Experts: money-saving efficiency left out of utilities’ plans - WOWK 13 Charleston, Huntington WV News, Weather, Sports

Experts: money-saving efficiency left out of utilities’ plans

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Updated Dec. 21 with a quote clarification from a source interviewed for this story.

Visions of West Virginia's power generation future differ.

In the past month, the state's major utilities have filed proposals with the Public Service Commission of West Virginia to buy coal-fired capacity from sister Ohio subsidiaries. FirstEnergy's Mon Power filed on Nov. 16, and AEP's Appalachian Power filed on Dec. 18.

But even as the utilities assert that these coal-fired facilities are the lowest-cost resource for West Virginia ratepayers, observers see danger to ratepayers in further reducing the diversity of the state's generation portfolio.

They look around the nation and see cheap natural gas, renewables and especially energy efficiency saving ratepayers money in other states, and they want West Virginia's utilities to take it seriously.

"Who ends up paying? Customers end up paying," said Van Nostrand, director of the Center for Energy and Sustainability Development at West Virginia University and a former utility lawyer and regulator.

"Better planning would make it so industrial customers can pay their energy bills," he said. "That's jobs."

Heavier reliance still on coal

Both Mon Power and Appalachian Power are staring down generation shortfalls in coming years. Both propose to meet them by taking coal-fired capacity off their sister utilities' books.

FirstEnergy would have Mon Power buy 80 percent of the Harrison power plant for more than $1 billion.

AEP wants Appalachian Power to buy part of John Amos power station and half of Mitchell at a cost that is not spelled out in the filing but, using book values the company presented in another filing, may be on the order of $1.4 billion.

Coal state readers may hear "more coal" almost instinctively as a good thing.

But those same readers, as ratepayers, might want more information about the alternatives before coming to a conclusion.

"West Virginians have not been well served in recent years by the heavy dependence of local utilities on coal for electricity generation," Van Nostrand wrote in a recent discussion paper.

About 97 percent of the state's electricity comes from coal, Van Nostrand wrote. Without any hedge against price increases, coal price hikes in the last decade led to dramatically higher rates: 68 percent for AEP's residential customers from 2000 to 2011, and 39 percent, from a higher baseline, for FirstEnergy's.

That could have been prevented, Van Nostrand wrote, with Integrated Resource Planning.

The idea behind IRP is straightforward. Its methods acknowledge that reducing demand is just as good as increasing supply for meeting future power needs. And, further, that ratepayers should be afforded protection from big increases in the cost of any one fuel through diversification.

To achieve those ends IRP compares the cost of demand-side measures — energy efficiency, for example — with the cost of supply-side measures — new generation or buying power in the market.

IRP has been around for decades and is in use in some form in more than half of states, according to Synapse Energy Economics.

Plans not integrated; diversification suffers

Both Mon Power's and Appalachian Power's generation resource transaction proposals are based on incomplete analyses, Van Nostrand said.

Neither sets demand-side options alongside supply-side options — that's the "integrated" part of IRP, he said. And neither gives serious consideration to renewables which, while their costs are loaded up front, have no fuel cost and so serve to hedge against fuel price volatility.

Van Nostrand said he's reviewed possibly 25 IRPs in his career and has never seen an analysis that would put so much of a utility's generation on any one resource.

"That, to me. is the biggest advantage of IRP: diversification," he said. "You're trying to come up with a portfolio of resources that results in the lowest cost for customers over time. Diversification usually promotes that. Things like wind and solar should be part of it. And energy efficiency, that should be part of it too."

Cost of efficiency

Energy efficiency is a resource that builds up over time, noted policy analyst and Energy Efficiency West Virginia Coordinator Cathy Kunkel.

"Energy efficiency investments now would yield significant savings in the next 10 or 15 years," Kunkel said.

"The company's plan is looking at locking ratepayers into a major capacity investment with significant long-term risk," she said of the more recent Appalachian Power filing, "rather than considering options that would allow it to ramp up energy efficiency and demand response or build other assets in West Virginia that wouldn't have the same sort of long-term environmental risk."

A paper released Dec. 19 put another view on the untapped potential for efficiency — and cost savings to ratepayers — in West Virginia.

"When examining studies of the potential for reducing energy waste and the accomplishments of leading states in the Mid-Atlantic, it is clear that FirstEnergy and ApCo should be achieving far more cost-effective energy savings than they are currently planning in West Virginia," reads the report prepared by Optimal Energy for the Sierra Club.

From 2013 to 2016, the utilities propose to save ratepayers 413,000 megawatt-hours through efficiency measures, according to the report, but the authors find that three times that, or 1.4 million MWh, is achievable.

The utilities are doing more to save energy in other states, Van Nostrand said.

Mon Power proposes in its filing to reduce demand by 3.3 percent by 2022, and attributes that goal to what is considered "realistically achievable" in a 2009 Electric Power Research Institute study.

But, Van Nostrand said, AEP companies are doing far more in other states.

An AEP filing in Virginia acknowledges that demand-side resources likely will play a significant role in satisfying capacity and energy requirements in the future, saying "they are the least-cost resource, even in significant amounts," he quoted.

Virginia has a voluntary 10 percent energy efficiency target by 2020, he said. Michigan's mandated target is more than 10 percent by 2020, and Indiana's is 13.9 percent. And in Ohio, where both AEP and FirstEnergy are headquartered, utilities have to put in place efficiency measures equal to more than 20 percent of energy supplied by 2025.

The commission will be considering the utilities' proposals over the coming months. Mon Power seeks a decision in April; Appalachian Power is aiming for June.

Kunkel would like to see complete IRPs included with the utilities' proposals.

"If we're looking at a major investment in an asset that's going to last another 15 to 20 years, we really need to be looking as well at other alternatives that create local jobs and save ratepayers money," she said.