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Appalachian defends wind farm pursuit, says benefits are underestimated

There’s less risk for Appalachian Power customers to be hit with a long-term rate hike from the company’s two planned wind farm purchases than outside parties project, company staff members argued in recent filings with the state Public Service Commission.

Randall Short, a member of the PSC’s independent staff, and Stephen Baron, a representative of the West Virginia Energy Users Group, recently argued in filings that the benefits of buying the wind farms are “overstated” and customers would be better off if the company purchased energy from the regional marketplace.

Appalachian Power wants to acquire the Greenbrier County-based Beech Ridge II Wind Facility and the Ohio-based Hardin Wind Facility. They would generate 50 and 175 megawatts of power, respectively, and add toward the company’s goal of 25 percent renewable energy by 2031. Both Short and Baron recommended the PSC deny the Hardin facility specifically.

Short cited a 25-year forecast from Appalachian of marketplace energy cost estimates that didn’t factor in any extra cost in the future for carbon emissions. The forecast indicated the wind facilities would still produce an economic benefit, but there was little margin for error before the facilities would become a customer burden, Short said.

In rebuttal testimony, Appalachian Power representatives say Short and Baron’s analysis rely on conservative estimates about the wind farms’ cost that are unlikely to be realized.

Karl Bletzacker, a director of fundamentals analysis for American Electric Power Service Corporation, said using a 25-year forecast not factoring in the possibility of future carbon costs inherently underestimates the value of purchasing wind power. Appalachian Power has maintained that renewable energy tax credits and avoiding carbon regulatory hurdles played a big part in their pursuit of the two wind farms.

Although President Donald Trump’s administration is more lax on carbon emission regulations than its predecessor, the federal government could easily change its stance during the next president’s term, Bletzacker argued.

“A long-term forecast is not merely concerned with the current status of regulations and other current conditions that affect prices, but instead must also reflect reasonable expectations regarding future conditions that affect prices,” he said.

Short also criticized the company’s economic analysis for projecting 2019 to have significantly higher market energy prices than in years previous. Bletzacker said Short’s analysis used a 12-month stretch ending in November that was relatively warm weather-wise. That made his 2019 market price projections lower than they likely will be, Bletzacker said.

Appalachian Power is proposing to finance their development through an $84.6 million construction surcharge put into customer rates for a span of 10 years. It needs approval from the PSC, along with the Virginia State Corporation Commission and Federal Energy Regulatory Commission, in order to finalize the purchases.

John Torpey, director of integrated resource planning for American Electric Power Service Corporation, said even using a conservative measure like Short did, the average annual customer benefit would be $5 million in years three through 10 of the wind farms. That follows a $1 million annual cost for the first two years.

“Therefore, if the Commission accepts Mr. Short’s recommendation regarding the Hardin Wind Facility [deny the purchase], the Companies’ customers will forego significant value through 2028,” Torpey said.