Public Service Commission of West Virginia

Transcription

1 Public Service Commission of West Virginia 201 Brooks Street, P.O. Box 812 Charleston, West Virginia Phone: (304) Fax: (304) September 19,2016 Re: CASE NO E-P MONONGAHELA POWER COMPANY and THE POTOMAC EDtSON COMPANY Dear Ms. Ferrell: Enclosed for filing are the original and twelve (12) copies of the Staff Reply to the Companies Response and Motion to Dismiss to the Show Cause JWbg Enclosures Sincerely, P4 John R. Auville Staff Attorney West Virginia State Bar I.D. No. 8057

2 PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON CASE NO E-P MONONGAHELA POWER COMPANY and THE POTOMAC EDISON COMPANY STAFF REPLY TO THE COMPANIES RESPONSE AND MOTION TO DISMISS TO THE SHOW CAUSE On August 5, 2016, the Staff and the Consumer Advocate Division (CAD) of the Public Service Commission filed a Petifion of Commission Staff and the Consumer Advocate Division Requiring Monongahela Power Company and The Potomac Edison Company to Show Cause Why They Should not be Required to File Requests for Proposals for AI1 Future Capacity and Energy Requirements Above 100 MK The basis of the Staff and CAD motion was a stipulation from Case No E-PC (Harrison Transaction) and basic common sense utility planning. On August 18, 2016, the West Virginia Citizen Action Group (WVCAG) and the West Virginia Solar United Neighborhoods (WV Solar) petitioned to intervene in this matter. WVCAG was a participant in the Harrison Transaction case, but was not a signatory to the stipulation. On September 7, 2016, the West Virginia Energy Users Group (WVEUG) filed a petition to intervene in this matter. WVEUG was both a participant in the Harrison Transaction and signatory to the stipulation.

3 On September 8, 2016, the Companies filed a Response and Motion to Dismiss the Show Cause. The Companies requested dismissal of the Staff and CAD petition for three reasons: 1) the settlement provision threshold from the Harrison transaction has not been triggered; 2) the imposition of an RFP requirement would usurp reasoned management decision-making; and 3) the Commission should maintain flexibility for hture procurement of capacity and energy and should not prescribe an RFP process, or any specific mechanism, for procurement. Argument number one from the Companies appears to be an effort to address the call for an RFP prior to the acquisition of the Pleasants Power Station, which Staff and CAD believes is required by the Harrison Stipulation. Arguments two and three appear to attempt to address the need for an RFP any time the Companies need to acquire large capacity resources. The Companies note the stipulation from the Harrison Transaction states the Company shall issue an RFP if it is determined in any Base Residual Auction (BRA) that the Companies capacity obligation exceeds their owned or contracted-for capacity by 100 MW. In the latest BRA (delivery year 2019/2020), the Companies capacity obligation was 3,229 MW and the capacity resources totaled 3,399 MW. Thus, the Companies are still 170 MW to the good and the conditions of the stipulation have not been met. This capacity to obligation ratio is in stark contrast to the picture the Companies painted in Case No E-IRP where on page 14 of the initial filings, the Companies stated they had an anticipated capacity shortfall of 700 MW by 2020 (Staff believes this would correspond to the BRA for the delivery year for comparisons sake). The Companies would go from 170 MW ahead to 700 MW behind in 2

