FirstEnergy says plants would close regardless of new environmental regulations
State Sen. Timothy J. Solobay, D-Canonsburg, third from left, and Sen. Robert M. Tomlinson, fourth from left, listen to testimony at a hearing of the Senate Consumer Protection and Professional Licensure Committee about FirstEnergy’s plans to deactivate the Hatfield’s Ferry and Mitchell power stations by Oct. 9. Tomlinson is chairman of the committee. The hearing was held at Waynesburg University on Friday. (Photo by Amanda Steen, Herald-Standard)
State Rep. Pam Snyder, D-Jefferson, asks a question at a hearing of the Senate Consumer Protection and Professional Licensure Committee about FirstEnergy's plans to deactivate the Hatfield's Ferry and Mitchell power stations by Oct. 9. The hearing was held at Waynesburg University on Friday. (Photo by Amanda Steen, Herald-Standard)
State Sen. Richard A. Kasunic, D-Dunbar, poses a question at a hearing of the Senate Consumer Protection and Professional Licensure Committee about FirstEnergy's plans to deactivate the Hatfield's Ferry and Mitchell power stations by Oct. 9. The hearing was held at Waynesburg University on Friday.
WAYNESBURG — FirstEnergy’s Hatfield’s Ferry and Mitchell coal-fired power plants are losing money now and investing $270 million to make them comply with new anti-pollution regulations is not economically viable, the company president said.
The plants are losing money because market prices for electricity are at historic lows because of low demand and an abundance of low-cost natural gas, and because of dysfunction in the state’s unregulated power generation market, James H. Lash, president of FirstEnergy Generation, testified during a Senate committee hearing on Friday.
Lash and officials from regional power grid operator PJM Interconnection, the state Public Utility Commission (PUC) and the union representing the 380 employees at both plants testified before the Senate Consumer Protection and Professional Licensure Committee during a hearing at Waynesburg University about FirstEnergy’s plans to deactivate the plants by Oct. 9.
The officials also answered questions from committee members including Sen. Tim Solobay, D-Canonsburg and Sen. Richard Kasunic, D-Dunbar, and Rep. Pam Snyder, D-Jefferson, who joined the hearing.
The Hatfield’s Ferry Power Station in Greene County has a generating capacity of 1,710 megawatts of electricity and the Mitchell Power Station in Washington County has a generating capacity of 370 megawatts. Combined, the plant comprise about 10 percent of FirstEnergy’s total generating capacity, Lash said.
Market pressures from the sluggish economy, the abundance of natural gas, including Marcellus shale gas from Pennsylvania, have resulted in historically low market prices for electricity and operating costs that are rising mainly because of state and federal regulations, Lash said.
He said FirstEnergy’s analysis of its power plants determined that the slow economy and the cost of upcoming anti-pollution regulations makes operating the plants uneconomical. PJM’s Independent Market Monitor came to same conclusion, he said.
Since 2007, residential demand has been flat, commercial deliveries are down about 6 percent and industrial deliveries are down about 8 percent, Lash said. The company’s utilities in the state serve fewer customers than they did in 2007, he said.
Low wholesale prices, which are about half of what they were in 2008, are good for consumers and result in the less revenue for the plants, which are losing money and are projected to continue operating at a loss for the foreseeable future, Lash said.
Hatfield and Mitchell would need about $270 million to comply with the federal Mercury and Air Toxins Standards (MATS), he said.
“We simply can’t justify making that kind of investment at plants that are already losing money,” Lash said.
Converting the plants to run on natural gas isn’t economically feasible, either, he said.
The cost to comply with MATS would be in addition to the $715 million spent to install sulfur dioxide removing scrubbers at Hatfield in 2009, he said, pointing out that company shareholders will bear the entire cost of of repaying the tax-exempt bonds obtained through the Greene County commissioners for the scrubber project.
In addition to MATS, current and pending regulations call for investment in coal combustion byproduct, or fly ash, disposal; cooling water intake structures and waste water effluent controls, Lash said.
More expenditures also would be needed to meet climate-change regulations, National Ambient Air Quality Standards, new source performance standards and Cross-State Air Pollution Rule, he said.
“Those regulations are ominous,” Lash said.
Others testified that those regulation take effect in 2015 and FirstEnergy could continue running both plants until then without investing in new pollution controls.
He said no one has approached the company about buying either plant.
While Lash said the company doesn’t believe closing the plants will harm service reliability, Andrew Ott, PJM’s executive vice president for markets, said FirstEnergy likely will be asked to run the plants for a short time during peak demand next summer.
PJM’s initial reliability study found issues that have to be addressed, but the complete 90-day reliability study should be done in about two weeks, Ott said.
Most of the issues can be fixed by upgrading transmission lines and substations and those improvements are already approved, but if they are not completed by next summer, PJM will ask FirstEnergy to sign a voluntary reliability must run contract to operate the plans for “a few days for a limited amount of power,” Ott said.
The need to operate the plants after the deactivation dates is “very limited,” and the Federal Energy Regulatory Commission would work out a plan in which the company would be paid for the power it would produce, he said.
Regarding the plants’ employees, Lash said FirstEnergy hopes to transfer 25 percent of the workers to other jobs in the company. The rest will receive severance pay, an extension of medical benefits, career transition counseling and reimbursement for career training expenses. Early retirement incentives are not being offered, he said.
FirstEnergy currently does not have enough employees to maintain its service trucks, install and repair power lines or operate its substations, said Robert T. Whalen, president of the Utility Workers Union of America Local 102, which represents plant employees.
He said staff shortages have existed since 1996 and there are jobs that should be filled at both plants and other company facilities.
A group of local investors is interested in buying Hatfield, Whalen said, but he didn’t identify the group. He said another group of investors has bought other closed coal-burning plants. The company should put both plants up for sale, he said.
Whalen said the union questioned FirstEnergy’s closing of the Armstrong Power Station last year. That plant could have run until 2015 without any upgrades, he said.
The state should revert to a regulated generation market, he said. Prior to deregulation in 1998, power generators were required to maintain their plants and invest in pollution controls and allowed to make a reasonable profit.
The PUC is concerned about the impact the plant closings will have on service reliability, but has no regulatory authority over FirstEnergy’s deactivation plans, said PUC Chairman Robert F. Powelson.
“We have to, in terms of just proper and due diligence, look at reliability, which is our main priority, keeping the lights on and, more importantly, addressing the potential impact on the local economy,” Powelson said.
He said the PUC has requested a meeting with U.S. Environmental Protection Agency Administrator Gina McCarthy to discuss the compliance issues raised by FirstEnergy, but hasn’t received a response.