FirstEnergy filed a proposed settlement with the WV PSC today. The settlement requests approval of the internal sale of Harrison between two FirstEnergy subsidiaries at full asking price, and includes a few cheap parting gifts for some of the other parties in order to thank them for playing the FirstEnergy Corporate Separation Issues Game.
The settlement must still be approved by the WV PSC, but as I told a reporter this afternoon, chances of the PSC not approving a settlement in this case are slim to none. But, if you'd like to vent about this crazy miscarriage of justice and the PSC's lack of leadership and vision for West Virginia and how it continues to cost ratepayers money, feel free to let them have it (select case number 12-1571 from the drop down list).
So, let's jump in here, shall we? The parties to this case included FirstEnergy, PSC staff, the Consumer Advocate ("your" representative), the West Virginia Energy Users Group (representing the interests of a group of industrial electric customers, such as Essroc Cement), different union groups representing labor, the Sierra Club, the WV Coal Association (representing our friend coal), a couple of West Virginia natural gas trade associations and the West Virginia Citizens Action Group. All parties either agreed to this appallingly bad settlement, or took no position (the gas groups). The only hold out was West Virginia Citizens Action Group, who opposes the settlement. Good for you, WV CAG! At least some organization is sticking up for the public interest. The rest of the parties? Yeah, they all went creeping off with their tail between their legs after FirstEnergy threw them a cheap, carnival prize. Let's take a look at who got what:
1. West Virginia Coal Association - got this limp, meaningless statement inserted in the settlement:
"The Companies will maximize the amount of West
Virginia coal to be burned at Harrison consistent with the obligation to procure reliable sources of coal at the lowest available cost and other relevant West Virginia statutory provisions." It does nothing. Congratulations, coal! For this, you sold ratepayers down river!
2. Labor - got the promise that FirstEnergy will create 50 new jobs in West Virginia. You will pay for these jobs in your electric bill, of course. The jobs cannot be related to the Potomac Edison billing General Investigation (no new meter readers!) and cannot be legal, accounting, finance or rate jobs (no white collars -- blue only!) and should be in the distribution sector as directed by PSC staff. This probably means more linemen, which really can't be a bad thing, however, it does nothing to ameliorate the billion dollar cost of owning Harrison. Congratulations, labor! For this, you sold ratepayers down river!
3. WV Energy Users Group - got an "Economic Stability Credit" that will total around $2.3M in electric rate credits to industrial rate classes K & PP. Congratulations, WVEUG! For a crappy $2.3M in your own pocket, you sold ratepayers down river!
4. Sierra Club - got a promise from FirstEnergy to retire $100K of Renewable Energy Credits so that someone else is required to buy them. The credits will not be available for trade in WV's ineffectual Alternative & Renewable Portfolio Standard. But since that was such a crappy gift, Sierra Club also got the promise of a plan to create a program to increase energy efficiency by reducing electricity usage by .5% (yes, that's one-half of one percent) of 2013 sales by 2018. You will pay extra for that though, little ratepayer, although those industrial users may opt out of paying their share as long as they don't use the program. Congratulations, Sierra Club! You probably were never really interested in having the WV PSC deny the transaction, you just wanted to get your free gifts (at ratepayer expense)! For this, you sold ratepayers down river!
5. Governor Earl Ray Tomblin (wait, he's not a party!) - got a $500K contribution to his "Kids First" program over the next five years. This program will "support" energy efficiency in schools. But, wait, that's not all the trinkets that were rained down on our state government! There was also $500K over the next five years to state low-income energy assistance programs, and an additional $500K over five years to the WV Office of Economic Opportunity Weatherization Program (yes, the program that was investigated for mismanaging funds by giving preference to program employee relatives, paying contractors who hardly worked, etc.). This contribution is in addition to the $250,000
amount currently included in rates as a result of the Joint Stipulation in Case No. 09-1352-E-42T. !PLUS! Another $250,000 per year, funded by customers, paid toward WV's low-income assistance Dollar Energy Fund. It's awful nice of FirstEnergy to give away our money to get the assistance of the state in screwing its electric consumers out of over a billion dollars. Congratulations, Governor Tomblin! For this, you sold ratepayers down river!
