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FERC Denies Sought Transfer of FirstEnergy Competitive Generation To West Virginia Utility
January 15,2018 FERC has denied without prejudice a proposed transaction under which Allegheny Energy Supply Company was to transfer the Pleasants Power Station to Monongahela Power Company. Both companies are units of FirstEnergy Specifically, Monongahela Power Company (Mon Power) and Allegheny Energy Supply Company, LLC (AE Supply) had submitted an application for authorization to permit the transfer by AE Supply of the Pleasants Power Station, an approximately 1,159 megawatt (MW) coal-fired electric generation facility, to Mon Power Mon Power also filed an application pursuant to section 204(a) of the FPA (Section 204 Application) requesting authorization to assume a $142 million promissory note (Note) to secure a lien on AE Supply’s interest in certain pollution control assets at the Pleasants Facility. As the result of an RFP process, Mon Power selected AE Supply as the winning bidder and subsequently entered into an asset purchase agreement to acquire the Pleasants Facility FERC concluded that Mon Power’s competitive solicitation did not meet the standards established in Ameren. "Therefore, Applicants have not demonstrated that the Proposed Transaction will not result in inappropriate cross-subsidization. Accordingly, we deny authorization for the Proposed Transaction. However, this finding is without prejudice to a future application resulting from a new competitive solicitation by Mon Power," FERC said FERC found that the RFP used by Mon Power was inappropriately limited FERC said, "We find that the product sought [in the RFP] was overly narrow because the stated objective could have been achieved if the RFP considered PPAs and resources that were outside of the APS zone. First, the Commission agrees with protestors that, by excluding PPAs, the RFP limited the number of potential respondents and thus products that could have met the RFP’s stated objective. Mon Power’s justification for the need to acquire facilities, rather than meeting its needs through PPAs, is because of the 'increased control and flexibility asset ownership affords Mon Power relative to a PPA – including greater control over operations, maintenance, fuel procurement, and capital improvements, as well as the flexibility to modify facility operations.' We believe that this justification could have instead been a factor in the evaluation of offers, similar to the score for development risk, rather than eliminating from consideration an entire class of offers that could have been used to meet the capacity shortfall identified in the IRP. The desire of bidders to offer PPAs as an option is evidenced by the two non-conforming bids for PPAs that were received but not evaluated by Charles River." "We also find that the APS zone limitation in the RFP improperly excluded resources that otherwise could meet Mon Power’s stated objective," FERC said "We find the RFP does not meet the Evaluation principle. We agree with West Virginia Sun/Consumer Action that the use of a 15-year NPV calculation excessively favors existing, older generation resources with low upfront costs but potentially high maintenance costs in subsequent years," FERC said "While we appreciate and recognize Mon Power’s legitimate need to address a potential capacity shortfall and to provide for its future capacity and energy needs, it should do so in a way that provides non-affiliate competing suppliers with the same opportunity as an affiliate to meet the utility’s needs," FERC said Docket Nos. EC17-88
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