Opinion

Op/Ed by Jeremy Richardson: Pleasants Power deal would stick WV ratepayers with uneconomic plant

West Virginia native Jeremy Richardson of the Union of Concerned Scientists wrote an Op/Ed commentary about the FirstEnergy/Pleasants power plant deal in The Charleston Gazette-Mail. 

Excerpt: There’s an old saying that goes, “Fool me once, shame on you. Fool me twice, shame on me.”

The West Virginia Public Service Commission will soon make a decision that reveals whether it has learned that lesson. If not, hardworking West Virginians are in danger of footing the bill.

At issue is FirstEnergy’s proposal to transfer ownership of one of its coal-fired power plants, the Pleasants Power Plant, from one of its subsidiaries to another. While that might not sound like a big deal, it turns out that, if approved, it could cost West Virginians dearly on their monthly electricity bills.

The current owner, Allegheny Energy Supply Co., is a merchant generator in an unregulated market — meaning that it must sell the power it generates to the competitive wholesale market and compete with other resources, like natural gas power plants, to earn profits. On the other hand, Mon Power and Potomac Edison Power, the proposed new owners, are in West Virginia’s regulated market — meaning they get a guaranteed rate of return on their assets — paid for by ratepayers.

If this sounds familiar to you, it should. FirstEnergy just did the same thing in 2013, when it transferred full ownership of the Harrison Power Plant over to Mon Power. At the time, utility executives claimed the plant was needed to meet future demand, and that it had the “potential to significantly reduce customer rates.”

How has that panned out?

Click here to read the rest of Richardson's commentary.

Let the commissioners and your lawmakers know that you oppose FirstEnergy's bad deal for West Virginia! 

The FirstEnergy Bailout: Risky Business for WV Ratepayers

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By JOHN JACOBS

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Jacobs is a lifelong West Virginia resident, manufacturer and exporter of fine hardwood veneers (retired) and international markets specialist. "I pay for utilities the same way you do," he says.

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FirstEnergy Corp. came to West Virginia late, at the top of the market for coal-fired electricity generators and bought its way in by paying too much for now antiquated money-losing assets. FirstEnergy reported losses of over $6 billion in 2016 in a market where coal, its primary fuel, is dirt cheap.

Without a bailout prospects are grim. FirstEnergy's survival depends, not on earnings which will be years in coming, if at all, but on continued access to credit markets. Therefore, costs born and bonds guaranteed by West Virginia's credit-worthy ratepayers must seem rather attractive – in the corporate suites. On the other hand, West Virginians themselves may see that a little differently.

The Corporate Lay of Land
FirstEnergy (NYSE: FE), headquartered in Akron, is a holding company that owns and operates 10 subsidiaries including Allegheny Energy Supply in Ohio, along with Monongahela Power and Potomac Edison, which operate in West Virginia. Mon Power and Potomac Edison filed an application in March to purchase Pleasants Power Station from Allegheny Energy Supply for $195 million. Pleasants Power Station is a coal-fired generating plant near St. Mary's, WV, that opened in 1979.

Keys to Understanding the Deal
FirstEnergy CEO Charles E. Jones has been clear about the need to exit deregulated markets during investor conferences.

  • Electricity rates in Ohio are deregulated. FE's subsidiary Allegheny Energy Supply (AES) sells electricity into the grid, PJM Interconnection (PJM), which buys electricity at lowest bid.  If sales do not cover costs shareholders suffer.
  • Electricity rates in West Virginia are regulated. FE's subsidiaries Mon Power and Potomac Edison sell electricity to PJM and purchase electricity back from PJM to meet customers' needs. Customer rates are established by the Public Service Commission (PSC) to cover all costs, ensure reliable electric supply, and provide a rate of return to company shareholders; today, 9.9%.
  • Natural gas and horizontal drilling have revolutionized the cost of electric power generation. In 2008, over 50% of electricity was generated by coal. By 2016 that was down to 30% and gas up to 34%.
    • Utility sized wind and solar generation are competitive now and their prospects are even better.
    • The cost of wind energy has declined 66% since 2009.
    • The cost of utility sized solar energy has declined 85% since 2009.
  • FirstEnergy Solutions (the competitive markets subsidiary) medium and long bonds are trading at distressed levels; 40% of par. Bonds guaranteed by WV ratepayers should be expected to do better.

