West Virginia PSC staff says commission can’t change contract to save coal-fired plant

Saying that the West Virginia Public Service Commission has no power to adjust contract electricity prices for a PURPA project, commission staff on June 16 recommended that the commission reject an application by American Bituminous Power Partners LP (Ambit) and Monongahela Power to save an 80-MW, coal-fired power plant.

“Staff believes regardless of previous Commission decisions that may appear contrary, it is clear that once the Commission sets the avoided cost rate for a [Public Utilities Regulatory Policy Act] project, the Commission no longer retains the jurisdiction to engage in rate regulation or financial and organizational regulation or any other ‘utility type regulation’ of PURPA projects,” said the staff brief. “The Joint petitioners are asking the Commission to do just that, engage in rate regulation by changing the avoided capacity rate. The Commission’s decision in the 1996 AmBit Order citing the Freehold decision is clear: the Commission is preempted from that action. The fact the parties to the Electric Energy Purchase Agreement (EEPA) in this matter have mutually agreed to change the avoided cost rate does not allow the Commission to overcome this preemption. Staff therefore recommends the Commission deny this petition to reopen for lack of jurisdiction.”

On June 5, AmBit and Monongahela Power filed a joint petition to reopen a longstanding proceeding for this project for approval of and amendment to the EEPA and associated ratemaking treatment. AmBit states it is in financial difficulty, and without a change in the contract price paid by Mon Power, AmBit will have to cease operations. Mon Power pays an avoided energy cost rate plus an agreed upon capacity cost rate for up to 80 MW of energy.

Under the current contract, the capacity cost rate in 3.425 cents per kilowatt-hour ($34.25/MWh). That rate is scheduled to decrease to $27.00/MWh in October of 2017 when AmBit pays off its bonds, and remain at that level through the end of the contract in 2036. The amended agreement at issue here calls for Mon Power to purchase 80 MW at a rate of 85% of all aggregated net revenues for energy, capacity, ancillary services and any other PJM revenues for the project as reported by PJM Interconnection and paid by or through PJM to Mon Power. The rate paid by Mon Power will never be less than the energy cost rate plus $34.25/MWh and no more than the energy cost rate plus $40.00/MWh.

The petitioners said that the ratepayers of Mon Power are not expected to see an increase in cost due to this change of the rate before October of 2017. At that time, costs are expected to increase by approximately $4.6 million per year over the current costs.

This amended EEPA is the latest in a long line of attempts to make this project work by amending aspects of the EEPA, staff noted. The first time AmBit was back before this commission due to financial difficulties was in 1989, just a year after the commission first approved the EEPA and before construction of the project had been completed. In 1989, the commission, among other things, authorized an increase in senior debt of $20 million to pay for increased costs due to unforeseen delays in project construction.

In May 1993, the project, called the Grant Town Power Plant, commenced commercial operations. It is fired by about 565,000 tons per year of waste coal, which is pulled from old mine sites in the region around the plant, which is located in Marion County in northern West Virginia.

Staff further argued: “The fact the parties to the EEPA have agreed to this change is irrelevant. The parties to the EEPA cannot bestow jurisdiction upon the Commission that does not exist. Further, logically, it does not make sense the Commission can now review this change in rates because it was agreed upon by the parties. It is well established the Commission cannot, on its own, revisit the avoided cost rate once it is set. If the Joint Petitioners’ position is correct and the Commission can review this filing because the parties to the EEPA agreed, the Commission is powerless to do anything but accept the rate as filed by the Joint Petitioners, or risk engaging in rate regulation. The Commission may possibly be able to reject the filing, but the Commission most certainly could not modify the provisions of the rate change if necessary to protect the public interest. That would clearly be engaging in rate regulation. Without its full tool box of options, the Commission cannot properly review a filing to ensure the interests of the public are being protected. Either the Commission can accept, reject or modify a petition or it can do none of those three things. Since it is clear the Commission cannot modify this Petition, Staff believes it can do none of those things.”

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.