MORGANTOWN, W.Va. – West Virginia Citizen Action Group said Tuesday it will appeal the state’s approval of a $1.1 billion deal for the sale of the Harrison Power Station, arguing the value of the coal-fired plant is inflated by some $257 million.
The Public Service Commission approved the transaction late Monday, saying it would reduce Mon Power rates by $16 million a year. The deal involves Ohio-based FirstEnergy subsidiaries Mon Power and Potomac Edison, and affiliate Allegheny Energy Supply.
Mon Power would buy the remaining 80 percent of the 1,984-megawatt plant that it does not currently own. In exchange, Mon Power would sell 8 percent of its interest in the Pleasants Power Station to Allegheny Energy Supply.
The commission set some conditions it said would protect ratepayers, including provisions for a refund of a portion of the purchase price if the Federal Energy Regulatory Commission determines the amount charged to ratepayers exceeds the plant’s fair-market value.
But West Virginia Citizen Action says the price markup ruling violates stipulations of the merger agreement and contradicts commission policy. It pointed to a dissenting opinion from Commissioner Ryan Palmer to bolster that argument.
Palmer said the value was “not reasonable” and would hurt ratepayers. The companies used financial models that are “flawed and results-driven,” he said, and the deal will likely harm their overall financial condition.
He also said that wholesale electricity markets are currently stable, and the companies have enough time to explore other alternatives for meeting their shortfall in capacity.
Palmer’s opinion says $257 million of the purchase price is an unnecessary inflation and noted that Mon Power plans to write off the remaining $332 million as a loss.
“It is clear to me that the public utility is paying too high a price,” he wrote.
The citizens’ group had already indicated it would likely appeal, FirstEnergy spokesman Todd Meyers said, “so the news does not come as a surprise. We will respond appropriately as the process unfolds.”
The utility has long argued that the deal would ensure Mon Power can meet its demand through 2020, providing about 1,500 megawatts of additional power, or enough to supply about 1 million homes.
The company supplies electricity to both its 385,500 customers and 132,000 Potomac Edison customers in the state’s Eastern Panhandle.
The deal includes the companies’ promise to bring at least 50 more jobs to the state and provide $3.8 million in credit and contributions for economic development projects, low-income utility assistance and other programs.
The dissent also says the companies failed to show “any compelling public interest” for the sale at that price.
At best, Palmer wrote, “the companies’ attempt to burden ratepayers with the entire $1.2 billion purchase price for the Harrison plant ... is another example of `corporate enthusiasm.’ At its worst, the originally proposed transaction is a text book write-up of which JP Morgan and Samuel Insull would be proud.”
The PSC’s Consumer Advocate Division had also argued the markup was a transparent effort to bail out FirstEnergy, which publicly announced earlier this year its need to reduce debt by $1.5 billion.
“The effect of the PSC order is to move more than half of that $1.5 billion debt off of FirstEnergy’s balance sheet and onto the electric rates of Mon Power and Potomac Edison customers,” said Gary Zuckett, executive director of West Virginia Citizens’ Action Group.
“Their gain,” he said, “comes directly out of the pocket of every customer of Mon Power and Potomac Edison.”