In response to pressure from utilities and consumer advocates, West Virginia lawmakers have watered down a bill originally designed to make it difficult — if not impossible — for utilities to shut down the state’s struggling coal plants.
The bill would have forced the state’s coal plants to continue to “burn” coal at 2019 rates and gave three different state agencies — including one created solely for the purpose of promoting the state’s extraction industry — veto power over future closures.
But after pushback from utilities, consumer advocacy groups, and other lawmakers, who pointed out that West Virginians would pay more on their utility bills as a result, the proposed law was gutted. Now, as it moves to another committee, it’s not clear if the legislation does much of anything at all.
Even so, the week-long negotiations over the details of the bill illustrate the tough dilemma facing lawmakers, increasingly desperate to come up with new ways to prop up the dying coal industry. Initially eager to establish hard requirements, lawmakers softened the bill’s language after hauling in industry executives — twice — to explain the deep consequences of the proposed legislation on their West Virginian customers.
And even in its hollowed out form, the bill could hurt West Virginians on their electricity bills, according to Sammy Gray, a FirstEnergy executive. He warned that if the company uses more coal, as the bill encourages, instead of cheaper alternatives it would pass the extra expense on to its customers.
More than 90% of the electricity produced in West Virginia comes from coal — but that’s not necessarily true of the electricity consumed in the state. That’s because all of this power goes into a larger regional energy grid, where it’s bought and sold. Local utilities generally purchase the cheapest energy available. SB 542, as originally designed, would curtail that option — forcing utilities to keep burning coal even when there’s cheaper alternatives.
“This bill is really anti-competition and anti-capitalism. It’s regulation upon regulation,” said Sen. Mike Romano, D-Harrison, in protest of the introduced version of the bill.
The legislation is sponsored by Sen. Rupie Phillips, R-Logan, an enthusiastic supporter of the state’s coal industry, and Sen. Mike Caputo, D-Marion, a former coal miner and union leader. Phillips called upon Chris Hamilton, president of the West Virginia Coal Association, to defend the bill last week. Citing billions of dollars in economic benefit to the state, Hamilton demanded that lawmakers “do what we have to do to keep these plants running as long as they possibly can.” A representative of the United Mine Workers of America echoed the sentiment.
They eventually compromised; instead of requiring utilities to burn at 2019 rates, the modified bill — which is now headed to the Senate Judiciary Committee after being given the go ahead from the Energy, Industry and Mining Committee late Tuesday night — will simply “encourage” it.
The law also empowers the state’s utility regulator’s ability to stop future coal plants from closing — a power that the Public Service Commission’s chair, Charlotte Lane, said it already had.
This debate is one West Virginians have heard before.
Over the last decade, state officials and policymakers have attempted to slow a persistent decline in coal production due to rising costs and competition from cheaper, cleaner natural gas. The decline has decimated communities as jobs disappear and tax revenues evaporate. But the officials’ efforts have come at a substantial cost to taxpayers and utility ratepayers.
West Virginia’s electric rates, some of the lowest in the nation as recently as 2013, are no longer so low. The state now ranks near the middle — thanks to a 81% rise since 2002, nearly 50% faster than the federal inflation indicator over that same period.
This latest effort continues the trend, explained Jamie Van Nostrand, director of the Center for Energy and Sustainable Development at West Virginia University. “We’re going to save the coal industry by putting it on the backs of the ratepayers. That’s it in a nutshell,” he said.
Early indications that West Virginians would be bankrolling the state’s campaign to “bring back” coal occurred nearly a decade ago, when the state’s two largest electric utilities, American Electric Power and FirstEnergy, pulled a curious accounting trick. Within a year, the two companies announced plans to shift the ownership of West Virginia coal plants off the books of out-of-state subsidiaries — and onto the books of West Virginian subsidiaries: Appalachian Power and Mon Power, respectively.
Because those two subsidiaries are regulated by West Virginia’s Public Service Commission, their rates are directly tied to their costs. Therefore, West Virginian rate-payers would shoulder the risks of operating these plants long into the future. Not only that: West Virginians paid a surcharge on their electricity bills for the privilege.
