PSC Hears Testimony In Proposed Power Rate Hike
CHARLESTON -- Representatives of Appalachian Power and Wheeling Power attempted to make their case for the need for an additional rate increase on customers to the West Virginia Public Service Commission on the second day of evidentiary hearings Wednesday.
Appalachian Power and Wheeling Power, both subsidiaries of American Electric Power, presented their cases to the commission beginning Tuesday regarding three Expanded Net Energy Costs filings.
In the most recent case filed in April, Appalachian Power and Wheeling Power are seeking a rate increase to recover more than $641.7 million in costs for coal used to power its three electric plants in the state, including the Mitchell Power Plant in Marshall County.
The rate increase request would amount to about a $20 per month increase for the average AEP ratepayer in West Virginia.
The ENEC requests includes $552.9 million for an accumulated under-recovery and an additional $88.8 million in increased projected costs.
The other two ENEC cases from 2021 and 2022 deal specifically with a report, "Independent Technical Prudency Review of the Actions Affecting the Operations of Amos, Mountaineer, and Mitchell Coal Plants." The report was ordered by the PSC in both the 2021 and 2022 ENEC cases and completed in April by Critical Technologies Consulting.
According to the report, the companies did not meet the PSC's prior orders to increase capacity factors at its three West Virginia-based coal-fired power plants to a level of 69%. The companies also did not set up technical task forces to look at how the power plants could meet the PSC's capacity factors or how the companies would obtain lower-cost coal.
The CTC report determined that Appalachian Power and Wheeling Power could have entered into longer term contracts with coal suppliers to reduce the costs of purchasing the coal, resulting in reductions in the dollar amount of rate increase requests.
Jeff Plewis, a principal at Charles River Associates, is an energy and environmental policy analyst. Testifying on behalf of the power companies, Plewis pushed back on the CTC prudency review and whether the 69% capacity factor was prudent.
"I think (the companies) understood, I know they understood, that forcing a 69% capacity factor in many expected market outcomes would lead to higher costs for consumers," Plewis said.
Under questioning from attorneys for the PSC, Plewis said it was unclear from the PSC orders whether the companies were required to meet the 69% capacity factor for their power plants.
"I believe that there were expectations that would be an outcome. I didn't see it as a directive to do so," Plewis said. "I believe I did see indications that the companies often explored opportunities to make changes constantly and adapt to find least-cost fuel to meet the demands of their customers to provide least-cost service. So, I did see evidence of that."
Commission Chairwoman Charlotte Lane asked Plewis whether the companies had complied with Senate Bill 542, a 2021 law passed by the West Virginia Legislature that requires coal-fired power plants to maintain a minimum 30-day aggregate coal supply.
"Did you see any evidence that the company made arrangements to keep a 30-day supply under contract on an ongoing basis," Lane asked. "For instance, if you use so much coal today, do we have under contract enough to replace that and going forward?"
"I definitely saw evidence of that," Plewis said. "I don't know the law specifically, whether it says how much you said contracted amounts versus onsite. I don't have the specifics of that. But I know that they are constantly ensuring that they have enough coal."
"But they didn't," Lane said.
"As it turned out, they did not," Plewis said. "That would have been ... nice to have."
"Or essential to have," Lane said.
"Essential is a strong word," Plewis responded.
"I mean, if you have coal-fired plants, it's sort of essential to have coal run them, isn't it," Lane said.
The companies submitted two plans for the PSC to consider. One would increase rates by $88.8 million and spread the remaining under-recovery costs across three years at an increase of 12% for ratepayers, with the first-year rate increase set at $293.1 million.
The second option is a securitization of the ENEC under-recovery balance with an $88.8 million rate increase effective Sept. 1, resulting in a more than 3% increase in rates. By using the second option, the companies could wipe out approximately $150 million ratepayers are currently paying for costs at the John Amos Power Plant in Putnam County and the Mountaineer Power Plant in Mason County.
The evidentiary hearings are expected to continue through Friday.