By Mike Tony [Charleston Gazette-Mail]
Full article here.
The West Virginia Public Service Commission published a column from its chairman, Charlotte Lane, on June 26 titled, “Happy Birthday, America.” What starts off as a festive nod to Independence Day, though, quickly turns into an embrace of West Virginia’s coal dependence.
Lane signals support for President Donald Trump and West Virginia Gov. Patrick Morrisey's administrations being “committed to promoting coal as a domestic energy source” before acknowledging that “the resurrection of coal may take a little time as we work through new incentives from Washington and at the local level.”
“But as far as electric power is concerned,” Lane writes in the column, “we will remain energy independent long into the future as long as we rely on what underlies our mountains.”
What Lane calls energy independence has been increasingly anachronistic West Virginia coal dependence amid electricity costs rising sharper in the state than most of the U.S.
West Virginia ratepayers faced a 90% climb in average residential electricity retail prices from 2005 to 2020, per U.S. Energy Information Administration data. Only Michigan had a greater increase by percentage. Market forces have rendered coal uncompetitive compared with renewable energy and gas.
A 2023 study by San Francisco climate policy firm Energy Innovation LLC estimated that 99% of coal plants nationwide are more expensive to run than replacing their generation capacity with either new solar or new wind.
West Virginia is more reliant on coal than any other state in the nation, with coal-fired electric power plants accounting for 86% of its total electricity net generation in 2023, according to the EIA.
Lane’s PSC, to which longtime former West Virginia Coal Association president Bill Raney was appointed to in 2021 by coal magnate and then-Gov. Jim Justice, has helped ensure West Virginia’s anachronistic dependence on coal. It set a standard in 2021 for Appalachian Power and Wheeling Power to run their in-state coal-fired plants at a 69% capacity factor — a measure of how often a plant runs at full capacity — deemed uneconomic by energy experts and the utilities themselves but geared toward getting utilities’ plants to double down on self-generated, coal-fired power.
Also in 2021, the PSC granted $448.3 million in cost recovery to Appalachian Power and Wheeling Power to make environmental upgrades at three in-state coal-fired plants federally required to keep them operating past 2028 – even after Kentucky and Virginia utility regulators deemed the upgrades uneconomic.
The PSC contended that its decision was the most affordable option for state ratepayers, citing testimony indicating that they’d be on the hook for over $1 billion in replacement capacity costs.
Energy Innovation said in its 2023 report that replacing the Wheeling Power co-owned Mitchell Power Plant in Marshall County with local solar and battery storage would be roughly 50% cheaper and provide the reliability the PSC seeks while saving ratepayers hundreds of dollars every year.
The request follows a 207% increase from $55.28 in 2005 to $169.69 in 2024 in the average Appalachian Power and Wheeling Power monthly residential utility cost, according to PSC data.
Credit rating agencies wary of APCo coal dependence
Now Appalachian Power and Wheeling Power are asking the PSC to approve their request for a $250.5 million rate hike that would impose a $23.74, 13.54% increase in the bill of an average residential customer using 1,000 kilowatt-hours per month.
The companies estimated an alternative option of recovering costs through consumer rate relief bonds, a process called securitization, would yield a shorter monthly bill climb of $6.72 — or 3.8% — for a residential customer using 1,000 kilowatt-hours.
The utilities admit in their rate hike request filing that coal has become a liability. In written case testimony filed by the companies, independent regulatory finance and economics consultant John Thompson noted their “relatively high dependence on coal increases their exposures to regulatory risk and, along with natural gas, has recently left the Companies faced with elevated commodity prices and under-recovered costs.”
Thompson noted an observation from the credit rating agency Fitch Ratings last year that Appalachian Power had experienced significant increases in deferred fuel and purchased power costs resulting from high natural gas prices the past two years and the inability to timely pass along the costs.
The companies’ primary source of energy being coal exposes them to increasing risk in a changing environmental regulatory landscape, Thompson testified, noting a PSC order last year disallowed them from recovering $231.8 million in fuel costs from ratepayers after the commission found they mismanaged their coal procurement, over-relying on power bought from a regional grid operator rather than energy from their own West Virginia plants.
