by Bill

PJM Interconnection issued a press release today documenting the dramatic increase in solar generation across the PJM region.

In 2009, the WV Legislature and Gov. Manchin passed the WV Renewable and Alternative Portfolio Standard law to sabotage the development of solar power in WV.  The results are clear.  Here is the map from the PJM press release.  Look at NJ, where incentives are strong and PV installation has been exploding.  Compare NJ's results with WV.  In fact, compare WV with just about any other state in PJM.  Pathetic.

If you are fighting PATH, you should thank our friends in NJ, because they are taking responsibility for their own power generation, insuring that coal by wire transmission lines like PATH can never be built.

Cross posted from The Power Line

by Keryn

The Sierra Club submitted this letter to the WV PSC regarding the Commission's scrutiny of FirstEnergy's decision to close the Albright, Rivesville and Willow Island coal-fired generation plants in West Virginia on September 1, 2012.  Regular readers will remember an earlier post about the meeting Sierra Club mentions in their letter. 

So, what's Sierra Club's purpose here?  A successful transition from economic dependence on coal-fired power plants to a cleaner, more prosperous future for the affected West Virginia communities.  Read Sierra Club's success story about closure of a coal-fired plant in Centralia, Washington, that gave new hope to the community, instead of leaving them high and dry, as FirstEnergy intends to do to the West Virginia communities.   A similar story is playing out in other states affected by FirstEnergy's plant closure plans. 

FirstEnergy's abandonment of these communities that have supported their highly profitable coal-fired generation plants over the years raises the larger question of corporate social responsibility.  Some of these plants date back to the 1920s -- nearly 100 years of profits for FirstEnergy and its predecessors!  It also means nearly 100 years of these communities depending on the economic livelihood these plants have provided.  Now FirstEnergy has made the decision to close these plants during difficult economic times without giving anything back to the communities that have supported them and stoically accepted the pollution of their local environment by these plants in exchange for the good-paying jobs they provided.  To add insult to injury, FirstEnergy points the finger of blame at the EPA, when the reality is that FirstEnergy's closure decision is in their own pecuniary interest.

What social responsibility does FirstEnergy have to these communities?  Sierra Club tried nicely to get FirstEnergy to the table to talk about their responsibility, but was unsuccessful.  Now the WV PSC is dragging them to the table, kicking and screaming all the way.

FirstEnergy talks a big game about their "community involvement"

"Public service is a privilege and our obligation to serve goes beyond providing energy services to our neighbors. In partnership with other businesses, government and the nonprofit sector, we've pledged our resources and the FirstEnergy Foundation to help make our neighborhoods and communities attractive places to live, work and do business."

but when it comes time to put their money where their mouth is, FirstEnergy doesn't deliver.

Perhaps that's because, in reality, FirstEnergy's "corporate stewardship" consists of payments (subsequently recovered from electric ratepayers) to entities like the Maryland Chamber of Commerce ($20,000) for the self-serving purposes of: "Sponsorship related to corporate stewardship and the education of business leaders about PATH (proposed high-voltage transmission line). The Maryland Chamber of Commerce provides PATH with the opportunity to provide educational materials along with personal discussions of the PATH project and issues relating to the project to municipal, county and state elected officials and staff as well as the general public. Corporate monitoring of organizations activities." 

Another example is their $20,000 "membership" in the Westmoreland (PA) Museum, where former Allegheny Energy CEO Paul Evanson sits on the Board of Trustees.  (see Attachment A of this publicly filed document for compete listing of some of FirstEnergy's self-serving "corporate stewardship" in 2010).

