West Virginia regulators have approved the environmental compliance work deemed necessary to keep three large American Electric Power Co. Inc. coal-fired power plants online until at least 2040. The decision could impact whether the plants continue to generate power for Virginia and Kentucky customers beyond 2028.
The Public Service Commission of West Virginia on Oct. 12 directed AEP utility subsidiaries Appalachian Power Co. and Wheeling Power Co. to take the steps necessary to notify the U.S. Environmental Protection Agency and the West Virginia Department of Environmental Protection that they "will proceed with environmental compliance work to assure that the plants may remain operational until at least 2040."
Appalachian Power and Wheeling Power in September petitioned the West Virginia PSC to reopen their case (docket 20-1040-E-CN) and consider increasing the state's jurisdictional share of environmental compliance costs at the 2,900-MW John E. Amos, 1,299-MW Mountaineer and 1,560-MW Mitchell power plants.
In early August, the West Virginia PSC granted a certificate of public convenience and necessity that allows Appalachian Power and Wheeling Power to make the modifications necessary to comply with federal environmental regulations under the EPA's Effluent Limitation Guidelines, also known as the ELG rule, and the agency's Coal Combustion Residuals, or CCR, rule and recover a portion of the costs from ratepayers.
The power plants, however, are also subject to jurisdiction by Virginia and Kentucky regulators.
The Mitchell plant in Marshall County, W.Va., is co-owned by AEP subsidiaries Kentucky Power Co. and Wheeling Power.
The Kentucky Public Service Commission (docket 2021-00004) approved Kentucky Power's request to pursue construction projects for the Mitchell plant to comply with the CCR rule but rejected the utility's request for work designed to comply with the ELG rule.
Appalachian Power owns the other two plants, and it sought cost recovery from the Virginia State Corporation Commission, or SCC, as well as in West Virginia.
The SCC on Aug. 23 approved (SCC docket PUR-2020-00258) about $27.4 million in cost recovery through an annual rider for upgrades and other construction projects needed at the Amos and Mountaineer plants to comply with the CCR rule.
Virginia regulators, however, rejected approval of about $4.2 million in initial rider recovery for upgrades needed to comply with the ELG rule.
In their September filing with the West Virginia PSC, Appalachian Power and Wheeling Power provided updated cost estimates that show the total cost of CCR and ELG compliance work at all three plants is $448.3 million. The annual revenue requirement for West Virginia would be about $48 million for full compliance work given the state's jurisdictional share of CCR costs and full allocation of ELG expenses, according to the utilities.
In a news release, the West Virginia PSC said its Oct. 12 order notes the "benefits of the plants' continued operation to the state's economy are considerable."
No cost-sharing, no power
The commission also declared its order is "the result of Virginia and Kentucky refusing to approve" the upgrades necessary to keep the plants online beyond 2028.
"The commission determined that if those two states will not share the cost of the upgrades, they will not be permitted to use the capacity and energy produced by the plants," the news release states.
"The additional compliance costs, including the ELG compliance costs allocable to West Virginia because of the Virginia and Kentucky decisions that would require the retirement of the plants no later than 2028, are small when compared to the costs of replacement capacity that would be required if the plants are prematurely retired," the West Virginia PSC wrote in its order.
"Prematurely retiring the plants at least [12] years prior to the current estimated retirement year of 2040, continuing to require ratepayers to pay for the capital costs on the stranded investment created by prematurely retiring the plants and, adding to that the capital costs between $1.9 [billion] and $2.3 billion in capacity costs to replace the plants that could have continued to operate is not a decision that is supported by the evidence," regulators wrote.
The commission said its most recent order would not "immediately affect the power bills" of AEP's electricity customers in the state.
In response to the West Virginia PSC's decision, AEP spokesperson Scott Blake said the "current operating agreements" for the Mitchell coal plant, which is currently operated by Kentucky Power, will "need to be revisited to make Wheeling Power the plant's operator and to clarify that West Virginia customers are responsible for the costs that would allow the plant to run past 2028."
