MORGANTOWN — The state Public Service Commission has approved Mon Power’s proposal to stop buying electricity from Morgantown Energy Associates as of Jan. 1 – with conditions.
The chief condition is a concession to LP Mineral, which supplies the waste coal from the defunct Humphrey Mine in Maidsville to power MEA’s generators. LP Mineral’s Manager James Laurita had told the PSC that terminating the contract seven years early would lead to lost revenue for LP and lost jobs at LP, MEA and various suppliers that service the MEA plant on Beechurst Avenue.
So the PSC required MEA to give Mon Power and LP six months’ notice of the date it will stop buying the coal and stop using its coal-fired boilers.
MEA sent out that notice to both companies on Christmas Eve, setting the date at June 24, 2020.
As we’ve reported before, Mon Power proposed a $60 million buyout of its contract with MEA – set to expire April 17, 2027 – because the contract rates are higher than market rates and it believes it can save its customers money by stepping away Jan. 1, 2020. Power companies factor their energy-purchase costs into customer bills. These are pass-through costs; companies aren’t permitted to tack on profit.
Mon Power has been purchasing electricity – about 50 megawatts – from the plant under an Electric Energy Purchase Agreement with MEA since April 1992. 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 coal-fired boilers. MEA will 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 WVU steam supply obligation, which continues through 2027.
In its order, the PSC notes that the $60 million buyout will offset the initial (rounded down in the order) $17 million savings in 2020, resulting in a $43 million cost. However, there will not be any rate increase in 2020, Mon Power explained in an email exchange.
Rates will remain the same as 2019 as a result of the approval of the contract buyout, Mon Power said. The company will file its next ENEC case (energy rate case) by Sept. 1 of 2020 for rates effective January 1, 2021. However, the rates that will go into effect in 2021 will be lower than they otherwise would have been as a result of the company not having to purchase this above-market power.
In subsequent years, customers will realize the savings: $14 million in 2022, then $13 million each in 2023 and 2024, $12 million in 2025, $11 million in 2026 and $3 million in 2027. The projected net savings across the seven years equates to about 17 cents per month for an average residential customer.
Mon Power said, big picture, rates will be about $17 million lower per year for the next seven years as a result of the buyout. Savings to customers will be $20-40 million over the next seven years.
Weighing the cost savings against LP’s objections, the PSC said, “Prolonging that contract for 7.3 years will have negative impacts that are more certain and longer lasting that those arising from terminating it.”
In considering how to minimize harm to LP, MEA employees who might face layoffs, and other suppliers, the PSC considered Laurita’s request that the PSC delay terminating the contract for at least a year, preferably two. It observed, “It appears that LP Mineral anticipates that the potential economic impacts it foresees can be mitigated if sufficient time is provided before the MEA contract is terminated.”
The PSC also took into account MEA testimony that it will need several months to retire the coal boilers, and that LP may have a potential coal market at Mon Power’s Fort Martin plant.
That led to PSC’s requirement for the six months’ notice.
The second condition is based on PSC’s observation that weighing the cost savings against probable job losses made its decision “a very close call.”
So the PSC said it expects Mon Power to proactively work with MEA and the plant’s fuel, limestone and transportation providers regarding lost jobs. MEA must report to Mon Power, and Mon Power quarterly to PSC, on the status of all terminated employees at MEA, LP and the other suppliers, and whether those employees were offered jobs at Mon Power.
Mon Power must also notify PSC no later than Jan. 31, 2021, of the status of a potential waste coal contract with LP for the Fort Martin plant.
PSC limited its discussion to the economic impacts of terminating the contract and didn’t mention the positive environmental benefits raised in testimony and letters of support. Those potential benefits stem from reduced carbon emissions from the plant and reduced truck traffic.
Most recently, Morgantown Mayor Bill Kawecki cited those benefits in a letter filed Dec. 17. He said, “As I understand it, the MEA facility will likely cease burning waste coal if the termination is approved. This would benefit our community by helping to alleviate traffic in Morgantown. Dozens of trucks each day drive in and out of the facility located in the busy Sunnyside neighborhood. The neighborhood has become increasingly built up with residential housing, restaurants and other amenities, and we welcome this proposal to ease traffic pressure in this part of our city.
He concluded, “We are also concerned that the air pollution from this facility (and the trucks) negatively affects our residents’ health. MEA’S plan to shift from waste coal to natural gas could reduce the emissions in Morgantown, thereby benefiting our residents, including West Virginia’s best and brightest who study at WVU.”
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