FirstEnergy’s Solution
The company wants to transfer risk to West Virginia ratepayers. This is not an arm's length transaction in which each company can negotiate a mutually beneficial agreement. All three FirstEnergy subsidiaries must comply with a single larger corporate objective. Nor is it a paper transaction in which assets are transferred from one division to another.

This is a purchase in which Mon Power and Potomac Edison will finance the purchase from another FE subsidiary. WV ratepayers will be responsible for that financing as well as for operational costs, improvements, and a guaranteed return to FirstEnergy shareholders and investors.

  • Mon Power gets a fixed asset (plant) and a liability (debt).
  • Allegheny gets a current asset (cash) and liquidates a fixed asset (plant).
  • FirstEnergy gets $195 million of borrowed money for which WV ratepayers are responsible.
  • WV ratepayers get a $195 million continuing financial obligation (a long-term liability) and will pay expenses (current liabilities) plus a return on capital for an otherwise money-losing enterprise and a weak 16-month promise which appears to be premised on unrealistic short-term projections ignoring the higher future costs of maintaining and operating an aging facility.

A Case of Deja Vu
In a nearly identical 2013 sale Mon Power acquired Harrison Power Station for $1.2 billion. The Harrison transaction was overvalued by $578 million (called an acquisition adjustment). At the time, the addition of that 1,476 MW to Mon Power’s generation portfolio was said to be necessary and would be “more than enough to meet its 2026 projection of need.” The companies' analysis concluded that acquiring Harrison would be cheaper than buying in the market, building new capacity, converting existing stations to use other fuels, or promoting efficiency. 

Because of the Harrison deal:

  • Our rates went up.
  • From October 2013 to June 2016, WV ratepayers have paid an additional $160 million above what that electricity would have cost on the spot market.
  • WV ratepayers assumed an ongoing responsibility to service $858 million in new debt.

FirstEnergy’s chief nuclear officer Sam Belcher said, “Our plants have been losing money. We’ve continued to operate them at a loss. But, at some point, those economics don’t make sense.” He's right. But also, at some point, it doesn't make sense for WV ratepayers to continue to absorb FirstEnergy losses.

Risky business. Fool me once, shame on you. Fool me twice, shame on me!

Disruptive technologies abound
FirstEnergy’s business model is busted… and it's turtles all the way down. The coal industry is in a depression. Our coal miners are broke, employees are out of work, pensions and healthcare are on the dole, and the tax revenues which would support that – all gone. Companies who have been reliant on the coal industry, like FirstEnergy, are going to find things difficult. Before the coal industry gets back on its feet energy markets will be transformed.

West Virginia, always overly reliant on coal, must face those realities too. Perhaps worse than the immediate economic consequence of a FirstEnergy bailout is an anti-competitive subsidy to aging technology which delays adoption of the cleaner more efficient energy that we've wanted since the 1960's and the negative repercussions a bailout would be to the development of a more diversified more resilient economy.

West Virginia has become the largest producer of shale gas in the country. Already, there’s a vision to transform Chemical Valley into Petrochemical Valley with ethane storage and distribution hubs. Those may be pipe dreams, and certainly, there will be associated problems. Importantly, the trend toward renewables, wind and solar, is more promising still. We are almost completely in the dark as to those possibilities. Major companies like Amazon and Google are insisting on their use. These changes will be transformative to our economy.

Opportunity is at our feet, but we must reach for it. It will not fall into our laps. We can be assured nothing good will happen if we remain constrained by old thinking and if the investment is limited by anti-competitive policy or the need to service unproductive debt. The danger is finding ourselves in investment limbo as the business climate is perceived as being too late for coal and too soon for alternatives.

FirstEnergy is unprepared for the transition taking place in energy markets. West Virginia will benefit more from having local utilities with strong balance sheets able to adapt to and prosper from the new realities we face. A FirstEnergy bailout in which West Virginia is used as a dumping ground for distressed assets works counter to those objectives and is not in the public interest. It's a move in the wrong direction.