FirstEnergy seems to have plenty of money for "corporate stewardship" when it furthers their own interests, but not when it's truly about corporate social responsibility and paying it forward.  How about it, FirstEnergy, can you walk your talk and do the right thing for the communities affected by your plant closures?  According to this article, you're soon going to have an extra $216M to play with as a direct result of these plant closures.  Helping communities affected by your business decision would be a step toward true corporate social responsibility.

by Bill

Last night, Energy Efficient West Virginia's Cathy Kunkel and Molly McLaughlin and I gave C4RP's and EEWV's fifth Real Solutions to West Virginia's Rising Electric Rates presentation at the Huntington Public Library.  We spent a half hour yesterday afternoon in an engaging conversation with the Huntington Herald-Dispatch's editorial board, and the paper sent a reporter to cover the evening meeting.

Here is a link to the resulting story.  Reporter Lacie Pierson did a pretty good job of covering the main points of the meeting, but she got a little carried away with paraphrasing many of my comments and enclosing the resulting approximations in quotation marks.

At one point in the story, she attributed comments made by an Appalachian Power employee at the meeting to me.  I had just made the point that the fact that 97% of WV's electricity is generated from coal was the reason we could expect rates to continue rising for the foreseeable future.  The power company employee responded by saying that, in his opinion, WV's rising electric rates had been caused by, in the quote Ms. Pierson attributed to me:

"One of the big problems when it comes to rate increases in the state, Howley said, is that it takes more materials to span the power lines throughout the rural, mountainous geography of the state, which is sparsely populated.

The cost of installing and maintaining materials is greater, while the number of customers is smaller than in more urban areas, Howley said. That means when rate increases are ratified, they take a bigger toll on customers."

This is actually a garbled account of what the APCo employee said.  I would certainly never point to WV's geography as the reason for WV's rising electric rates.  Our state's features have been a part of power company experience from the very beginning.  If this were the cause of high electric rates, WV would have had the highest electric rates in the US, instead of some of the lowest, as in the past.

Ms. Pierson did a good job with the rest of her coverage, and we appreciate her reporting on the meeting.  As we pointed out in the meeting, the issues surrounding our electrical system can be complicated.  It is a tough job for a reporter to walk into a discussion like this with little or no background and put out a 100% accurate account of the discussion.

by Bill

We made progress yesterday and this morning.

Yesterday, the House Finance Committee passed a committee substitute for HB4530 which restricts the bubble bond bailout of APCo only to APCo’s existing coal-created debt.

This morning, Keryn’s op ed piece detailing obstruction of the least cost planning bill, SB162, by AEP and FirstEnergy lobbyists ran in the Gazette.  Remember that the Gazette link will die after a week.

by Bill

APCo has gotten themselves (and WV rate payers) in a mess.  They want to try a new financing scheme, HB4530, to bail them out.  The mess was caused by rising fuel costs.

As long as electric power generation depends on burning something, electric rate payers will be paying for fuel.  The other thing we know about fuel is that world supply gets smaller and smaller every year, and demand for fuel rises every year around the world.  From these two trends, we can safely conclude that the price of fuels used to produce electricity will continue to rise, as they have been doing for decades now.

There are three ways of "producing" electricity that don't involve burning fuel.

1. We can increase the efficiency of our use of electricity.  That is, we can invest in equipment and systems that produce more "work" for the same amount of electricity.
2. We can conserve electricity more effectively by simply being wiser about how we use power.
3. We can eliminate the need for fuel altogether by investing in solar power and wind power.

Items 1 and 2 above don't involve producing any new electricity at all.  Electrical engineers who have studied efficiency savings have concluded that 13% of our current electrical use can be eliminated easily from our current systems just through the easiest efficiency improvements.  Conservation is different from efficiency, because it simply means using less electricity by installing automatic switches on electrical lighting and equipment.  Conservation can be as simple as getting in the habit of waiting to use your washing machine until you have a full load, or turning off lights in rooms you are not using.

Investing in efficiency and renewable power, such as solar panels or wind turbines, does not require any fuel costs.  All of the investment in these systems, however, comes as an initial payment for installation of equipment that will last 30 years or more.  It is that initial investment that is the big hurdle for government regulators and politicians.

