July 9, 2021 - The fate of three coal-fired power plants in West Virginia owned by American Electric Power subsidiaries rests in the hands of not just the Mountain State’s utility regulators but those in Kentucky and Virginia.
The subsidiaries have asked the Public Service Commission of West Virginia to approve $317 million in utility customer costs to pay for upgrades per federal environmental regulations required to keep the Mitchell, Mountaineer and John Amos coal-fired generating facilities in Marshall, Mason and Putnam counties respectively operating through 2040 instead of shuttering in 2028.
But prominent voices in Virginia and Kentucky have spoken out in recent regulatory filings against aspects of the subsidiaries’ requests for approval of the environmental compliance work.
In a report filed with Virginia state utility regulators Thursday afternoon, senior hearing examiner A. Ann Berkebile recommended that regulators deny Appalachian Power’s request for approval to incur and recover costs of complying with federal wastewater guidelines at the Mountaineer and Amos plants.
Berkebile found that aspect of Appalachian Power’s request lacked sufficient evidentiary support.
Appalachian Power in December proposed to the Virginia State Corporation Commission a rate increase of $2.50 for residential customers using 1,000 kilowatt-hours per month, a 2.37% hike on the total bill of such customers as of April 1, 2021.
The State Corporation Commission’s jurisdiction applies when Virginia ratepayers are asked to pay their portion of operation, maintenance and electric output costs of facilities to serve Virginia customers.
A decision from Virginia regulators on Appalachian Power’s request is due on Aug. 23. Parties to the case have until July 26 to file comments on the hearing examiner’s report, which recommended that the commission approve a rate adjustment for recovery of costs of complying with federal guidelines on coal combustion residuals at the Amos and Mountaineer plants.
But the hearing examiner’s opposition to Appalachian Power’s request for approval of effluent limitation guideline compliance cost recovery follows April testimony from an energy consultant on behalf of the Virginia Office of the Attorney General’s Division of Consumer Counsel against the company’s request to recover $250 million of capital investment and costs to implement environmental compliance projects at the two plants.
In a filing before Kentucky utility regulators last month, Kentucky Attorney General Daniel Cameron supported something that Marshall County government and labor officials have pleaded West Virginia utility regulators to oppose: retiring the Mitchell plant in 2028.
Cameron argued the Mitchell plant provides almost no economic benefit to Kentucky’s economy and noted substantial projected savings for ratepayers from retiring the units in 2028 rather than the end of its useful life in 2040.
Cameron notes that total West Virginia tax revenue in 2020 from the plant was $10.4 million and that Kentucky has never received any tax revenue from the Mitchell plant, nor will it in the future.
“As these statistics reflect, the Mitchell plant provides little to no economic value to the Commonwealth,” Cameron said in the June 24 filing with the Kentucky Public Service Commission.
Appalachian Power and Wheeling Power said in their December filing with the West Virginia Public Service Commission that performing only the coal combustion residual compliance work at Mitchell and retiring the plant in 2028 has “comparable costs and benefits” to making the additional wastewater compliance investment to allow the plant to operate beyond 2028.
Replacing a portion of the retired Mitchell capacity with a portion of Appalachian Power’s excess capacity in 2028 would result in savings to West Virginia customers of approximately $27 million annually from 2029 to 2040.
But Kentucky Power, which, like Wheeling Power, owns 50% interest in the Mitchell plant, contended to the Kentucky Public Service Commission upon seeking approval for environmental upgrade cost recovery that continued operation of the facility through 2040 was the more economical option.
Kentucky Power reported the monthly increase in the total bill for a residential customer using 1,219 kilowatt-hours per month is expected to be $0.40 starting in October 2021 and increase to $2.26 beginning in July 2024.
The Kentucky Public Service Commission said it will render its decision by Aug. 6.
Cameron argued that if Kentucky and West Virginia state utility regulators reach different decisions on whether to allow effluent limitation guideline compliance cost recovery, Kentucky Power or a new owner could explore selling its 50% undivided ownership interest in the Mitchell units to Wheeling Power, Appalachian Power or another party, or otherwise restructure its ownership interest in Mitchell.
“Selling Kentucky Power is likely to be easier with a 2028 end date to the ownership of an aging West Virginia coal plant,” Cameron offered to the Kentucky Public Service Commission.
West Virginia Coal Association President Chris Hamilton argued that keeping the Mitchell plant open through 2040 would provide “enhanced security” for any new owners of Kentucky Power’s share of the plant and buy more time for large-scale deployment of carbon capture, use and storage technology that could maintain coal as an economic driver in the state while reusing carbon dioxide to create products or storing it permanently underground so it will not enter the atmosphere.
“If we’re talking about the difference between 2020 and 2040, that seems to be a reasonable period of time that we can move this all down the field,” Hamilton said.
But carbon capture technologies are unproven at a large scale, and Appalachian Power rejected them as uneconomical in a brief filed with West Virginia utility regulators on June 25.
Appalachian Power and Wheeling Power have proposed to the West Virginia Public Service Commission residential, commercial and industrial rate increases of 1.59%, 1.52% and 1.72% for the environmental compliance work, respectively. The proposed increased project-related rates and charges would produce $23.5 million in additional annual revenue.
In a brief filed June 25, West Virginia Public Service Commission staff deemed the proposed environmental compliance work necessary but concluded that Appalachian Power and Wheeling Power did not conduct any meaningful analyses of the potential to convert the plants to alternate fuel sources or what new resources will eventually have to be used to replace generation at the three plants.
“The future reality is that West Virginia customers will still need affordable and reliable electricity past 2040,” commission staff noted in its brief. “It is not enough to say that the compliance work should be approved because it is too expensive to do otherwise, when the useful lives of these plants is within sight, and the compliance work would only keep these three large power plants operational with their current fuel source until 2040, at best.”
Commission staff did not support approval of the requested environmental compliance surcharges, saying that the companies did not justify the rates requested.
The average monthly residential bill (as measured by the residential rate for 1,000 kilowatt-hours) for American Electric Power’s West Virginia utilities escalated from $55.28 in 2006 to $138.57 in 2021 — an increase of 150% over 15 years.
“How much more are we supposed to keep paying?” asked Emmett Pepper, policy director of Energy Efficient West Virginia, which joined the West Virginia Citizens Action Group and Solar United Neighbors to file briefs in recent weeks suggesting a 2028 closure of the Mitchell plant and a just transition plan for communities impacted by its closure funded in part by the annual $27 million that a 2028 retirement has been projected to save ratepayers and American Electric Power.
The West Virginia Public Service Commission must render a decision by Jan. 27, 2022, as state statute requires the body to issue certificates like the one Appalachian Power and Wheeling Power are requesting within 400 days of the application. Appalachian Power and Wheeling Power applied for its certificate on Dec. 23.