APCo asks PSC to revisit artificially high coal plant capacity factor directive as Virginia reconsiders plant upgrades

Prompting the filing was testimony submitted to Virginia regulators by their staff utilities analyst leaving a door open to Virginia approval of federally required environmental upgrades at two Appalachian Power coal-fired plants in West Virginia that Virginia previously rejected.

Last week’s filing from Virginia State Corporation Commission utilities analyst Timothy Morris contended that continued operation of Appalachian Power’s Mountaineer plant, in Mason County, with federally required retrofits for wastewater discharges would cost less than replacement alternatives.

Morris concluded that whether continued operation of Appalachian Power’s John Amos plant, in Putnam County, with the same upgrades was economically viable depended on if the facility would dispatch at the Public Service Commission’s required 69% capacity factor. Morris found the commission’s directive to be uneconomic.

Capacity factor is the ratio of electrical energy produced by a generating unit for a given time to the electrical energy that could have been produced at full power during the same span.

Public Service Commission spokeswoman Susan Small declined comment on the Appalachian Power and State Corporation Commission staff filings.

In August 2021, the State Corporation Commission denied Appalachian Power’s request to recover wastewater discharge investment costs, for which Virginia’s share was projected to be $60 million. The agency found the proposal uneconomic.

But the Virginia regulators allowed Appalachian Power the option to file again for approval of wastewater treatment costs “should [the company] conclude circumstances so warrant.� Appalachian Power did so in a subsequent, unresolved case before the Virginia panel.

In October, the Public Service Commission granted approval for the wastewater upgrades at the Amos and Mountaineer plants, in addition to the Mitchell coal-fired plant, in Marshall County, co-owned by Wheeling Power and Kentucky Power. That approval resulted in West Virginia ratepayers picking up a burden of nearly $22 million per year from Virginia and Kentucky customers after those states ruled the proposal uneconomic.

Those states’ jurisdiction applies when their ratepayers are asked to pay their portion of operation, maintenance and electric output costs of facilities to serve customers.

Without the required upgrades, the plants would have to shutter in 2028.

In its Wednesday filing with the Public Service Commission, Appalachian Power asked the commission for permission to address Morris’ analysis in supplemental testimony in the company’s case seeking a $297 million rate hike.

Appalachian Power and Wheeling Power asked for that increase in April in the rate that the companies charge for buying power or fuel to generate electricity, known as an Expanded Net Energy Cost rate.

The rate increase would raise the monthly bill for a residential customer using 1,000 kilowatt-hours by $18.41.

Appalachian Power cited rising energy and fuel costs as reasons for the proposed increase, which followed the Public Service Commission ordering a $31.4 million Expanded Net Energy Cost rate increase to reflect a commission recalculation of reduced purchased power costs and additional fuel-handling costs incurred by Wheeling Power.

The American Electric Power subsidiaries raised concern upon filing for the rate hike with the Public Service Commission’s emphasis on maintaining a 69% capacity factor.

In September 2021, the commission required the Amos, Mitchell and Mountaineer plants to operate at that capacity factor, citing concern that Appalachian Power may not be maximizing use of the plants.

Projected Expanded Net Energy Cost expenses included plant use at capacity factors of 49.6%, 57.3% and 34.7% for Amos, Mountaineer and Mitchell, respectively, the commission noted at the time.

The Public Service Commission has been alarmed by rising fuel costs and persistently low capacity factors reported by those utilities. The panel has contended that operating at higher capacity factors would lower costs recoverable from customers, encouraging self-generation over paying rising PJM market prices for purchased power.

PJM coordinates electricity movement through West Virginia and all or parts of 12 other states.

At the West Virginia Coal Association’s request, the commission in June approved the creation of a task force to consider issues preventing Appalachian Power, Wheeling Power, Mon Power and Potomac Edison from running their in-state coal-fired power plants at higher capacity levels.

Morris noted in the filing that Virginia State Corporation Commission staff had requested an updated analysis from Appalachian Power in the case still pending before the commission. Morris reported a company projection that the Amos units would run at a loss in certain years between 2028 and 2040, the date until which West Virginia regulators ordered Appalachian Power and Wheeling Power to “take all necessary steps� to operate.

But Morris cited an Appalachian Power finding that during that span, the Amos units are expected to produce a positive net energy margin, with the Mountaineer facility expected to operate at a profit in all future years of operation.

Morris also cited testimony from a Sierra Club witness that whose modeling projected that removing Amos from the Virginia rate base at the end of 2028 and approving wastewater investments at Mountaineer would require less revenue than any other scenario, including removal of all Amos and Mountaineer units and meeting Virginia’s energy needs with solar, wind, battery storage and market purchases.

But the witness, Shelley Kwok of Massachusetts-based research and consulting firm Synapse Energy Economics, Inc., also concluded that removing both plants from the rate base was “likely prudent� due to other risks linked to long-term dependency on coal generation. Morris didn’t mention that finding in his testimony.

Morris concluded by stating that Virginia commission staff was declining to take a position on continued operation of the Amos facility with wastewater upgrades.

Appalachian Power asked the Public Service Commission for “anything that this Commission could do� to help the State Corporation Commission “appreciate the economic benefits� of approving Virginia participation in the wastewater upgrades and jurisdictional sharing of those costs between the two states.