As we have seen, our WV PSC and our WV Legislature are more willing to lock WV rate payers in to rising fuel costs than they are to support real investments in efficiency and renewable power generation that will eliminate fuel costs altogether.

Why is it that the WV Legislature is rushing to force rate payers to borrow money to pay for coal that has already been burned?   Why won't the legislators and the WV PSC consider using a feed in tariff system or state bonding authority to support WV owned and installed renewable power systems that would eliminate the need for fuel cost adjustments forever?

I personally don't have a dog in the fight over the APCo bailout bill.  I am a Mon Power customer.  Mon Power, just as dependent on coal as APCo is, managed to do just fine during the 2008 coal price bubble, and avoided APCo's big boo boo.

I hold the WV Legislature and the WV PSC accountable for failing on the larger question of diversifying WV's sources of electricity.  Back in 2009, the Legislature had the opportunity to pass a renewable energy credit system which would have helped WV citizens and businesses make the initial investment in solar power generating systems.  This bill would also have created dozens of new businesses in the state, created new jobs and increased property tax revenues for schools and counties.  Instead, then Governor Joe Manchin and the Legislature passed a bill that shut new solar power investors out of any benefits and locked up the "alternative energy credit" system exclusively for coal burning power companies.  So the WV Legislature and now Senator Manchin are directly responsible for failing to resove problems that have led to the current APCo coal mess.

The Legislature has a chance during this legislative session to move our state in the right direction, toward a more stable energy future.  Legislators can pass the following bills that are before them right now:

• SB 162/HB 4646 to create a least cost plan reporting system at the PSC
• HB 4363 requiring the PSC to set energy efficiency targets for power companies in WV
• HB 2740 the Solar Bill of Rights to limit local restrictions on installing solar panels
  

by Keryn

This bill proposes granting authorization for the Public Service Commission to issue “financing orders” to electric utilities to recover increased Expanded Net Energy Costs from their ratepayers through the issuance of consumer debt bonds.

In the instance that caused this legislation to be proposed, AEP affiliate Appalachian Power has already incurred the expense of purchasing fuel that has already been burned and turned into electricity that it has already supplied to its customers.  Now ApCo finds that it will have to request another rate increase in the neighborhood of 40% to recover its expenses from customers. 

Fuel is a recurring expense that should be paid for at, or as close as possible to, the time it is used.  If not, the recurring liability of deferred expenses not recovered through current rates will merely snowball until the debt reaches a point where it can never be repaid through rates that consumers can afford.  “Pay as you go” makes financial sense.

Expanded Net Energy Costs (ENEC) represent a utility’s operating expenses that will vary from year to year.  Capital expense and fixed costs are covered under a different ratemaking process at the PSC.  In an ENEC case, a utility presents its projected cost of service for an upcoming year.  It also presents its actual cost of service for the prior year and compares, or trues up, its actual costs to the previous estimate that has been collected from ratepayers.  Any resulting rate increases are completely dependent upon the accuracy of the utility’s planning when presenting an ENEC case.  The “true-up” determines whether an over recovery or under recovery of rates from customers has occurred.  In the case of an over recovery, a refund is due to ratepayers.  In the case of an under recovery, the unpaid rate balance is charged to ratepayers over the next year.  This balances rates, when properly planned, so that large increases are unlikely to occur.

Appalachian Power’s planning process is broken.  The traditional ratemaking process works for other utilities.  In FirstEnergy affiliates Mon Power and Potomac Edison’s ENEC case last year, a projected 2012 over recovery was balanced against outstanding fuel-related under recovery to result in a smaller rate increase than would have otherwise been required.

The issuance of consumer debt bonds will reward AEP by allowing them to recover their expenses, while their customers incur the liability of the company’s poor planning over a longer period of time.  Instead of fixing the problem, this merely shifts it onto the backs of our children and grandchildren.

