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Watchdogs: Power Plant Sales About the Company’s Needs, Not the Consumers

The John Amos power plant - seen in this government PHOTO from the 70s - is part of a proposed utility deal observers say has more to do with the needs of the companies involved than the needs of ratepayers.
The John Amos power plant - seen in this government PHOTO from the 70s - is part of a proposed utility deal observers say has more to do with the needs of the companies involved than the needs of ratepayers.
July 15, 2013

CHARLESTON, W.Va. - Consumer groups say an Appalachian Power plan to buy chunks of two big generating stations does more for Appalachian's parent company than for West Virginia ratepayers. The utility wants to buy additional generating capacity from the John Amos and Mitchell power plants, taking it off the hands of another subsidiary of American Electric Power and charging the cost to ratepayers here.

According to Byron Harris, director of the Public Service Commission's Consumer Advocate Division, the utility only needs half of what it wants to buy. He said ratepayers would lose a big rate reduction they should be getting.

"Acquiring these plants is going to increase their rates higher than what they otherwise would be, by at least $100 million per year," he said.

The company contends it's facing a big shortfall in generating capacity. Harris said the sale would lock ratepayers in at a time when electricity generated from coal is facing an uncertain future, including changing coal prices and competition from cheap natural gas.

"It's a billion-dollar asset transfer," he said. "That will be there forever and ever amen. It severely reduces your flexibility."

Harris said Appalachian has known about the coming shortfall for three years, but waited until the last moment to force the PSC to accept the proposal.

Cathy Kunkel, policy analyst at Energy Efficient West Virginia, said the company has admitted the sale is intended to help AEP reorganize its generating capacity. She said the company initially wanted to shift more of the Mitchell plant to Appalachian, until the AEP subsidiary in Kentucky decided to take on part of Mitchell.

"Because of some events in Kentucky, suddenly we're asked to acquire fifty percent of the Mitchell plant instead of eighty percent," she said. "It has nothing to do with the actual needs of the West Virginia utility, which haven't changed."

Appalachian Power serves about half of West Virginia. Similar deals in the other half of the state and in Kentucky could mean ratepayers there would also end up paying for shares of big coal-fired power stations.

The PSC will hear case number 12-1655 Tuesday through Thursday, but the decision may be some months later.

Dan Heyman, Public News Service - WV