Virginia commission rejects APCo purchase of Mitchell plant - WOWK 13 Charleston, Huntington WV News, Weather, Sports

Virginia commission rejects APCo purchase of Mitchell plant

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In Appalachian Power Co.'s billion-dollar proposal to buy shares of two coal-fired power stations from an AEP affiliate, the Virginia State Corporation Commission on July 31 approved the Amos purchase but rejected the purchase of Mitchell.

APCo has a parallel case before the Public Service Commission of West Virginia.

The VSCC approved a lower purchase price for the two-thirds of Amos unit 3 that it does not already own than that proposed by APCo: $565 million, compared with nearly $620 million. The commission said in a media release that the lower price "reflects the use of traditional regulatory accounting principles to determine the plant's book value."

The Virginia commission wrote that the risks associated with the Mitchell plant were greater than those associated with Amos 3. It noted that APCo owns none of the Mitchell plant, has no track record of operating and maintaining it and has no knowledge of all potential environmental and contractual risks associated with Mitchell.

In distinguishing Mitchell from the Amos 3 acquisition, the SCC wrote, "We consider it relevant and important that APCo already owns [most of the Amos plant] … Virginia ratepayers already have made substantial investments in the Amos units."

And the VSCC cited risks associated with a lack of diversity in APCo's generating fleet. Approving both acquisitions would raise the share of electricity that comes from coal in APCo's fleet to a projected 87 percent by 2017.

In a matter considered alongside the proposed coal asset transfers, the Virginia commission also approved APCo's proposed merger with Wheeling Power Co. It directed that APco provide a $3.3 million rate credit to Virginia ratepayers "to resolve timing concerns," with the assurance that it would look at the effect of the merger on Virginia ratepayers during the company's next biennial review.

Approval of the purchase of Amos and rejection of Mitchell is consistent with the position taken by the Consumer Advocate Division in the West Virginia case.

"I'm surprised that's what came out with the transfer of assets," said West Virginia Consumer Advocate Byron Harris. "It's in line with what we were saying in our case here. But I also didn't think they would approve the Wheeling merger — I guess the company made an offer to hold Virginia harmless and I think that's probably reflected in the order."

The Virginia order may cast light on a similar case before the West Virginia commission only, in which Mon Power proposes to buy the Harrison coal-fired station from a FirstEnergy affiliate.

"I think the fact that the Virginia commission has rejected part of APCo's proposal is not good news for FirstEnergy," said policy analyst Cathy Kunkel, who has served as a witness in both cases for the West Virginia Citizen Action Group.

"Part of the basis for Virginia's decision was the lack of fuel diversity that Appalachian Power would have if it purchased the Mitchell Plant,' Kunkel said, "and that issue is an even bigger problem for Mon Power if they acquire Harrison. The Virginia decision doesn't have direct bearing on the West Virginia commission's decision on Harrison, but it certainly makes FirstEnergy's case look worse."

There is no clear rule for how the West Virginia commission is to proceed in a case in which another state's commission has rejected a portion of a parallel case.

PSC spokesperson Susan Small said there is no guidance saying either that the West Virginia commission is to rule independently on the merits of the proposal as filed without being influenced by the Virginia commission's decision or to take the Virginia commission's ruling as reason to choose not to consider that part of the filing.

If the West Virginia commission could still approve the Mitchell transfer.

"APCo can always ask the Virginia commission to reconsider its decision," Harris said, "but it can't acquire Mitchell without both commissions approving it."

There is no statutory timeline on the decision in West Virginia. Transcripts of the July 16-18 evidentiary hearing before the West Virginia commission just became available; see case number 12-1655 on the PSC's website