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W.Va. governor signs bill giving tax breaks to coal plants

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Essential Energy Insights - January 2021


W.Va. governor signs bill giving tax breaks to coal plants

A new law in West Virginia, which takes effect July 1, will provide a tax break to merchant coal plants that continue operating in the state for at least another five years.

West Virginia Gov. Jim Justice on March 25 signed Senate Bill 793, which will reduce the state's business and occupation tax for owners and operators of merchant coal plants that agree to keep the plants online until at least July 1, 2025.

"Beginning July 1, 2021, the owner or operator of a coal-fired generating unit in operation before Jan. 1, 1995, may elect to recompute the taxable generating capacity of those coal-fired generating units ... so that the tax attributable to the second half of 2021 is computed and paid on 45[%] of the official capability of those generating units," the legislation states.

The lower, 45% tax rate election would also apply "for taxable years beginning on and after Jan. 1, 2022." The tax cuts are expected to equal about $16 million.

Coal plants are exempt from the tax retroactive to Jan. 1, 2020, through Jan. 1, 2021.

The legislation also incorporates a "recapture tax" under which the owners or operators of coal plants that shut down before July 1, 2025, must "remit back all of the business and occupation tax savings incurred during the time period between July 1, 2021, and the date the coal-fired generating units ceased operation."

The legislation applies to plants that do not receive regulated cost recovery in West Virginia or any other state. It is expected to be most beneficial to Dominion Energy Inc.'s 1,676-MW Mount Storm coal plant in Grant County, according to local news reports.

Justice signed a bill in July 2019 that provides a multimillion-dollar tax break to Energy Harbor Corp.'s 1,300-MW Pleasants coal plant in Pleasants County.

The Longview Power station in Monongalia County, operated by Longview Power LLC, is already exempt from the tax based on negotiations with the state before the plant began commercial operation in December 2011.