Tim Manchin’s “least cost planning” bill will be introduced in the House.  That bill will require utilities to file Integrated Resource Plans with the Public Service Commission every two years that will demonstrate how the utility plans to provide electric service to its customers in the most cost-effective manner over the next 20 years.  In its plan, the utility must evaluate costs and benefits of choices for power purchase contracts, the cost of new and existing generation facilities, investments in demand-side resources, including energy efficiency, and to create and effectively manage a diverse generation portfolio in order to protect ratepayers from unmanageable rate increases caused by over-dependence on any one source of fuel.  This approach works to solve the underlying planning problem that has continued to cause huge rate increases.

A sensible approach to this problem must include long-term solutions, not just a temporary “band-aid” approach that sweeps the issue under the rug for consumers to deal with in the future, such as HB4540 proposes.  The current under recovered fuel expense balance must be dealt with in a manner that Appalachian Power’s customers can afford.

We propose the following:

1. Bond issuance is limited to this one-time specific event.
2. Any bond issuance is limited to a 5-year re-payment period.
3. Least-cost planning must be instituted.
4. The outstanding fuel cost debt was directly caused by Appalachian Power’s poor planning, therefore some responsibility for the expense should remain with the utility, instead of the entire cost becoming the burden of customers.
5. Several provisions in the bill need amendment to ensure :

• That debt is repaid proportionally by customer classes who caused it;
• That the utility cannot sell the debt bond to their affiliates or absorb it internally, which defeats the purpose of the bond;
• That costs to administrate and set up financing of the bond, including costs of the Public Service Commission, become the responsibility of the utility, not to be recovered from ratepayers;
• That review of the utility’s books and records relating to the financing be transparent and open to review by affected customers;
• That the PSC’s financing order be subject to public hearing and review, including proper publication/notice to all affected consumers.

The increasing cost of electricity for West Virginians, at a time when they can least afford it, is a serious problem that deserves thoughtful consideration by all stakeholders, not a last-minute, quick fix that will allow all utilities to shirk future responsibility for their actions and create consumer debt outside of the traditional just and reasonable regulatory ratemaking process.

by Bill

Sen. Dan Foster (D-Kanawha) introduced Senate Bill 162 on January 12.  Senate Judiciary Committee chairman Sen. Corey Palumbo has yet to put the bill on his committee's agenda for a vote.  You can read Sen. Foster's original version of SB162 here.

SB162 would require the WV PSC to require all WV electric companies to submit least cost plans, also known as integrated resource plans, every two years.  The 1992 federal energy policy act states that the purpose of least cost planning is to provide "adequate and reliable service to its electric customers at the lowest system cost."  Here is a good explanation of how this system works and why it is needed here in WV to keep our electric rates from rising as rapidly as they have in the last five years.

Currently, the WV PSC has no mechanism for analyzing or comparing alternatives when a power company requests a rate increase.  The power company comes in, tells the PSC what its costs were and how much it wants in rate increases.  In 27 other states, PSCs can compare the power companies' costs with the cost/benefit analysis they provided in their least cost plans and use that comparison in making rate decisions.

The power companies prepare the least cost plans which are used only for informational purposes.  They are not required to follow the plan, but the plans are used by the PSC as guidance or comparison in rate cases.

Well, the power company lobbyists have freaked out over this bill.  They wanted to drop most of the important elements of the original bill.  They wanted to cut any public involvement in development or approval of the plan.  They wanted to drop the requirement that the PSC approve the power companies' plans.  They wanted to eliminate all reference to the requirement that power companies had to identify the combination of resources with "the lowest system cost" as defined in the federal law.  In other words, they wanted to gut the bill and make it entirely meaningless.  That was no surprise.

Sen. Palumbo has not yet put any version of SB162 before his committee, despite the fact that Energy Efficient WV has made a number of concessions and the power companies have made NONE.

Compare the over one month delay in moving SB162 and the well lubricated HB4350 referred to in the previous post.  AEP's bubble bond bill has the skids greased with sponsors from the House leadership.  It appears that a companion bill in the Senate is also sponsored by the full Senate leadership.

