West Virginia’s natural gas industry wants to intervene in the Public Service Commission’s review of FirstEnergy’s Monongahela Power Co.’s request to purchase a majority share of the Harrison power plant from another FirstEnergy affiliate.
The West Virginia Oil and Natural Gas Association, which represents gas producers, shippers, and distributors, said in a March 11 filing that it “desires the opportunity to express its views to the Commission about using natural gas as inexpensive, clean and reliable fuel for power generation.”
Richard L. Gottlieb, attorney for the group, said that while the state has historically relied on coal for electric generation, the commission should reconsider that reliance due to the increased availability, low cost and reduced carbon emissions of natural gas.
New Reality
“That’s simply reflecting the new energy reality in West Virginia,” Gottlieb told PJM Insider in an interview yesterday. “That’s something we should acquaint the PSC about if they’re not already.”
Monongahela Power’s (Mon Power) proposed acquisition is already facing opposition from the West Virginia consumer advocate, who is challenging the price tag FirstEnergy has placed on the Harrison power plant.
The company filed a petition Nov. 16 for approval to purchase the 80% ownership interest currently held by Allegheny Energy Supply Co., LLC (AE Supply) in the Harrison Power Station, giving Mon Power full ownership of the 1,984 MW coal-fired generator near Clarksburg, W.Va. FirstEnergy acquired AE Supply, an unregulated generation subsidiary, in its 2011 merger with Allegheny Energy Inc.
Mon Power said it will pay the lower of market or book value for the plant. It filed a valuation by Navigant Capital Advisors estimating the fair market value of AE Supply’s interest in Harrison at $1.333 billion ($846/kW), higher than AE Supply’s $1.164 billion book value.
Byron L. Harris, director of the West Virginia Consumer Advocate Division of the Public Service Commission, said the companies’ valuation is more than double the $554 million book value AE Supply assigned to the plant two years ago.
Paid Too Much
“FirstEnergy basically paid too much for the Allegheny acquisition,” he said, noting that FE booked $800 million to goodwill in the acquisition. Harris said his office is awaiting an analysis on whether the acquisition is the best solution to Mon Power’s generation needs.
As part of the deal, AE Supply would purchase Mon Power’s 8% interest in the Pleasants Power Station, giving AE Supply full ownership of the 1,300 MW coal plant in Willow Island, WV.
The two transactions will increase Mon Power’s net installed capacity by 1,476 MW, capacity the utility says it needs to address a generation deficit identified in its 2012 Resource Plan.
Mon Power wants the commission to approve a $63.4 million annual surcharge to help fund its net $1.1 billion investment until the Harrison plant can be included in a new base rate case. The surcharge would boost the companies’ annual revenues by 5.5%.
The companies said residential customers using 1,000 KWh would see a net increase of less than $1 monthly because the surcharge will be partly offset by a $65.7 million rate reduction that took effect in January due to lower fuel and purchased power costs.
FERC Approval also Required
The acquisition also will face scrutiny from the Federal Energy Regulatory Commission.
The company will be required to show that the transaction will have no adverse impact on competition or result in cross-subsidization of AE Supply. Docket # EC13-43
The PSC set an April 26 deadline for filing of intervener and staff testimony and a May 17 due date for rebuttal testimony. The commission will take oral testimony May 29-31.
Hearing: Wednesday – Friday, May 29-31, 9:30 a.m., Howard M. Cunningham Hearing Room, PSC Building, 201 Brooks Street, Charleston, WV.
