AEP readies for likely Wheeling buy of part of Mitchell coal plant

American Electric Power Service Corp. (AEPSC), on behalf of Kentucky Power and Wheeling Power, filed with the Federal Energy Regulatory Commission on Oct. 22 a copy of the latest Mitchell Plant Operating Agreement.

AEPSC asked that that commission permit the Mitchell Agreement to be made effective on Dec. 31, 2014.

Wheeling Power, a subsidiary of American Electric Power (NYSE: AEP) that up to now has only been a wires company, proposes to obtain AEP Generation Resources Inc.’s 50% undivided interest in the coal-fired Mitchell Plant and appurtenant interconnection facilities located in Moundsville, West Virginia.

Kentucky Power, another AEP subsidiary, owns the remaining 50% undivided interest in the Mitchell Plant, which it got at the end of 2013. AEP’s Ohio Power unit had to divest to the unregulated AEP Generation all of the 1,600-MW plant at the end of 2013 under a deregulation plan in Ohio. Kentucky Power picked up half of the plant to make up for the imminent shutdown of the 800-MW, coal-fired Unit 2 at its Big Sandy plant in eastern Kentucky.

On Oct. 9, a Joint Stipulation and Agreement for Settlement was filed jointly by all parties with the Public Service Commission of West Virginia that, if adopted, would authorize Wheeling to acquire the 50% interest in the Mitchell Plant, the AEPSC filing noted. Wheeling currently is awaiting approval from the West Virginia commission of that settlement.

Kentucky Power and AEP Generation currently are parties to an operating agreement pursuant to which Kentucky Power is the operator of the Mitchell Plant. In anticipation of Wheeling’s acquisition of AEP Generation’ interest in the Mitchell Plant, Kentucky Power and Wheeling have entered into the Mitchell Agreement that is the subject of this filing, pursuant to which Kentucky Power will continue to operate the plant.

The Mitchell Agreement is virtually identical to the version of the agreement that FERC accepted for Kentucky Power and AEP Generation Resources. Article One of the Mitchell Agreement sets out Kentucky Power’s and AEPSC’s functions, including their obligations to operate and maintain the plant in accordance with good utility practices, to maintain the necessary books, records, and joint bank accounts for transactions involving the Mitchell Plant, and to prepare statements detailing for Wheeling the monthly costs associated with operating and maintaining the plant. Article Two provides for the apportionment of capacity and energy between Kentucky Power and Wheeling. Section 2.3 provides that in each hour, the parties will share the units’ minimum load responsibilities in proportion to their ownership interests, and that each owner will independently dispatch its share of the capacity between minimum and full load.

Article Three details each owner’s responsibilities and obligations for the costs of installing additional or replacement facilities at the plant, and specifies generally that the cost of facilities for jointly-owned property will be allocated in accordance with the ratio of each owner’s ownership interest. Article Four discusses the owners’ working capital requirements.

Article Five provides for Kentucky Power and Wheeling to establish and maintain sufficient coal stockpiles to provide adequate fuel reserves for normal operations, and for the owners to make monthly investments in the common coal stockpiles. This article further provides the right to each owner to directly purchase fuel supplies and arrange transportation, subject to approval of procedures by the Operating Committee.

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.