If any aspect of the deeply flawed bubble bond bill passes, WV rate payers will need SB162 more than ever as the PSC's only tool for holding down electric rates.  The bubble bond bill will hide power company rate increases behind a complicated borrowing process that will insulate the power companies' outrageous fuel costs from public scrutiny.  Power companies bad decisions will pass rapidly into the bubble bond black box with its hidden fees and "adjustments."  Only least cost planning will force power companies to show the PSC and rate payers what goes into that black box.

cross posted from The Power Line

by Bill

The whole "securitized" real estate bubble collapsed less than five years ago.  Now securitization has come to WV power companies and the WV PSC.

Power company lobbyists have fast-tracked a bill, HB 4530, that would allow power companies to sell bonds and charge interest to rate payers to cover the rapidly rising costs of generating electricity from coal.  In the coded world of the WV Legislature, this bill is well-lubricated to pass.  Two of the bill's sponsors are leaders in the House, the Majority Leader and the chairman of the Finance Committee.  These sponsors send a signal to all House members that this is a special bill.  The same bill has also been introduced in the Senate as SB584 and is loaded with sponsors from the Senate leadership.

You can read the bill here.  You can also read a discussion of the bill's impacts here.

AP's Larry Messina, in the story linked above, makes the following statement:

Other states have provided such financing alternatives to utilities. Lawmakers in Texas, for instance, approved a similar proposal in 2009 as electric utilities struggled with costs from restoring power systems in the wake of Hurricane Ike. West Virginia's PSC also allowed Allegheny Energy that year to sell $105 million in bonds so it could install a scrubber to remove sulfur dioxide and mercury from emissions at a Monongalia County power station.

Messina also quotes AEP spokeswoman Jeri Matheney:

Matheney said the company hopes to sell low-interest bonds that would allow the utility to recover the energy costs immediately. The existing rate structure should provide enough revenues to repay those investors over the life of the bonds, she said.

"We have already bought the coal, we have already made the power and customers have already used that power," Matheney said. "We're facing this large amount of money that has already been spent."

And

The utility estimates that its yearly per-ton coal costs jumped 70 percent between 2007 and this year. Matheney said the normal process has proved unable to cope with such circumstances.

"When it doesn't work well is when those expenses accumulate much faster and grow to become much larger than you anticipated," Matheney said. "We feel that's where we are right now."

Now read the actual wording of HB 4530.  The new WV bill is not an authorization of borrowing to pay for the coal purchases AEP has already made.  The bill is a general authorization that can be used by any power company in any similar situation.  Messina's examples from Texas and WV were borrowing to meet costs from one-time events, not ongoing rate increases.

Just like the liar loans and bogus mortgages of the recent real estate bubble, HB 4530 also contains new fees and "adjustments" that will allow power companies to change the terms of the bonds with little or no input from rate payers.

Right now, WV has a pay as you go PSC system that requires power companies to justify their rate increases in a pretty transparent process.  With the additional layer of complexity that the new "financing orders" would bring to the PSC process, the WV rate system becomes more complex and opaque.

The changes proposed in HB 4530 will do nothing to control rising rates.  The bill will only postpone the day of reckoning and push power companies' past bad decisions off onto our children and grandchildren.

cross posted from The Power Line

by Keryn

While West Virginia Governor Earl Ray Tomblin is focusing on West Virginia's energy past with comments like these:

More than once he lit into the Environmental Protection Agency, under constant fire from the coal industry over regulations it feels are too stringent and that are smothering production.

“This is West Virginia, where we appreciate the need for reasonable, open environmental regulations but understand the fundamental need for jobs and for low cost, reliable energy developed right here in the United States of America,” Tomblin said.

Calling it “a war on coal” by the Obama administration, Tomblin vowed to personally take on the EPA until it understands that a key to America’s future lies in the use of natural resources.

“It is a fight from which I will not shrink, and one that I fully expect to win,” he promised, evoking thunderous applause.

“Coal is, and always will be, a part of our future.”