The Public Service Commission approved both companies’ plans. Its chairman at the time, Mike Albert, called one of the plants in question, the Mitchell Power Plant in Marshall County, a “high-value asset with significant benefits for the companies’ West Virginia customers.”
That asset lost value quickly. Late last year, Appalachian Power outlined plans to shut Mitchell down by 2028, but it deferred to the commission whether to go forward with the plan, given such a decision’s larger economic ramifications. The commission is currently weighing the utility’s proposal.
First Energy pulled a similar maneuver in 2013 when it transferred its Harrison Power Plant in Haywood, West Virginia from its Pennsylvania subsidiary to Mon Power.
The proposal was approved by the commission despite a scathing dissent from commissioner Ryan Palmer, who wrote, “[the commission] is going ‘all in’ on coal, at a time when the coal industry is under attack and the general school of thought is to diversify.”
Advocates took the decision to the state’s Supreme Court, arguing that the plant was overvalued and that ratepayers were subsidizing FirstEnergy’s bankrupt business. They lost.
Three years later, one of those advocates, Cathy Kunkel, an energy analyst for the Institute for Energy Economics & Financial Analysis, deteremined that the Harrison decision had cost ratepayers $160 million.
Lawmakers, too, have stepped in. In 2019, they passed a bill providing $12 million in tax breaks for FirstEnergy after the company threatened to close its coal plant in Pleasants County.
They did it again the following year, approving $16 million in tax cuts designed to help money-losing coal plants, like Dominion Energy’s plant in Mount Storm, stay afloat.
Mount Storm, however, is not regulated by the Public Service Commission — Dominion ships that energy to Virginia. As a result, Lane testified, this legislation will do little to save it.
New duties for the Public Energy Authority
Lawmakers have almost annually for several years pushed one version or another of a “coal bill” aimed at helping the state’s mining industry as it struggled against stiff competition from natural gas and renewables, and the mining out of some of the state’s best coal reserves.
Despite years of wrangling over the issue, however, lawmakers’ latest maneuver shocked advocates.
“It’s impossible to overstate how bad this bill is for West Virginia,” said Karan Ireland, a former Charleston city councilwoman who now works for the Sierra Club, speaking about the introduced version of the bill on Friday.
Calling the bill a “ploy” by the West Virginia Coal Association, she argued that money and attention would be better spent elsewhere. “We should be investing in [the] jobs of the future with cheaper and cleaner energy,” she said.
Instead, the law would give a little known — but highly powerful — state agency additional oversight over the operations of West Virginia’s coal plants. The Public Energy Authority, created in 1985 to finance the creation of new plants, would report to the legislature whether power plants were operating at “maximum reasonable output” as “encouraged” by the law.
Despite its 36 years in existence, the PEA only ever completed one project: a coal plant near West Virginia University’s downtown campus. Funded with $129 million in tax-free PEA bonds in 1992, the plant was opposed vigorously by WVU faculty and many Morgantown residents.
A decade later, citing the agency’s lack of progress on any other projects, the Legislative Auditor recommended the PEA be eliminated. Lawmakers never followed the recommendation. Last year, the Morgantown plant switched to natural gas.
Under the latest version of SB 542, the state’s Public Service Commission would also be given new statutory responsibilities, including the ability to stop the closure of existing coal plants. Whether it would choose to do so is unclear — the commission is required by law to keep utility rates “reasonable” while ensuring utilities can continue to profitably operate.
And according to the very public utilities regulated by the commission, forcing plants to stay open is not reasonable.
“It’s an economics decision,” Chris Beam, the president of Appalachian Power, explained to lawmakers the rationale behind closing additional coal plants. “These units are no longer economical. You cannot and should not force onto the customer an economical solution.”
Furthermore, Appalachian Power has committed “to becoming 100 percent carbon-free by 2050” — and getting there will require the utility to rely even less on coal.