Thompson cited an analysis from credit rating agency Standard & Poor’s finding that Appalachian Power is exposed to potentially higher expenses as increasingly tight environmental regulations are implemented due to its high coal generation. Another credit rating agency, Moody’s, found Appalachian Power had “highly negative exposure to carbon transition risk” since coal is the company’s main generation fuel, Thompson noted.
APCo, WPCo want higher profit rate than U.S. average
Appalachian Power and Wheeling Power are asking for a return on equity — a rate of profit on capital investments — of 10.8%, which is well above their current 9.75% rate and a national 9.7% average in 2024, according to Rocky Mountain Institute, a nonpartisan energy analysis nonprofit.
Thompson endorsed the Appalachian Power and Wheeling Power 10.8% request in his testimony, citing “the specific risks for the Companies' utility operations in West Virginia.” But it’s the risks for ratepayers that are top of mind for consumer advocates after Trump signed into law a budget reconciliation bill on July 4 that makes sweeping cuts to renewable energy incentives and is expected to send electricity prices soaring further nationwide.
Energy Innovation projected that changes in a similar House of Representatives-passed version of the bill would result in an average increase in household energy spending in West Virginia of nearly $160 per year in 2030 and more than $410 per year in 2035 due to increased capital, fuel and operating expenses.
“It’s a definite step backwards,” Gary Zuckett, codirector of West Virginia Citizen Action Group, a progressive activist organization, said of the budget reconciliation bill, which drew key votes from all four members of West Virginia’s congressional delegation.
Zuckett was speaking during an electricity rate-focused virtual briefing last week hosted by West Virginians for Energy Freedom, a ratepayer advocacy group whose founding members include the West Virginia Citizen Action Group.
The briefing highlighted a survey of 500 West Virginian voters conducted this spring by Virginia-based polling firm Echelon Insights that found 68% of respondents wouldn’t be willing to pay anything extra for coal when choosing energy sources if it was more expensive than renewables.
But nearly half of voters believed solar energy is more expensive than coal, a perception especially prevalent among Republicans, 56% of whom said solar is more expensive.
Three out of every five respondents said more of West Virginia’s power generation should come from sustainable or renewable sources, including solar.
One in every five Republican West Virginian voters said lowering electricity bills is the top issue facing West Virginians, as many as creating new jobs and more than improving education.
But the West Virginia Legislature has resisted calls from consumer advocates to join 24 other states that have legislation enabling community solar, an arrangement other states have approved that has slashed energy costs. Community solar arrangements allow customers to receive solar energy without having to install their own solar energy system. Customers typically benefit from energy generated at an offsite array.
Consumer proponents have criticized Appalachian Power and Wheeling Power for proposing to make more unfavorable the terms of customers’ net metering, an arrangement in which a residential customer owns or leases and operates an energy resource — typically solar — connected on their side of the utility meter. Solar advocates say the companies’ plan to no longer credit the full retail rate for the metered energy they produce and deliver to the utility electric system could chill solar development in West Virginia.
The Trump administration has proposed to zero out the budget for the federal Low Income Home Energy Assistance Program, which supports states via the federal Department of Health and Human Services. The Trump administration laid off the entire program staff in April, according to national reports.
Appalachian Power and Wheeling Power also have not committed to continuing shareholder contributions or directing ratepayer funding to the Dollar Energy Fund, a Pittsburgh-based program that provides grants to customers facing service terminations or already have had their service terminated.
“There’s a stark contrast there between what Republican voters want and what’s being proposed,” Emmett Pepper, policy director of Energy Efficient West Virginia, said during the West Virginians for Energy Freedom briefing. High disapproval result for PSC Just under two-thirds of the Echelon Insights survey respondents said they strongly or somewhat disapproved of how the PSC is doing its jobs. Only 20% approved.
“I don't understand why the PSC is allowing all these different raises to go through,” public commenter Dakota Riggs said at a hearing the PSC held last month in Charleston to take public input on the Appalachian Power and Wheeling Power rate hike request. “I don't think it's fair to us as the people of West Virginia.”
But as this year’s Fourth of July holiday weekend fades in the rearview mirror, West Virginia’s nation-highest coal reliance doesn’t appear to be going anywhere.
“It’s a good thought,” Lane wrote of that reliance in her column, “as we consider the anniversary of our nation’s independence.”