on a brave face, but the fact is that dumping the Mitchell plant on WV customers will prevent any significant change in how WV produces its electricity.  With this expensive over-supply of electricity for the next 30 years, there is no need for power companies or the WV PSC to do anything to increase energy efficiency or substitute renewable power in our state.