Major utility fails to get West Virginia customers to bail out its aging coal plant

FirstEnergy Corp. owns the Pleasants power station in Willow Island, West Virginia along the Ohio River. CREDIT: Michael Williamson/The Washington Post via Getty Images

FirstEnergy Corp., a strong supporter of President Donald Trump’s pro-coal agenda, conceded defeat this week in its bid to shift the costs of one of its struggling coal-fired plants onto the backs of customers in West Virginia.

The company’s decision to withdraw its plan represents yet another loss for owners of coal-fired plants who had hoped a pro-coal president would keep their plants profitable.

FirstEnergy’s coal-fired Pleasants power station — located in Willow Island, West Virginia — has been struggling to compete with lower-cost sources of electricity in the unregulated market. To help revive the coal plant, FirstEnergy wanted to force its utility customers, who don’t have a choice of what type of fuel generates their electricity, to subsidize the plant.

To do this, for more than a year now, the company has been trying to transfer the Pleansants plant —  owned by FirstEnergy’s unregulated subsidiary Allegheny Energy Supply — to Monongahela Power (Mon Power) and Potomac Edison, the company’s regulated utilities in West Virginia.

If this scheme had succeeded, its West Virginia customers would have assumed all of the plant’s costs and financial risks, while FirstEnergy and its shareholders would receive a guaranteed revenue stream. But on Monday, the company sent a letter to West Virginia regulators informing them that the Pleasants plant transfer agreement “will be terminated.”

The Pleasants transfer plan was part of a larger strategy by FirstEnergy to re-regulate unprofitable assets in deregulated markets as a way to capture subsidies from its utility customers. Aside from increasing customers’ monthly bills, the transfer of the plant would have given FirstEnergy’s two West Virginia utilities generating capacity they did not need to meet demand.

Adding another large coal plant to the generation portfolio of the West Virginia utilities also would have created barriers to adopting carbon-free strategies. “They didn’t need this plant to begin with,” said Earthjustice staff attorney Michael Soules, who had fought the plant transfer on behalf of Solar United Neighbors of West Virginia and West Virginia Citizen Action Group.

If FirstEnergy had succeeded in transferring the plant to its West Virginia utilities, it would have “sucked all the oxygen out of the room in terms of getting clean energy or allowing energy efficiency to be part of the resource mix,” he said in an interview with ThinkProgress.

FirstEnergy was hoping to accomplish on a smaller scale the same goals that the Trump administration had set in its proposal to subsidize the nation’s coal and nuclear plants with guaranteed cost recovery from electricity customers — even if the plants cannot compete in the wholesale power market with lower-cost natural gas and renewable energy generation sources. Under the guise of grid resilience, Energy Secretary Rick Perry released a proposal last fall that would have provided cost recovery for power plants such as coal and nuclear facilities that keep 90 days of fuel onsite.

Like FirstEnergy’s plant transfer scheme, Trump’s proposal suffered a major defeat at the Federal Energy Regulatory Commission (FERC), an independent agency that regulates the interstate transmission of natural gas, oil, and electricity and oversees the wholesale sale of electricity. In a unanimous vote, the commission on January 8 rejected Perry’s plan to raise consumer energy bills in order to subsidize coal and nuclear power plants.

Given the size of its coal generation fleet, FirstEnergy was one of the biggest supporters of Perry’s failed plan. “We commend Secretary Perry and the Department of Energy for recognizing the importance of a reliable, resilient electric grid for American families and our nation’s economy,” the company said last September after Perry released the proposal.

Overall, FirstEnergy’s subsidiaries control more than 16,000 megawatts of electric generating capacity, enough to serve millions of customers. Fifty-eight percent of the company’s power plants are fueled by coal. Nuclear power makes up 25 percent of its generation portfolio, with hydroelectric, wind, and solar accounting for 12 percent. The company’s regulated utility subsidiaries serve about 6 million customers in parts of Ohio, Pennsylvania, New Jersey, West Virginia, Maryland, and New York.

The Pleasants plant has a generation capacity totaling 1,300 megawatts and uses more than 3.4 million tons of coal annually. In 1978, the deadliest construction accident in U.S. history occurred at the plant, when scaffolding on one of the cooling towers collapsed, killing 51 workers.

FirstEnergy controls 16,000 megawatts of electric generation capacity. Source: FirstEnergy Corp.

FirstEnergy and its subsidiaries needed approval from both FERC and the West Virginia commission to move forward with the transfer. At the federal level, FERC delivered a blow to FirstEnergy on January 12 by rejecting its attempt to transfer ownership of the struggling Pleasants plant to its West Virginia utilities. The commission was concerned with the “cross-subsidization” that would occur — using regulated businesses like Mon Power to subsidize or shield unregulated assets like the Pleasants plant from market forces.

But then, on January 26, the West Virginia Public Service Commission approved the sale of the Pleasants plant to Mon Power. In its decision, however, the commission established several conditions aimed at protecting customers from financial and legal risks that FirstEnergy would have to meet if the transfer went forward. After reviewing the commission’s conditions, Mon Power said in its letter that moving forward with the transfer “would result in Mon Power assuming exposure and significant commodity risk” — the very risks FirstEnergy tried to force on customers through its proposal.

Numerous groups and customers in West Virginia lined up in opposition to the deal. More than 2,500 people, businesses, and cities sent letters to the West Virginia commission opposing the transfer of the Pleasants plant. The PSC held three public hearings that were packed with opponents of the plan.

“In the long term, it’s going to be not just a victory for West Virginia ratepayers, but also for creating a window for more clean energy resources and energy efficiency to be a robust part of the energy mix,” Soules said.

Earthjustice attorney Michael Soules worked with clients in West Virginia to fight FirstEnergy's proposed transfer in ownership of the coal-fired Pleasants power plant. CREDIT: Earthjustice

The Pleasants deal would have cost the average residential household approximately $69 each year for the next 15 years, according to expert testimony in the case before the state commission. In total that’s a loss of $470 million that Mon Power and Potomac Edison customers would have been forced to bear.

“This is a major win for the 530,000 Mon Power and Potomac Edison consumers in West Virginia,” Emmett Pepper, executive director of Energy Efficient West Virginia, said Tuesday in a statement. “This deal was bad from the beginning and the extensive evidence presented at the PSC proceeding made clear that the proposed transfer would benefit FirstEnergy and hurt West Virginians struggling to survive in today’s economy.”