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FERC tells FirstEnergy to submit more information on proposed Pleasants plant deal


The State Journal

CHARLESTON, W.Va.  — The Federal Energy Regulatory Commission wants more information before it moves forward with FirstEnergy’s request to sell the Pleasants Power Station to its West Virginia subsidiary, Monongahela Power Co.

FERC issued a five-page notice of deficiency June 26, saying additional information is required before FirstEnergy’s requested transfer of ownership can be considered. FirstEnergy has 21 days to respond.

FirstEnergy wants to sell the nearly 40-year-old Pleasants generating plant, currently owned by one of its Ohio subsidiaries, to Mon Power for $195 million. The company says it needs the additional capacity to plug a 1,300 megawatt shortfall it anticipates over the next 10 years in Northern and North Central West Virginia.

FirstEnergy insists the deal would be a win for West Virginia: preserving coal-related jobs and providing other economic benefits. FirstEnergy says Pleasants “employs about 200 people, consumes more than 3.4 million tons of coal per year and pays millions of dollars in annual property taxes.” The company predicts the average residential bill will drop about $1 a month as a result of the transaction.

Critics, however, say the deal will allow Ohio-based FirstEnergy to shift an underperforming asset from the performance-driven deregulated Ohio market to West Virginia, where electricity markets are still regulated and their shareholders would be guaranteed a return on their investment. They also contend FirstEnergy exaggerated the need for additional capacity and insist the company built technical requirements into its request for proposals in mid-December designed to ensure only Pleasants could achieve 100-percent compliance.

Mon Power spokesman Todd Meyers, however, said the deficiency notice “does not constitute any initial or final decision on the merits of the proposed transaction, but is merely a request by FERC staff for additional factual data regarding the proposed transaction.

“We will respond to the letter by July 18,” Meyers said. “We are reviewing the request and we’ll file our response once that review has been completed and we’ve compiled the requested information.

“Right now, FERC lacks a quorum of commissioners and can’t complete much of its official business,” he added. “Therefore, we don’t expect a decision on the merits regarding the proposed Pleasants transaction until new FERC commissioners are appointed.”

FERC asked FirstEnergy to explain its rationale for procuring the entire amount of capacity it will need by 2027 in a single RFP “and explain whether there are products that were not included in the RFP that would otherwise allow Mon Power to address its projected capacity shortfall” and why they weren’t included.

Commission rules say RFPs “should not be written to exclude (options) that can appropriately fill the issuing company’s objectives,” FERC said in the letter. “This is particularly important if such exclusions tend to favor affiliates.”

FERC also wants FirstEnergy to explain how it scored the three proposals that were submitted, pointing out commission rules mandate RFPs must “clearly specify the price and non-price criteria under which the bids are evaluated,” spelling out the importance of each item, as well as how it factors into the evaluation. The government also wants to see all work papers supporting the testimony that was submitted in support of the evaluation, “including those used to determine the three conforming bids’ net present value calculations and the discount rates used.”

FERC also pointed out FirstEnergy suggested the proposed transaction falls within a commission “safe harbor” for transactions that are subject to review by state panel — in this case, the West Virginia Public Service Commission. The government wants FirstEnergy to explain “what, if any, ring-fencing provisions Mon Power committed to in the West Virginia Public Service Commission proceeding addressing the proposed transaction.”

Benjamin Locke, one of the attorneys representing WV SUN and WV Citizen Action Group in the FERC case, said the plan’s critics take “some encouragement from the deficiency letter, because the specific deficiencies identified in the letter correspond to deficiencies we’ve been highlighting in our briefs to FERC.

“We’re cautious about interpreting the deficiency letter,” Locke said. “(But) we take it as some sort of validation that FERC is hearing the arguments we’ve presented to them and they’re in agreement there are gaps in the information the company has provided so far.

“It’s definitely not a decision,” Locke added. “I don’t think we’re going to draw any conclusions on how FERC is ultimately going to come down in this case just on the basis of this letter.”

The RFP, for instance, was issued Dec. 16 with responses due just a week later.

“The prequalification requirements ruled out a number of products that could have filled the company’s needs, so they refused to accept (those) bids,” Locke said. “That’s one of the deficiencies that was highlighted by FERC, so FERC asked which products were barred and why they were barred.

“The second deficiency they identified has to do with how they evaluated the bids they actually did (consider) — the ones they didn’t kick out or disqualify, what methods they used to compare final bids,” he said.

“There were only three bids in the end, and in lot of RFPs when they’re comparing those final bids … often they try to compare those bids just based on numbers, so when they finally arrive at a decision and select a winning bid they can point at a bunch of numbers to explain how did it. In this case, they looked at some numbers, but they also looked at a bunch of non-numeric factors … they used non-price evaluation criteria. There were five of them. The question FERC is asking is how (FirstEnergy) scored those criteria,” Locke said.

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