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PUC Questions Closing Plants Instead of Switching to Natgas

As FirstEnergy Corp. prepares to deactivate two coal-fired power plants in southwestern Pennsylvania, the heart of the Marcellus Shale, the commissioner of the state Public Utility Commission (PUC) is asking lawmakers and company officials why more consideration wasn't given to switching the plants' source fuel to natural gas.

Testifying before a state House Consumer Affairs Committee hearing last Thursday, PUC Commissioner Pamela Witmer said the agency was concerned about FirstEnergy Generation's decision to close the Hatfield's Ferry Power Station in Masontown, PA, and the Mitchell Power Station in Courtney, PA. The total capacity for both plants is 2,080 MW.

At issue is whether the closures will affect PJM Interconnection LLC, the region's power grid operator.

"Almost two weeks ago, PJM indicated that the closure of these two plants will not cause problems when it comes to ensuring the reliability of the electric grid," Witmer said, but added that at a PUC meeting in August, "PJM indicated reliability concerns did exist."

"Why is FirstEnergy not pursuing the sale of the Hatfield's Ferry and Mitchell plants to a third party who would be willing to take the steps to keep the plants operational, whether through fuel conversion, necessary upgrades, or a dual-fuel retrofit?

"Four months ago, FirstEnergy indicated they were considering converting the facilities to natural gas co-firing units. Conversion seems to be a logical move, as these plants sit atop one of the largest natural gas supplies in the world, with convenient access to natural gas through a network of pipelines in Greene and Fayette counties."

Witmer said James Lash, president of FirstEnergy Generation, told the state Senate Consumer Protection and Processional Licensure Committee on Sept. 13 that it would not be economical for the company to convert the plants at today's gas prices, and cited a 10% drop in electricity prices.

"I would counter that both natural gas prices and electric prices have been relatively stable since March," Witmer said. "In fact, Pennsylvania natural gas has been selling for about $4/MMBtu for the last quarter. This low-cost gas obviously depresses wholesale prices for generators; however, one could argue that because the cost of fuel is the single largest component of a generating station's expenses, now would be a good time to make a conversion."

In July, Akron, OH-based FirstEnergy said its decision to deactivate the plants was based on the cost to keep the coal plants compliant with current and future environmental regulations. The company also cited low market prices for electricity.

According to reports, Lash told the committee Thursday that the two coal-fired plants "are losing money today and will lose money in the future. Our plans are not to run those units again."

Lash denied reports that the company had received offers to buy the plants. "We've never had anyone make us an offer to buy our [power] plants...the prices being offered are not very good." He later added that FirstEnergy "is not out there seeking buyers."

The company said the two plants represent about 10% of FirstEnergy's total generating capacity, but make up 30% of the cost ($277.5 million) of the estimated $925 million for all of its power plants to comply with the U.S. Environmental Protection Agency's Mercury and Air Toxics Standards (MATS).

FirstEnergy, which serves customers in Maryland, New Jersey, New York, Ohio, Pennsylvania and West Virginia, said the plant closures would affect 380 jobs. Once the two plants are closed, the company's generation portfolio would have a combined 18,000 MW of capacity, with 56% coal, 22% nuclear, 13% renewables and 9% combined-cycle (natural gas and oil).

FirstEnergy also cited the new MATS rules when it closed six older coal-fired plants in September 2012 (see Daily GPIJan. 27, 2012). 

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