6. WV PSC Staff and Consumer Advocate - got some really masterful corporate bookkeeping hocus pocus that will keep the financial magnitude of this transaction from becoming a reality for struggling consumers for the next 16 months. Because this transaction includes not only the purchase of Harrison, but also the sale of Pleasants, there are actual credits that will reduce ratepayer liability. However, our thoughtful regulators have included the $25M in credits upfront over the first 16 months of ownership, instead of applying the credit over the useful life of Harrison (life of Harrison - 27 years, life of Pleasants credits - 1.33 years). It only makes it look like the transaction doesn't cost as much as it did. In addition, our regulators arranged to allow FirstEnergy to create a regulatory asset (or holding account) for deferred costs to include a whole bunch of little charges and actual amounts spent so you won't see them in your bill today (but eventually you will pay the charges, with interest!) The best part, though, is the $129M yearly credit to rates that will supposedly come from Harrison's sales revenue and cost reductions. This magical money machine will completely obviate any rate increases and actually result in a 1.5% decrease in your rates (unless you're an industrial customer, then you get a 5% decrease because you had a lawyer at the table). Now stop and take a moment to reflect on this: If this transaction was always going to reduce rates over the long run, do you think all these parties would have wasted time and money opposing it? Of course not, FirstEnergy and the settling parties are lying to you with a sugar-coated, alternative version of reality, hoping you don't get too angry at the way they have failed you, the ratepayer. The Consumer Advocate has so thoughtfully swept the nasty bits under the rug, instead of protecting your interests for a change. Some advocate. What a joke! For this, you sold ratepayers down river?
There's also something really funky going on with accounting for a reduction to the full purchase price that is to be written off (or is it? only the phantom knows!). The amount added to rate base that you'll be paying off over the next 27 years is $795,851,333. Isn't that funny? Looks like someone wanted to "split the difference" with FirstEnergy and assume half of the inflated merger book value that should never be recovered from ratepayers. Half-a-Loaf Harris strikes again! Depending on which section of the settlement, or which Exhibit you're reading, FirstEnergy is going to book an impairment of anywhere between $256 to 351M. Yes, FirstEnergy's accounting leaves much to be desired, but our representatives have historically proven themselves completely clueless about regulatory accounting and inept at recognizing when they are being cheated, so this is probably just one of those "regulatory got'chas," this time directed at ratepayers. It's a regular little (Gary) Jack-in-the-Box that's going to pop out eventually as time continues to crank the handle of this box of balefulness.
The settlement must still be approved by the WV PSC, but as I told a reporter this afternoon, chances of the PSC not approving a settlement in this case are slim to none. But, if you'd like to vent about this crazy miscarriage of justice and the PSC's lack of leadership and vision for West Virginia and how it continues to cost ratepayers money, feel free to let them have it (select case number 12-1571 from the drop down list).
So, let's jump in here, shall we? The parties to this case included FirstEnergy, PSC staff, the Consumer Advocate ("your" representative), the West Virginia Energy Users Group (representing the interests of a group of industrial electric customers, such as Essroc Cement), different union groups representing labor, the Sierra Club, the WV Coal Association (representing our friend coal), a couple of West Virginia natural gas trade associations and the West Virginia Citizens Action Group. All parties either agreed to this appallingly bad settlement, or took no position (the gas groups). The only hold out was West Virginia Citizens Action Group, who opposes the settlement. Good for you, WV CAG! At least some organization is sticking up for the public interest. The rest of the parties? Yeah, they all went creeping off with their tail between their legs after FirstEnergy threw them a cheap, carnival prize. Let's take a look at who got what:
1. West Virginia Coal Association - got this limp, meaningless statement inserted in the settlement:
"The Companies will maximize the amount of West
Virginia coal to be burned at Harrison consistent with the obligation to procure reliable sources of coal at the lowest available cost and other relevant West Virginia statutory provisions." It does nothing. Congratulations, coal! For this, you sold ratepayers down river!
2. Labor - got the promise that FirstEnergy will create 50 new jobs in West Virginia. You will pay for these jobs in your electric bill, of course. The jobs cannot be related to the Potomac Edison billing General Investigation (no new meter readers!) and cannot be legal, accounting, finance or rate jobs (no white collars -- blue only!) and should be in the distribution sector as directed by PSC staff. This probably means more linemen, which really can't be a bad thing, however, it does nothing to ameliorate the billion dollar cost of owning Harrison. Congratulations, labor! For this, you sold ratepayers down river!