4 one year. Staff understands that due to new PJM capacity requirements starting in 2020, the Companies project to lose some of the capacity currently provided by the Bath County Pumped Storage facility, but Staff does not believe that loss is in the neighborhood of 900 MW. It could be that the loss of the Bath County capacity will cause a shortfall of more than 100 MW, thus triggering the stipulation provision, but the capacity shortfall will not be close to the neighborhood of 700 MW. Staff also understands that some of this difference, as noted by WVCAG in their September 16, 2016 filing, is that the BRA uses a summer peak and the Companies used a winter peak in the IF@ (See IRJ? filing, Case No E-IRP, page 19). The Companies are winter peaking, so this creates a gap between the needs shown by the BRA and the needs shown in the Companies in the IRP. In 2014, the difference behveen the Companies actual summer peak and actual winter peak was 456 MW. The difference dropped to 414 MW by There was still a large discrepancy even after the numbers are normalized for weather (See IRP filing, pg. 16). Had the Companies used the winter peak numbers for need and compared that to their owned capacity, it is possible there is currently a shortfall. Staff cannot be sure and neither can the Commission because the Companies have decided to cherry pick numbers to suit the current need. Staff also continues to have concerns that the Companies actions and filings indicate an unwillingness to comply with the conditions of the Harrison Transaction stipulation and make Staff question the Companies intentions when they entered into that stipulation. If, as the Companies implicate in this filing and the IRP case, that every time the Companies project a capacity need in the mid-term, they will seek to contract for 3

5 new capacity in some manner, the terms of the stipulation will never be meet. The bottom line is Staff does not want the Commission to end up in the same circumstance as the Harrison Transaction Le., the Companies proposing a transaction to purchase an asset owned by their parent company with multiple assumptions that cannot be verified and no time to explore other options through the RFP process or other avenues. Indeed, that is why the Staff wanted this stipulated provision. In this circumstance, you have FirstEnergy hemorrhaging money*, mostly due to over reliance on coal assets in competitive markets, wanting to foist one of those currently non-competitive assets onto its regulated affiliate where ratepayers will be obligated to pay for the asset regardless of its ability to compete in the PJM market, thus creating a scenario where ratepayers have to pay for the asset and the capacity the asset was supposed to deliver. Given the desperation of the parent, can Monongahela Power and The Potomac Edison refke the parent company s desire to unload this currently undesirable asset even though it is probably not the correct thing to do for ratepayers? If the Companies issue an RPF, that question becomes moot. FirstEnergy Solutions, the actual owner of the Pleasants Power Station, can participate in the RFP and will be selected as the winner if that is the best outcome for ratepayers. For these reasons, Staff believes the Commission should enter an order that requires the Companies to issue an RFP prior to filing a case before this Commission to purchase the Pleasants Power Station or any other generating asset. Staff has two comments about the Companies argument that requiring an RFP is usurping the Companies reasoned management decision-making. First, when the 1 FirstEnergy reported a second quarter 2016 loss of $1.I billion. 4

6 Commission finds a utility is not acting in a reasoned manner, it is the Commission s duty to step in and require the utility to do something different. Failure to issue an RFP and gather the information the RFP process provides is simply not reasoned utility practice. Second, there is no requirement that the utility has to act on the RFP. If the response is poor and none of the offers are worthwhile or the utility was able to procure a better offer through other means, there is no requirement the utility has to pick the least worst option from the pool of respondents to the RFP. In other words, by requiring an RFP, the Commission would not be directing the utility absolutely how to procure capacity. It would simply be stating any reasoned procurement of capacity would, at the very least, have an RFP as part of that process. Lastly, the Companies believe requiring an RFP would limit flexibility. As stated above, that is not the case, because the utility would still be free to explore other avenues. The Companies argument that an RFP can be hampered by poor participation, higher prices compared to solicitations and private negotiations is counter intuitive. An RFP would certainly result in a more robust selection than what occurred in the Harrison Transaction and what is apparently about to happen with the Pleasants Power Station. The parent is in financial difficulty and needs to unload an underperforming coal asset. The Companies just happen to be in need of more capacity. The FirstEnergy parent solution: No need to hrther investigate what may be available in terms of other resources, time to negotiate a fair purchase price for the Pleasants Power Station. For these reasons, Staff believes the Commission should issue an order that requires the Companies to issue a FWP for any additional energy above 100 MW at any time. 5

7 Respectfully submitted this the 19th day of September STAFF OF THE PUBLIC SERVICE COMMISSION OF WEST VIRGINIA By Counsel, W.Va. State Bar I.D. No