And while West Virginia's Joe Manchin, Nick Rahall and Shelley Capito also focus on West Virginia's energy past with similar comments, there's one group that's actually taking action to support West Virginia's energy future.

The West Virginia Sierra Club is doing something about West Virginia's energy future.  At a community meeting in Preston County last weekend, Sierra Club representatives brought together residents, legislators and environmentalists to work together with utilities to craft coal-fired electric generation plant closure plans that take local needs into account.  Unfortunately, the utility was a no-show.  Perhaps they were holed up somewhere cozy with Tomblin, Manchin, Rahall and Capito crafting more crazy, coal-fired comments.

The Sierra Club has been successfully negotiating with energy companies in other states to give something back to their employees and the community when old, polluting plants close.  "Last year, for example, workers and local governments in Centralia, Wash., assisted by the Sierra Club, negotiated a 15-year plant closure plan with TransAlta. The plan sets aside $50 million for energy efficiency and clean energy projects — initiatives that will keep electricity bills down and offset the jobs impact of the closure."

FirstEnergy would prefer that their employees who will lose their jobs if plants close place the blame on environmentalists, however, the responsibility is clearly the utility's.  FirstEnergy has been aware that these plant closures were coming for years and should have been doing something to prepare for them that would protect jobs.  However the only thing employees are getting in exchange for years of loyal service is a trip to the unemployment office because that is the solution that makes money for FirstEnergy.  Money is the only thing that matters in the board rooms where decisions that affect "the little people" are made.  Even now, with plant closures imminent, FirstEnergy is a no-show.

"I think one of the challenges is to get the message across that, no matter how much you love it, the status quo is not one of the options," said Sconyers of this first meeting, aimed an  introducing the idea of entering a dialog with FirstEnergy.

Kotcon expressed frustration that little information has been forthcoming from the company.

"It is clear that economic forces are going to drive some very dramatic changes, but no one knows those data like FirstEnergy does," he said. "To get to a win-win scenario, FirstEnergy has to come forward with some discussion of what the market will dictate for the Albright plant and for plants like Rivesville and Willow Island."

And local residents will have to come together if they want a say in how this plays out, he said.

When push comes to shove is when you find out who your real friends are.

by Bill


The propaganda line is WV is that coal is our state’s most abundant electricity resource.  That statement, which we see repeated in the state media year after year, is simply not true.

Our state’s most abundant electricity resource is the resourcefulness and ingenuity of West Virginians.  The second most abundant resource is solar energy, which includes the power potential of the wind, as well as direct photovoltaic conversion.  So coal might be the third most abundant electric resource, but gas, at least temporarily, might be catching up fast.

Mike Harman, of Energy Efficient West Virginia, had an op ed piece in the Charleston Daily Mail the other day that illustrates how we can leverage our most abundant resource to lower electric bills in WV.  Increasing the wisdom of our electricity use, by using it more efficiently, or simply using it less, is the key to reducing electrical bills in WV.  Until we fully exploit this resource, we can’t even begin to assess how much new generating capacity we might need for the future.

Mike focuses on what power companies and regulators can do, but every West Virginian has the ability to reduce his or her electric bills right now, without government or corporate “help.”

As I have said many times before on The Power Line — stop thinking like a consumer.  Start thinking like an energy producer.  If you have electric heat, do you really need any incentives to install a programmable thermostat that will cost you $200 and pay for itself in one winter?  Do you really need a power company discount, that will be charged to your electric bill through the rate making process, to get you to replace your incandescent light bulbs with florescent bulbs that will reduce you lighting bill by over one half?  Do you really want to spend thousands of extra dollars on a home solar power system to cover your entire current 1000 kwh per month electrical use without trying to cut that use first to its bare minimum?

As Mike says, we need power companies to start investing now in efficiency and demand management, but there are lots of things you can do right now to save money, reduce your electric bills and build a more reliable and healthy electrical system in our state.  Why wait?  Do it now.