Fight over Morgantown plant credits lands at FERC

The Monongahela Power and Potomac Edison units of FirstEnergy Corp. (NYSE:FE) filed March 16 with FERC to intervene in a case where they intend to defend their ownership rights to renewable energy credits generated by the coal-fired power plant of Morgantown Energy Associates.

The FERC case is being handled under the Public Utility Regulatory Policies Act (PURPA) of 1978. Morgantown Energy Associates (MEA) has a Qualifying Facility (QF) under PURPA. MEA on Feb. 24 filed a petition with FERC alleging that a decision by the West Virginia Public Service Commission holding that, under West Virginia law, Mon Power and Potomac Edison own renewable energy credits (RECs) associated with energy generated by the facility and certain other QFs violates PURPA.

Because Mon Power/Potomac Edison and their ratepayers would incur an estimated $50m to replace those RECs, the utilities told FERC they have a direct interest in these proceedings. FERC should dismiss the MEA petition, since it has previously determined the very issue raised in it, that the ownership of state-created RECs is to be decided under state law, not PURPA, the utilities argued. Notable is that RECs are generated by a coal-fired plant because this facility uses waste coal, a qualifying REC fuel.

The utilities said they believe that the MEA petition was filed primarily as an effort to delay the resolution of MEA’s pending appeal of the West Virginia PSC decision to the West Virginia Supreme Court. Each month of delay reduces the number of RECs that the companies said they can bank for compliance purposes that are attributable to energy from QF facilities with which Mon Power has energy purchase agreements, including the MEA facility. For that reason, the utilities said they need a quick resolution of the PURPA issues presented to the FERC in the MEA petition.

MEA owns and operates a 53-MW generating facility in Morgantown, W.Va. Mon Power has purchased all of the electrical capacity and energy generated by the facility under an Electric Energy Purchase Agreement (EEPA) since April 1992, and will continue to do so under the EEPA’s terms until 2027.

In 2009, the West Virginia Legislature enacted the Alternative and Renewable Energy Portfolio Act, which provides for the creation of alternative and renewable energy resource credits under West Virginia law. The act requires each electric utility doing business in the state to own credits equal to a certain percentage of electricity sold by the electric utility to retail customers in West Virginia in the preceding year. The act further provided for the state PSC to establish a system of tradable credits.

On Nov. 22, 2011, the PSC ruled that under West Virginia state law, RECs attributable to energy purchases by Mon Power from the MEA facility pursuant to the EEPA are owned by the utilities during the term of the EEPA, not by MEA.

MEA’s Feb. 24 petition said the November 2011 PSC decision violated PURPA in several ways. One is that it violated PURPA to the extent the PSC order reasons that Mon Power’s payment of an “avoided cost” rate to MEA for energy and capacity under the EEPA is sufficient basis to hold that recently created West Virginia renewable energy credits can transfer from MEA to Mon Power at no compensation to MEA. Another MEA contention is that the PSC order violated PURPA to the extent the PSC order authorizes the PSC or Mon Power to make a management decision for (and in place of and contrary to that which would be made by) MEA, by requiring MEA to submit to being certified to generate RECs under PSC rules, or otherwise “deeming” MEA as certified under the West Virginia RPS Act.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.