CHARLESTON — Consumer advocates argue that West Virginia electric customers should not be held financially responsible for bad business decisions by two American Electric Power subsidiaries when purchasing more coal than needed for their power plants.

Attorneys for West Virginia Citizen Action Group, Solar United Neighbors and Energy Efficient West Virginia filed testimony last week in an expanded net energy cost petition filed in April by Appalachian Power and Wheeling power, subsidiaries of Columbus-based American Electric Power.

The companies, which provide power to residential and industrial ratepayers in 25 West Virginia counties, are seeking a $71.6 million — or a 3.79 prtvrny increase — in ENEC rates from the state Public Service Commission by Sept. 1. The proposed increase would result in residential power bills rising by $5.31 per month, with commercial customers seeing a $15.05 monthly increase and industrial customers being charged $13,400 more a month.

The ENEC process allows electric utilities to petition the PSC to consider rate increases to allow utilities to recoup actual costs for the previous year and prepare for projected costs. According to company testimony, $52.6 million of the $71.6 million was for the ENEC deferral balance, with $19.1 million for forecasted costs.

“The companies have demonstrated reasonable and prudent actions to procure economic fuel for their plants, maintained adequate coal inventory levels, scheduled and performed maintenance at their plants in an attempt to optimize their availability and utilized bidding strategies, all in an attempt to minimize rates for their customers,” said Randall Short, director of regulatory services for Appalachian Power, in direct testimony submitted to the PSC in April.

But testimony submitted on July 23 by West Virginia Citizen Action Group, Solar United Neighbors and Energy Efficient West Virginia refutes these claims with analysis from Catherine Kunkel, an energy consultant with the Institute for Energy Economics and Financial Analysis.

According to her testimony and analysis, Appalachian Power/Wheeling Power’s costs were due to poor decisions on its part to run its power plants at a financial loss by burning off excess coal supplies during the 2024-25 period.

“Throughout the review period, the companies frequently operated the Amos, Mitchell, and Mountaineer (power plants) at a loss — i.e., when the units’ fuel and other variable costs were higher than the revenues they earned from the PJM markets,” Kunkel said. “The companies ran these units at a loss due to an oversupply of coal.”

Appalachian Power/Wheeling Power operate the John Amos Power Plant in Winfield and the Mountaineer Power Plant near New Haven. The companies own a 50 percent stake in the Mitchell Power Plant in Moundsville. As well as serving West Virginia customers, the plants provide power to PJM Interconnection, a wholesale energy transmission company serving a 13-state region in the Northeast.

According to Kunkel, the three power plants operated at a net margin loss of $81.4 million during the reporting period, a formula based on the difference between the revenues obtained from the PJM energy markets and the plants’ total variable costs. That loss grows to more than $153 million over a two-year period.

Kunkel placed much of the blame for these losses on the companies buying more coal than needed, then burning off the excess.

“Simply put, the companies contracted for more coal than it would have been economic to burn during the review period, and needed to burn down their coal piles to avoid potentially exceeding their on-site maximum coal inventory levels,” Kunkel said. “With an oversupply of coal, the companies faced the risk that the coal inventories at their plants would exceed the maximum that the Companies are able to store.”

Instead, Kunkel said the companies’ real ancillary losses were closer to $66 million, of which approximately $36 million was the responsibility of ratepayers in West Virginia.

“If the companies had not over-procured coal, putting themselves in a position where they needed to burn down the coal pile, ratepayers could have been spared those additional costs,” Kunkel said.

The issue of purchasing too much coal is the opposite of issues from a few years ago when the PSC was critical of the companies not burning enough coal and relying on PJM for purchased power.

In a previous ENEC request, the companies had originally sought $552.9 million in rate increases through the PSC for costs incurred but not reimbursed between March 1, 2021, through Feb. 28, 2023. The companies also sought $88.8 million to cover forecasted costs between Sept. 1, 2023, and Aug. 31.

Instead, the PSC only allowed $321.1 million in ENEC costs to be collected during a 10-year period — approximately $32.1 million per year or $2.50 per month for residential customers. In its January 2024 order, the PSC determined that due to the companies purchasing power from PJM instead of generating their own, they were responsible for covering part of the $552.9 million ENEC request.

At the time, Appalachian Power/Wheeling Power claimed they had to purchase power from PJM instead of self-generating power from its three coal-fired power plants in the state due to increased costs of coal at the time and the non-delivery of 3.8 million tons of coal in breach of contracts.

A previous PSC order set an expectation that coal-fired power plants need to achieve at least a 69 percent capacity factor in order for in-state electric companies to self-generate power and reduce reliance on purchased power. But according to a report commissioned by the PSC, Mitchell Power Plant remained at 6 percent capacity between September 2021 and December 2021, with the John Amos Power Plant at 3 percent capacity and the Mountaineer Power Plant at 0 percent capacity.