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PSC staff wants Appalachian Power to specify wind farm purchases’ effect on rates

Appalachian Power’s plans to purchase two wind farms is facing scrutiny early in the approval process from the independent staff of the state Public Service Commission, specifically regarding a lack of notice to customers on how much the acquisitions would affect their electric bills.

The utility is proposing to finance the acquisitions of the Beech Ridge II Wind Facility in Greenbrier County (50 megawatts of power) and the Hardin Wind Facility in Hardin County, Ohio (175 megawatts) via a construction surcharge for the development of the facilities implemented into customer rates. That would occur not long after both facilities are placed into service, which Appalachian projects to occur in the second half of 2019.

As to how much the surcharge will be and how the costs would be initiated, Appalachian said that would be revealed in its 2019 Expanded Net Energy Cost proceeding, which is typically a reimbursement method for fuel costs. A filing from the PSC staff said Appalachian wants costs to be allocated to customers “based on demand and energy.”

The PSC, which regulates utilities, is one of the agencies responsible for approving Appalachian’s purchase. The PSC staff, which makes recommendations to the agency, said in its filing that the company should be required to provide notice to customers of any effect the acquisition will have on rates.

John Scalzo, Appalachian’s director of regulatory services for West Virginia, said in prepared testimony in July that the revenue requirement for the purchase would be $10.2 million for the first year and drop to $6.5 million in year ten. But PSC staff said specific construction surcharge costs should also be made public “to provide ratepayers notice of the costs they are anticipated to pay.”

“Based on its very preliminary review, Staff does not believe the proposed transactions will be rate neutral,” a PSC staff filing said. “…After reviewing the public filing, ratepayers will not know the costs they are paying for facilities, the cost they are paying for the energy as compared to what they would pay from the market, or the value of the asset.”

Appalachian announced the plans to purchase the wind farms in July as it looks toward its goal of 25 percent renewable energy in its portfolio by 2031.

Appalachian argued in a filing that a public notice detailing the specifics of the acquisition’s effect on rates “could cause customers to have an incomplete view” because some years rates may increase, and some years rates may decrease as a result of the transaction.

The utility added that the acquisition is much like its purchase agreement with NextEra’s Bluff Point Wind Energy Center, which the PSC approved earlier this year.

The PSC staff responded to that filing by saying year-to-year changes can be included in the notice, but added that rates are “unlikely to be a decrease … in the near future,” underlining the need for a notice of the expected effect on rates. It added that unlike the Bluff Point purchase agreement, customers would also be paying for construction costs, not just typical power and energy costs.

The engineering division of the PSC staff said Appalachian’s pursuit for additional power should not be limited to wind energy and is “disappointed” other renewable energy sources like solar were not factored into the company’s pursuit of additional power.

“Engineering Staff is concerned that solar producers were not considered, since many variables can affect the cost of a project, and energy production costs are changing rapidly in recent months,” the filing said.

Appalachian has said in filings that wind resources are appealing because they are more productive during the winter, when the company usually faces an energy deficit, and they qualify for the federal production tax credit.

In a petition to intervene, the West Virginia Energy Users Group, an association of industrial utility customers with heavy energy use, said it is “particularly concerned” with Appalachian Power’s pursuit of the wind projects because of customers bearing additional surcharge burdens and uncertainty surrounding the future of federal renewable energy benefits.