3. WV Energy Users Group - got an "Economic Stability Credit" that will total around $2.3M in electric rate credits to industrial rate classes K & PP. Congratulations, WVEUG! For a crappy $2.3M in your own pocket, you sold ratepayers down river!
4. Sierra Club - got a promise from FirstEnergy to retire $100K of Renewable Energy Credits so that someone else is required to buy them. The credits will not be available for trade in WV's ineffectual Alternative & Renewable Portfolio Standard. But since that was such a crappy gift, Sierra Club also got the promise of a plan to create a program to increase energy efficiency by reducing electricity usage by .5% (yes, that's one-half of one percent) of 2013 sales by 2018. You will pay extra for that though, little ratepayer, although those industrial users may opt out of paying their share as long as they don't use the program. Congratulations, Sierra Club! You probably were never really interested in having the WV PSC deny the transaction, you just wanted to get your free gifts (at ratepayer expense)! For this, you sold ratepayers down river!
5. Governor Earl Ray Tomblin (wait, he's not a party!) - got a $500K contribution to his "Kids First" program over the next five years. This program will "support" energy efficiency in schools. But, wait, that's not all the trinkets that were rained down on our state government! There was also $500K over the next five years to state low-income energy assistance programs, and an additional $500K over five years to the WV Office of Economic Opportunity Weatherization Program (yes, the program that was investigated for mismanaging funds by giving preference to program employee relatives, paying contractors who hardly worked, etc.). This contribution is in addition to the $250,000
amount currently included in rates as a result of the Joint Stipulation in Case No. 09-1352-E-42T. !PLUS! Another $250,000 per year, funded by customers, paid toward WV's low-income assistance Dollar Energy Fund. It's awful nice of FirstEnergy to give away our money to get the assistance of the state in screwing its electric consumers out of over a billion dollars. Congratulations, Governor Tomblin! For this, you sold ratepayers down river!
6. WV PSC Staff and Consumer Advocate - got some really masterful corporate bookkeeping hocus pocus that will keep the financial magnitude of this transaction from becoming a reality for struggling consumers for the next 16 months. Because this transaction includes not only the purchase of Harrison, but also the sale of Pleasants, there are actual credits that will reduce ratepayer liability. However, our thoughtful regulators have included the $25M in credits upfront over the first 16 months of ownership, instead of applying the credit over the useful life of Harrison (life of Harrison - 27 years, life of Pleasants credits - 1.33 years). It only makes it look like the transaction doesn't cost as much as it did. In addition, our regulators arranged to allow FirstEnergy to create a regulatory asset (or holding account) for deferred costs to include a whole bunch of little charges and actual amounts spent so you won't see them in your bill today (but eventually you will pay the charges, with interest!) The best part, though, is the $129M yearly credit to rates that will supposedly come from Harrison's sales revenue and cost reductions. This magical money machine will completely obviate any rate increases and actually result in a 1.5% decrease in your rates (unless you're an industrial customer, then you get a 5% decrease because you had a lawyer at the table). Now stop and take a moment to reflect on this: If this transaction was always going to reduce rates over the long run, do you think all these parties would have wasted time and money opposing it? Of course not, FirstEnergy and the settling parties are lying to you with a sugar-coated, alternative version of reality, hoping you don't get too angry at the way they have failed you, the ratepayer. The Consumer Advocate has so thoughtfully swept the nasty bits under the rug, instead of protecting your interests for a change. Some advocate. What a joke! For this, you sold ratepayers down river?
There's also something really funky going on with accounting for a reduction to the full purchase price that is to be written off (or is it? only the phantom knows!). The amount added to rate base that you'll be paying off over the next 27 years is $795,851,333. Isn't that funny? Looks like someone wanted to "split the difference" with FirstEnergy and assume half of the inflated merger book value that should never be recovered from ratepayers. Half-a-Loaf Harris strikes again! Depending on which section of the settlement, or which Exhibit you're reading, FirstEnergy is going to book an impairment of anywhere between $256 to 351M. Yes, FirstEnergy's accounting leaves much to be desired, but our representatives have historically proven themselves completely clueless about regulatory accounting and inept at recognizing when they are being cheated, so this is probably just one of those "regulatory got'chas," this time directed at ratepayers. It's a regular little (Gary) Jack-in-the-Box that's going to pop out eventually as time continues to crank the handle of this box of balefulness.
RSS Feed