Editorial: Pleasants Power Plant sale probably isn't good for consumers

"It is a complex issue, one made more muddy by (the) difference in laws governing some of the companies involved.... But here’s the bottom line: West Virginia residents should not have to pay additional money to improve FirstEnergy and its subsidiaries profit margins," wrote Executive Editor John Miller in The Exponent-Telegram on Sept. 12, 2017.

Click here to read the full editorial against the Pleasants power plant sale.

This is the first editorial in a daily newspaper against FirstEnergy Corp.'s bailout attempt, a strategy that started with the Harrison power plant sale in 2013. 

Click here to leave a comment in support of The Exponent-Telegram's stand against corporate welfare.

Thanks to The Exponent-Telegram for taking a stand for hard-working West Virginians.

Updates: Op/Ed in The Parkersburg News and Sentinel; hearing details

No Bailout For FirstEnergy Red

William Ambrose of Parkersburg delivered a strong Op/Ed in Sunday's issue of The Parkersburg News and Sentinel against FirstEnergy Corp.'s corporate bailout attempt with the Pleasants power plant deal before the PSC. Ambrose is a retired surveyor and founding member of Mid-Ohio Valley Climate Action, a member of West Virginians For Energy Freedom coalition. Below are a few excerpts from his excellent piece on FirstEnergy's bad deal for West Virginians. Click here to read the full commentary and leave a comment if you're so inclined (Tip: If the Google survey pops up, scroll to the bottom of it and click "Skip survey").

"FirstEnergy’s rationale for the sale is a bunch of high-minded double talk about how it will benefit energy consumers. Once you understand the issues, however, it becomes clear it is actually a cynical ploy to bail out a non-competitive drag on their portfolio with a hefty subsidy forced onto their customers."

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"FirstEnergy knows its cost saving argument can’t withstand scrutiny. They’re hoping the PSC will swallow their assertion that they’re in the beginning of a capacity shortfall that will peak in 2027 and require Pleasants to shore it up."

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"FirstEnergy is hoping this sale gets connected to “war on coal “ hysteria in enough people’s minds to obscure what’s really happening: A shameless, predatory corporate bailout."

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Click here to read a pithy Letter To The Editor that also published in Sunday's News and Sentinel.

Join us Wednesday at the PSC Public Hearing in Parkersburg. West Virginians For Energy Freedom is holding a pre-rally hearing at 5:30 p.m. outside the Parkersburg Municipal Building. Click here for more information on the rally and the hearing. 

Wear dark blue to demonstrate your opposition to FirstEnergy's bailout attempt. Stop by our table for a "No WV Bailout sticker," talking points and more. Got a question? Click here to email us.

Commentary in Ritchie Gazette: Power Plant Sale

Kudos to Jennifer Efaw for her recent commentary in The Ritchie Gazette on FirstEnergy Corp.'s bad deal for West Virginians on its proposed sale of the Pleasants power plant.

Here's an excerpt from her piece: "You may not have paid it much attention, just another legally-required meeting of the Public Service Commission of West Virginia... .

"Mon Power, Potomac Edison, and FirstEnergy may be hoping you don’t notice it.

"The public meeting in Parkersburg on Sept. 6th is to voice concern with the proposed sale of the Pleasants County power plant at Willow Island, from FirstEnergy subsidiary Allegheny Energy Supply to Mon Power and Potomac Edison. Mon Power and Potomac Edison are also both subsidiaries of FirstEnergy."

READ THE FULL COMMENTARY HERE.

Additional public hearings will be held Sept. 11 in Martinsburg and Sept. 12 in Morgantown. Click here for more info on public hearings and to fax a letter directly to the PSC.

Lewisburg mayor supports fight against Pleasants sale

 John Manchester, Mayor of Lewisburg

John Manchester, Mayor of Lewisburg

John Manchester, the Mayor of Lewisburg, advocates in a Nov. 6 opinion piece in the WV Gazette-Mail for opposition to FirstEnergy's possible sale of the Pleasant power station. 

"One thing that clearly will not spur economic development in West Virginia is for Mon Power and Potomac Edison electric customers to pay millions of dollars to bail out those utilities’ Ohio-based parent company, FirstEnergy.
Yet this is exactly what FirstEnergy is trying to do."

READ THE FULL COLUMN IN THE WV GAZETTE-MAIL.