PSC approves Harrison power plant sale - WOWK 13 Charleston, Huntington WV News, Weather, Sports

WV PSC approves Harrison power plant sale

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The Public Service Commission has given final approval to a plan allowing Monongahela Power Co. to acquire the Harrison Power Station and sell its ownership of the Pleasant Power Station, but at least one group plans to appeal the decision to the state Supreme Court.

The PSC order was filed Oct. 7 and comes with restrictions.

The total transaction involves a net payment by Mon Power to Allegheny Energy Supply Co. of about $1.102 billion. Mon Power will acquire the 79.46 percent interest in Harrison now held by AE Supply, and Mon Power will sell its 7.69 percent interest in Pleasants to AE Supply. All companies involved in the transaction are subsidiaries of FirstEnergy.

Mon Power ratepayers will cover about $800 million of the purchase price. According to the PSC, the net impact of the transaction will be an immediate rate decrease of about $16 million.

Mon Power supplies electricity to both its 385,500 customers in northern West Virginia and 132,000 Potomac Edison customers in the state's Eastern Panhandle.

This week's order is similar to a settlement agreement most parties reached in August, with some modifications.

"The PSC order authorizing the generation transaction was issued late Monday afternoon.  We are still reviewing the content of the order," FirstEnergy spokesman Todd Meyers said Oct. 8.

The order was approved by PSC commissioners Michael Albert and Jon W. McKinney. Commissioner David Palmer filed a 10-page dissent.

In his dissent, Palmer wrote that the settlement agreement as amended by the PSC does not meet the requirements of state law "because its terms are not reasonable and would adversely affect the ratepayers of Mon Power and Potomac Edison."

Specifically, Palmer cited five reasons for his dissent:

  • The $1.2 billion purchase price violates the merger stipulation involving FirstEnergy and its subsidiaries, and it violates PSC policy.
  • Many of the assumptions the companies used in their levelized cost of energy models are flawed and results-driven.
  • Mon Power becomes over-reliant on one fuel source.
  • The acquisition will likely harm the financial condition and bond rating of the companies.
  • There is no immediate need for the transaction.

On the first point, Palmer wrote, "The $1.2 billion purchase price that Mon Power intends to pay for the Harrison plant is unreasonable because it exceeds the net original cost of the plant by $589 million, as evidenced by the accounting for the transaction which includes a $589 million Acquisition Adjustment. …

"It is also troubling that the agreed-upon high price was proposed to the Commission without sufficient evidence of arms-length negotiations between the Companies and the seller, AES, or its holding company, FirstEnergy."

The morning after the PSC announced its decision, the West Virginia Citizen Action Group announced it would appeal the decision to the state Supreme Court.

"Mon Power and Potomac Edison ratepayers will pay nearly $800 million over the next 27 years to purchase the Harrison plant – a price that includes a $257 million mark-up of the cost Harrison incurred at the time of the merger of Allegheny Power and FirstEnergy in 2011," WVCAG said in a news release. "The Public Service Commission's order in the merger case explicitly prohibited markups on subsequent asset transfers between the merger partners."

WVCAG contends the markup in price is "a transparent effort to bail out FirstEnergy Corporation."

"FirstEnergy – the owner of both Allegheny Energy Supply and Mon Power – announced earlier this year its need to reduce debt by $1.5 billion, and FirstEnergy CEO Anthony Alexander noted in a quarterly earnings call earlier this year that the Harrison transaction was ‘critical' to the company's debt reduction plans at the time it was proposed," the WVCAG release said. "The effect of the PSC order is to move more than half of that $1.5 billion debt off of FirstEnergy's balance sheet and onto the electric rates of Mon Power and Potomac Edison customers."

Asked about WVCAG's statement, Meyers replied, "The news doesn't come as a surprise as this group had previously indicated it would likely appeal an order authorizing the transaction. We will respond appropriately as the process unfolds."