MORGANTOWN — The decision to approve Mon Power’s plan to stop buying electricity from Morgantown Energy Associates’ Beechurst Avenue plant lie in the hands of the Public Service Commission, following a public hearing this week.
The only objection to the proposal came from LP Mineral, which supplies the waste coal that fires MEA’s generators. LP Mineral’s Manager James Laurita supplied written testimony prior to hearing, saying LP will lose up to $56 million by terminating its contract with MEA seven hears early. Laurita asked the PSC to grant a two-year wind-down period
As we’ve reported before, Mon Power has proposed a $60 million buyout of its contract with MEA – set to expire April 17, 20207 – because the contract rates are higher than market rates and it believes it can save its customers money by stepping away Jan. 1, 2020.
Mon Power has been purchasing electricity – about 50 megawatts – from the plant under an Electric Energy Purchase Agreement with MEA since April 1992. The contract was set to continue through April, 17, 2027. The higher rates cost Mon Power customers about $70 million from 2014-2018, Mon Power has said, and will cost another $17.7 million above market rates in 2020.
Following termination, MEA will no longer supply electricity generated by its two boilers fired by coal and waste coal. MEA may continue using the coal-fired boilers to supply steam to WVU until it completes installation of equipment to replace them, at which time the coal-fired boilers will be retired. In the meantime, MEA will also install an additional auxiliary natural gas boiler to meet its steam supply obligation, which continues through 2027.
In his written testimony, Laurita sites several negative outcomes if PSC approves the contract termination.
One, LP Mineral is MEA’s exclusive supplier of waste coal, 400,000 tons annually from coal piles at the defunct Humphrey Mine in Maidsville, at the cost of $8 million per year. The LP-MEA agreement was renewed in 2017 and set to run through 2027. LP had MEA had been in talks throughout this year about extending the agreement and ways ot improve the economics at MEA.
“I was shocked to hear that Starwood [Energy Group, MEA’ owner] decided to stop generating electric energy at the facility,” he wrote. “While Starwood squeezed LP Mineral for financial concessions throughout 201 9, Starwood senior management never mentioned the possibility of no longer generating electric energy at the Facility. Clearly, the buyout of the EEPA has been in the works for some time and it is unfortunate Starwood chose to keep LP Mineral in the dark.”
If the LP-MEA ends, Laurita said, 11 LP employees will lose their jobs. Passing along hearsay from other discussions, he added that “all but a handful” of MEA employees will be terminated, and the coal trucking vendor will lose 12 employees. MEA’s various vendors will lose about $5 million per year.
Laurita said that because LP expected to continue supplying MEA, it turned down an opportunity to supply coal to Mon Power’s Fort Martin plant. Now, with this surprise move, LP approached Mon Power about supplying coal, but learned Mon Power has already contracted with someone else.
Also, Laurita said, ending its MEA contract will hinder LP’s reclamation of the Humphrey mine.
Laurita attached a letter to his testimony from LP’s attorneys to MEA stating early termination LP’s contract warrants damages calculated through April 17, 2027.
He concluded his written testimony, “While early termination of the EEPA [Mon Power’s energy purchase agreement ] will negatively impact LP Mineral and others, a two-year wind-down period (versus a three-month wind-down period) will allow all parties the time required to make other arrangements.”
WVU issues
Along with supplying power to Mon Power, the MEA plant also supplies steam for heat and other purposes to 63 WVU buildings in Morgantown. Under the WVU-MEA contract, WVU takes more steam than it actually uses – it takes 753,600,000 pounds per year but uses on average 680,000,000.
WVU filed written testimony expressing some concerns about the Jan. 1 termination of the Mon Power-MEA contract, but then withdrew the testimony the day before the hearing. But WVU’s objections remain in the record.
Joe Patten, WVU’s executive director of its Planning, Design, Construction and Scheduling Department supplied the testimony, which expressed concern that MEA might face difficulties providing steam to WVU after it ceased using coal power and relied entirely on gas.
“From our perspective, however, MEA has not provided a sufficient level of detail and comfort to WVU that the proposed amendments are reasonable given the new manner in which MEA will be providing steam to WVU,” Patten wrote.
The loss of Mon Power’s payments calls into question the plant’s economic viability to continue sending steam to WVU, he said. “If MEA were to cease to provide WVU with steam, that would be devastating to WVU’s operations.”
Patten said WVU would like to see the Mon Power-MEA contract continued until March 1 to allow WVU and MEA to conclude their talks. The current contract price is based on MEA generating steam based on 80% coal power and 20% gas. That ratio won’t apply anymore.
WVU’s press office was unable to supply details about the reason behind the change of course, but was able to say late Friday afternoon: “We have worked out our differences and have an agreement in principle with MEA.”
Other testimony
Several people offered written testimony to counter Laurita’s. Emily Medine wrote on behalf of the PSC’s Consumer Advocate Division. She said every procurement decision involves winners and losers. LP may suffer but that’s not the PSC’s affair. The PSC’s concern is for the ratepayers, and they will benefit.
MEA Director Jeffrey Delgado said MEA is obliged to provide only 20 days’ notice prior to termination of the Mon Power energy purchase agreement. It may exercise its right to end the LP contract without any obligation except for specified handling fees and any other liabilities due and owing for the time up to termination.
Since the Mon-Power proposal requires PSC approval, he wrote, “MEA does not know for certain that the EEPA will be terminated That is the point of this hearing, to obtain this commission’s approval. MEA cannot give LP Mineral formal notice of the termination of the Fuel Contract when MEA does not know that the EEPA will in fact be terminated.”
And even if the PSC does give the OK, MEA will keep using its coal-fired boilers several months to supply steam to WVU until it switches to gas-only. When MEA knows exactly when it will shut down the coal boilers, it will notify LP.
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