8 PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON CASE NO E-P MONONGAHELA POWER COMPANY and THE POTOMAC EDISON COMPANY CERTlFICATE OF SERVICE I, JOHN R. AUVILLE, Staff Attorney for the Public Service Commission of West Virginia, hereby certify that I have served a copy of the foregoing Staff Reply to the Companies Response and Motion to Dismiss to the Show Cause upon all parties of record by First Class United States Mail, postage prepaid on the 19 day of September, Christopher L. Callas, Esq. Counsel, Mon Power and PE JacksonKelly PLLC PO Box 553 Charleston, WV Willliam V. DePaulo, Esq. Counsel, WV Citizen Action Group 179 Summers Street, Suite 232 Charleston, WV Gary A. Jack, Esq. Senior Corporate Counsel Monongahela Power Company 5001 NASA Boulevard Fainnont, WV Susan J. Riggs, Esq. Counsel, WVEUG Spilman Thomas & Battle PO Box 273 Charleston, WV Patrick K. Maroney, Esq. Counsel, Utility Workers Union of America Maroney Williams Weaver & Pancake PLLC 608 Virginia Street East Charleston, WV Scott J. Rubin, Esq. 333 Oak Lane Bloomsburg, PA

9 Zachary Fabish, Esq. Counsel, The Sierra Club 50 F Street NW, 8th Floor Washington, DC J. Michael Becher, Esq. Counsel, The Sierra Club Appalachian Mountain Advocates PO Box 507 Lewisburg, WV Jacqueline Lake Roberts, Esq. Consumer Advocate Division 700 Union Building 723 Kanawha Boulevard, East Charleston, WV David B. Hanna, Esq. Counsel, IOGA Hanna & Hanna PLLC PO Box 3967 Charleston, WV Thomas N. Hanna, Esq. Counsel, IOGA Hanna & Hanna PLLC PO Box 3967 Charleston, WV Richard L. Gottlieb, Esq. Counsel West Virginia Oil & Natural Gas Assoc Lewis Glasser Casey & Rollins, PLLC PO Box 1746 Charleston, WV Phillip M. Magro, Esq. Counsel, I.B.E.W. Local 2357 AFL-CIO 204 High Street Suite 206 Morgantown, WV Charlotte R. Lane, Esq. Counsel, West Virginia Coal Association Shurman, McCuskey & Slicer, PLLC PO Box 3953 Charleston, WV Vincent Trivelli, Esq. Counsel, West Virginia State Building & Construction Trades Council, AFL-CIO, Intervenor The Law Office of Vincent Trivelli, PLLC 178 Chancery Row Morgantown, WV James M. Davis, Esq. Counsel, Mon Power and PE Jackson Kelly PLLC PO Box 553 Charleston, WV Derrick P. Williamson, Esq. Counsel, West Virginia Energy Users Group Spilman Thomas & Battle, PLLC 1100 Bent Creek Blvd., Suite 101 Mechanicsburg, PA Keith I).Fisher, Esq. Counsel, West Virginia Energy Users Group Spilman Thomas & Battle, PLLC PO Box 273 Charleston, WV Sang Ah Koh, Esq. Counsel West Virginia Oil & Natural Gas Association Lewis Glasser Casey & Rollins, PLLC PO Box 1746 Charleston, WV 25326

10 Emmett Pepper, Esq. Counsel, WVSUN and WVCAG 1500 Dixie Street Charleston, WV Evan D. Johns, Esq. Counsel, Sierra Club Appalachian Mountain Advocates 415 Seventh Street, Northeast Charlottesville. VA Barry A. Naum, Esq. Counsel, WVEUG Spilman Thomas & Battle, PLLC Bent Creek Boulevard, Suite 101 Mechanicsburg, PA Bill Raney West Virginia Coal Association PO Box 3923 Charleston, WV Michael Soules, Esq. Counsel, WVSUN and WVCAG Earthjustice 1625 Massachusetts Ave. NW Suite 702 Washington, DC VILLE, Staff Attornev W.Va. State Bar I.D.'No. 8057