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CHARLES TOWN – FirstEnergy has reached a settlement agreement with a number of groups that has been opposed to the intra-company sale of the Harrison Power Station for a new price of $800 million, well short of the $1.2 billion that had originally been proposed.
The sale is now projected to lead to an immediate decrease of $1.50 per month in residents electric bills.
Critics of the sale argue those costs will rise in the future, however.
Todd Meyers, spokesman for Potomac Edison, a FirstEnergy subsidiary, said the settlement represents a good compromise.
“Negotiations yielded a very reasonable settlement,” Meyers said. “It was compromise on all sides.”
Besides Potomac Edison, the staff of the Public Service Commission – including the Consumer Advocate Division charged with advocating for ratepayers – the Coal Association, and several labor unions have all signed off on the settlement.
It includes commitments on behalf of Potomac Edison and Mon Power, also a First Energy subsidiary, to employ 50 new workers in the state, $2.3 million in credits from large commercial and industrial customers, and $500,000 each for home weatherization, school energy efficiency and low-income energy assistance.
In a statement, FirstEnergy says the purchase will protect consumers from volatility in the electricity generation market. Myers said the purchase represents the best economic option for the state’s ratepayers.
“Throughout the entire time that we identified the Mon Power purchase of the entirety of Harrison as the best opportunity to get capacity and energy for our customers, we’ve always maintained that that was the best and most economic option,” he said. “We continue to believe that.”
The sole party objecting to the settlement is the West Virginia Citizens Action Group, or CAG, a progressive activist group.
In a press release, the CAG said it feels the proposed settlement would be unfair to ratepayers on a number of fronts, including the proposed sale price of $800 million.
“The price that ratepayers are being asked to pay for Harrison is still way too high and that acquiring the plant will increase long-term price risks for ratepayers,” according to CAG, which also argues that FirstEnergy is using accounting tricks to inflate the proposed sale price.
“The $796 million price is higher than the plant’s actual book value and violates a previous Commission order,” they said. “In its 2010 Order approving the FirstEnergy/Allegheny merger, the PSC stipulated that FirstEnergy would not seek future recovery of any ‘acquisition premium’ merger costs added to its books… Although the proposed settlement reduces the markup by about $300 million, [CAG] argues that this ‘in no way improves its legality.”
Karyn Newman, an anti-PATH activist and critic of the Harrison sale, called the sale one that trades short-term savings for a long-term increase in expenses.
“This is not a good decision for ratepayers,” she said. “If you look at it, rates will only go down temporarily.”
Newman points out that the settlement involves Mon Power’s sale of a small ownership of a second power plant at Pleasants to another FirstEnergy subsidary, which is being credited against the sale of Harrison.
“They are taking that credit and putting it up front and amortizing it over 18 months,” she argued. “It looks like rates are going down, but that is because they took the only credit part of this transaction and put it up at the front.”
Newman said the sale, if approved, will also expose state ratepayers to the risk of rising coal prices and new environmental regulations.
“If the commission approves this, we own a coal plant,” she said. “We own the risk. Over the long term, it is going to cost ratepayers a significant amount of money.”
The signatories had requested that the PSC approve the settlement by the end of the month, but the commission denied that request Monday, ruling that all parties would be given the opportunity to make oral arguments before it.
“We … understand the desire of the Stipulating Parties to move this matter to resolution with utmost speed,” the commission ruled. “The [PSC] shares that desire; however, we will chalk up the suggested decision date of ‘no later than August 30, 2013,’ to ‘corporate enthusiasm.’
“The issues to be decided in this proceeding are too numerous, too significant from a rate making and cost of service perspective, and too important to current and future ratepayers, Mon Power and [Potomac Edison], and the economy of the State to suggest that they be treated in anything other than a detailed and thoughtful manner by the Commission.”
CAG also alleges the sale will put ratepayers on the hook for higher future coal costs and for repairing the aging coal plant.
“Friday’s filing says that acquiring Harrison means that Mon Power and Potomac Edison will generate more than 90 percent of their energy from just two, coal-fired power plants that were constructed within five years of each other,” they said. “This is an extreme case of a utility putting all of its eggs in one fuel basket, and exposes ratepayers to significant financial risks – not only of coal price volatility, but also of both power plants contemporaneously facing declining operating performance and increasing operating and replacement costs as they age.”