A commissioner asked whether two power companies in a $641 million recovery case made a good faith effort to keep coal supplies up and run closer to capacity over the past few years.
Charlotte Lane, chairwoman of the West Virginia Public Service Commission, asked the questions during the second morning of a week-long cost recovery hearing.
Appalachian Power and Wheeling Power, both subsidiaries of American Electric Power, are asking to recover millions of dollars in expenses that accelerated during a post-pandemic period of booming demand and increased costs. Russia’s war in Ukraine also disrupted global energy supplies and boosted international demand for coal.
One of the underlying questions has been whether the companies worked to abide by a benchmark set by the Public Service Commission to generate their own power at a higher level, 69 percent.
Lane posed that question to Jeff Plewis, an economic and energy consultant who testified on behalf of the power companies. Lane asked whether an extensive review by Plewis, “did you find references to company personnel discussing the 69 percent order that the Commission issued?”
Plewis noted that the 69 percent capacity issue has been discussed openly during PSC hearings: “They certainly discussed it in this venue. Are you asking amongst themselves?”
Lane responded, “I’m asking if you saw any evidence that the AEP people actually reviewed and took seriously the 69 percent order.”
“Yes,” Plewis responded, “because I saw all the activity that was happening in these cases around that topic and the questioning and the attempts to determine what does it mean and how to implement it inside, and I’m quite certain that people I think should have been aware were and were factoring it in.”
Lane continued, “And what do you base that statement on?”
“Just seeing testimony that discussed the capacity factor order extensively from many different individuals,” Plewis replied.
Lane asked if he had reviewed testimony from prior witnesses who said they weren’t aware of the order to run at least 69 percent capacity.
Plewis noted that there have been thousands of pages of documentation in this recovery case that now goes back several years. He did not recall anyone saying they were not aware of such a PSC order.
Lane then asked if he had been made aware of a West Virginia law requiring utilities to have under contract at least 30 days supply of coal. “did you see any evidence that the companies took that law seriously?” she asked.
“I saw much discussion of that law,” Plewis said, “from the company expert witnesses that are the ones making decisions related to coal procurement. So I guess in some ways an assumption that they were taking it seriously or integrating it in their decision making.”
Lane asked if he saw evidence that the power companies made arrangements to keep 30 days supply under contract on an ongoing basis “for instance, if you use so much coal today, do we have under contract enough to replace that rolling forward?”
“I definitely saw evidence of that,” Plewis said. “I think it’s in the record quite a bit. The decision making processes and evaluations they do to make sure they to determine if they have coal to meet their target levels, which I believe are compliant with that law.”
“But they didn’t,” Lane said, referring to a post-pandemic period when supplies were in great demand internationally.
Plewis responded, “As it turned out, they did not have the coal that would have been, I guess, nice to have had…”
“Or essential to have,” Lane interjected..
“Essential is a strong word,” Plewis countered.
Lane concluded, “If you have coal-fired plants, it’s sort of essential to have coal to run them, isn’t it?”
As coal and natural gas prices rose dramatically in 2021 and remained high throughout 2022, Appalachian Power and Wheeling Power say they paid far more for fuel and purchased power than the amount included in rates.
The power companies filed in May to recover costs from recent years plus anticipated costs from the months ahead.
The big amount has piled up, consisting of an accumulated under-recovery balance of about $552.9 million plus increased projected costs of about $88.8 million for the forecast period starting Sept. 1 through August 31 , 2024.
The proposed increase was criticized in public hearings in recent weeks in Huntington, Princeton, Charleston and Wheeling.
Appalachian Power has proposed two ways to recover the money over a longer period of time.
One would be to increase rates by $88.8 million for the projected costs while also spreading the deferral recovery over three years, for a total first-year rate increase of about $293.1 million.
The second option would be to use rate relief bonds to take care of the under-recovery balance and then to raise rates to bring in the $88.8 million.
The securitization, which means pooling income-producing assets to turn them into a single product for investment, would come through consumer rate relief bonds.
The power company could do that because of a bill passed this most recent legislative session, House Bill 3308.
The Public Service Commission has set aside each day from now until Friday for hearings about the recovery request.