Dive Brief:

• American Electric Power (AEP) is seeking permission to charge ratepayers in three states for as much as $317 million of environmental upgrades to three coal-fired plants in West Virginia.
• The utility and its local subsidiaries say the work is needed to keep the plants in compliance with federal environmental regulations. Supporters of the proposal said upgrading the plants would preserve much-needed jobs from the power plants.
• Opponents of the proposal have pushed for the closure of the plants, asking the utility to fill the gap with solar and wind power.

Dive Insight:

AEP is now pushing proposals for rate increases totaling hundreds of millions of dollars to pay for work on the coal-fired Mountaineer, John Amos, and Mitchell plants, which face potential closure if they are not brought into compliance with federal environmental regulations.

To bring the plants up to the federal standard, AEP must install tighter internal controls on the wastewater discharged by the plants, while also getting rid of coal ash ponds used to stash waste, according to documents the company has filed with West Virginia's Public Service Commission (PSC).

However, to recover its costs, AEP must win approval from utility regulators in West Virginia, Virginia and Kentucky. Two of the coal plants provide power to AEP's Virginia customers, and the Mitchell plant, which AEP owns alongside Kentucky Power, provides power to Kentucky as well.

AEP subsidiaries Appalachian Power Company and Wheeling Power Company are seeking permission from West Virginia's PSC to raise rates by as much as $23.5 million per year in the Mountain State to help recoup the cost of the upgrades.

AEP has proposed two different options for dealing with the required upgrades, calling for the West Virginia PSC to pick between the two, one more expensive, but politically more palatable, the second cheaper, but facing more opposition, according to documents filed with regulators. 

The first, and most expensive, would total $317 million, with upgrades made on all three plants in order to keep them on line until 2040.

Under a second option, Amos and Mountaineer would be fully upgraded to meet federal environmental regulations, while Mitchell would be only partially modified and, as a result, would be shut down in 2028.

While that option, at $286 million, would cost less, it has run into stiff opposition from local elected leaders and union officials concerned about the loss of hundreds of local jobs.

The Mitchell plant employs 200 workers, while also providing additional work to hundreds more in the local construction and electrical trades.

“Please do everything in your power to ensure the AEP Mitchell plant does not close,” writes Republican West Virginia Del. David Kelly, who represents the area in the state legislature, in a letter to the PSC.

“When we talk about job loss, we often times miss the impact on the families involved. These folks live in our communities, shop at our stores, attend our schools, and worship with us,” Kelly states.

Meanwhile, the Sierra Club and other environmental organizations would like to see AEP focus instead on retiring the coal-fired plants and replacing their capacity with renewable sources like wind and solar.

The future of AEP’s proposals will now be determined by regulators in the three states.

West Virginia has been holding hearings, and Virginia's State Corporate Commission is preparing to hold an evidentiary hearing next week on the proposed rate increase, said Dori Jaffe, a staff attorney with the Sierra Club.

Virginia and Kentucky regulators are expected to decide by August whether to give a green light to the rate increases, while the West Virginia PSC could issue a decision by the end of July, she said.

“We completely understand the communities our dependent on the coal plants,” Jaffe said. “The companies need to move forward with a transition plan in place so they have the opportunity to transition from coal – they need to start doing that.”