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WV customers could bear cost of Appalachian Power wind projects

After Virginia regulators rejected Appalachian Power’s request to buy two wind farms under development, opponents of the deal warn West Virginia customers could bear the farms’ costs alone if the West Virginia Public Service Commission approves the purchase.

In July, Appalachian announced it would move to buy the Beech Ridge II Wind Facility in Greenbrier County and the Hardin Wind Facility in Ohio. Appalachian has proposed to finance the development of the two projects with an $84.6 million construction surcharge spread out over 10 years to ratepayers.

“We are continuing our transition to an energy company of the future and further diversifying our power generation portfolio. These acquisitions move us in that direction,” Appalachian Power President Chris Beam said in a statement announcing the pursuit.

The West Virginia PSC and the Virginia State Corporation Commission regulate utilities in their respective states. On April 2, the VSCC denied Appalachian’s request to buy the farms and then recover the costs from Virginia customers, saying the company didn’t need the additional power generation. The West Virginia PSC has yet to make a ruling.

The independent PSC staff, which makes recommendations to the agency, pointed out the VSCC’s rejection in an April 20 filing.

“In light of the VSCC’s Order Denying Reconsideration, the Companies’ West Virginia customers remain in the position of being solely responsible for the cost recovery and rate burden associated with the wind facilities,” the PSC staff said.

Appalachian said in a filing that the PSC staff is merely assuming that would occur with nothing in the record to support it, but added it is possible the PSC could approve such a scenario.

Appalachian said previously customers would notice little, if any, of the $84.6 million construction surcharge because of renewable energy credits the wind farms would qualify for. But the PSC staff raised concerns about how much customers would have to pay for the farms after those credits expire in the 11th year of the projects.

“[Appalachian’s] Initial Brief touts the price of the Wind Projects during the first ten years, but the problem is that the ratepayers pay for the facilities for twenty-five years,” the filing said.

In another filing, the PSC staff said Appalachian calculated the wind farms’ economic benefit to be about $9.7 million – $6.74 million for Hardin and $2.97 million for Beech Ridge.

Meanwhile, the PSC staff calculated the facilities “would cost ratepayers $50 million more” – $43.77 million for the Hardin project and $12.97 million for Beech Ridge – than just purchasing needed energy from the regional marketplace.

Beech Ridge would generate about 50 megawatts of power, while Hardin would generate 175 megawatts of power.

The PSC’s Consumer Advocate Division also voiced its opposition to Appalachian recovering wind farm costs from ratepayers, saying the VSCC found Appalachian’s energy price forecast inflated the actual economic value of the wind farms.

Appalachian’s forecast expects carbon dioxide/greenhouse gas regulation to be implemented by 2024, and the company said it was “shortsighted” for the PSC staff and the West Virginia Energy Users Group to conduct forecasts without factoring in a carbon tax.

“The Companies would be justly faulted if, in their planning, they ignored likely and expected developments simply because they hadn’t yet occurred,” Appalachian said. “There are many influential elements in American society today that favor such regulation.”

Appalachian added that wind farms are more productive during the winter, when the company typically purchases more energy from the market, underlining the need for the projects if market prices increase.

The PSC staff said since the implementation of a carbon tax is unknown and uncertain, a “no carbon” scenario should be used as the baseline projection.

“The record supports a conclusion that the wind facilities do not provide a positive economic benefit to customers, and the Companies’ petition should be denied,” PSC staff said.