January 30, 2013 / 2:30 PM / in 5 years

FirstEnergy West Virginia utilities to buy coal plant

* Utilities to invest $1.1 billion to buy coal plant

* Power bills to rise about $1 over 2012 after purchase

* Plant to provide future rate stability and power supply

Jan 30 (Reuters) - U.S. power company FirstEnergy Corp’s West Virginia utilities plan to buy 80 percent of the Harrison coal-fired power plant in the state for about $1.1 billion from the company’s unregulated Allegheny Energy Supply unit.

The Mon Power and Potomac Edison utilities want to buy the plant to “help ensure a continued supply of reliable, low-cost electricity for their West Virginia customers in the years ahead,” FirstEnergy said in a release Tuesday.

Under the proposed plan, Mon Power will purchase 80 percent of the 1,984-megawatt (MW) Harrison plant that it does not already own.

Mon Power has an obligation to supply electricity to the West Virginia customers of Potomac Edison, FirstEnergy spokesman Todd Meyers told Reuters Wednesday.

The Harrison plant is located in Haywood, West Virginia, about 130 miles northeast of Charleston, the state capital.

The plant has three units built between 1973 and 1974, which the utilities say are already equipped with modern emission controls. That is important since the federal government is imposing stricter emissions requirements on coal plants.

Since President Barack Obama entered office in 2009, power companies have announced the shutdown of more than 40,000 MW of coal-fired capacity as weak natural gas prices from record shale production depressed power prices.

Those lower power prices have made it uneconomic for many generators to invest in emissions control equipment needed to keep their older coal plants compliant with the administration’s stricter environmental regulations.

If West Virginia utility regulators approve the plan, the utilities expect a typical residential customer using 1,000 kilowatt-hours (kWh) of electricity per month to pay less than $1 more on their monthly bill compared to 2012.

In their original filing, the FirstEnergy utilities asked regulators for permission to change customer rates when the power plant purchase transaction was complete, making the rate changes smoother, Meyers said.

FirstEnergy hopes to complete the transaction in May or June, before the peak summer air conditioning season, to avoid having to buy what will likely be more expensive power from the market during the summer, Meyers said.

But, state regulators in December decided a rate reduction resulting from the utilities’ annual fuel cost adjustment case would take effect in January, Meyers said.

So starting January 1, 2013, the average monthly bill for a residential customer declined to $94.31, reflecting a 5 percent rate decrease due to lower coal and purchased power costs.

In 2012, the average residential bill was $99.07. If the power plant purchase plan is approved, the average bill will rise to $99.94, FirstEnergy said.

Power prices in West Virginia averaged about 10 cents per kWh in 2012, below the 12-cent national average.

In West Virginia, Mon Power serves 385,000 customers and Potomac Edison serves 132,000 in the state’s eastern panhandle.

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