FirstEnergy to Proceed With Deactivation of Hatfield’s Ferry and Mitchell Power Stations

Washington PA Observer Reporter
13 September 2013
By Bob Niedbala, Staff Writer

WAYNESBURG – FirstEnergy plans to proceed with the deactivation of its Hatfield’s Ferry and Mitchell power stations Oct. 9 as originally stated in the company’s announcement of the closings in July.

FirstEnergy Generation President James Lash testified Friday before the state Senate Consumer Protection and Professional Licensure Committee that the company would hold to its plan to close the two coal-fired plants on that date, eliminating the jobs of 380 employees.

The company has said it will close Hatfield’s Ferry, a 1,710-megawatt plant in Greene County, and Mitchell, a 370- megawatt plant in Washington County, because of weak demand, low electricity prices and the costs of bringing the plants into compliance with environmental regulations.

The committee hearing, organized by state Sen. Tim Solobay, D-Canonsburg, and held at Waynesburg University’s Stover Center, focused on the loss of jobs but also the continued reliability of electrical services with the loss of the two plants, which represent 10 percent of FirstEnergy’s total generating capacity.

Lash testified that for the last few years the company has faced a weak demand for power, as well as market prices at “historic lows,” partly as a result of the abundance of natural gas.

It also faces the costs of bringing the plants into compliance with environmental regulations, including the Mercury and Air Toxic Standards that take effect in 2015.

The company would have to invest $270 million just to bring the two plants into compliance with MATS and more regulations on power plant emissions from the Environmental Protection Agency are on the horizon, Lash said.

Responding to a question from the panel about the impact of the environmental regulations on the company’s decision, Lash said the regulations are a factor long term, but even if the regulations were not part of the equation the plants now remain “uneconomical.”

Part of the problem is low prices in the PJM capacity auction, which was created to provide payments to utilities in exchange for making power capacity available, Lash said. Those payments help keep existing plants running and encourage development of new generation.

Capacity payments, however, have not been sufficient to offset low energy prices, he said. The effects of this market “dysfunction” are not limited to Hatfield’s Ferry and Mitchell, he said.

Asked about a plan the company proposed to investors in March to convert Hatfield’s Ferry to burn natural gas and coal, Lash said the company investigated it but found it did not make economic sense.
In response to a question about the company’s willingness to sell the plants, Lash said no one so far has expressed interest in buying them.

FirstEnergy hopes to find employment within the company for at least 25 percent of the employees who will lose their jobs, Lash said. Severance packages and assistance in finding new employment will be provided those who aren’t retained, he said.

The closing of the plants is currently being reviewed by PJM Interconnect, a not-for-profit corporation that ensured the reliability of the power grid in Pennsylvania and all or parts of 12 other states.

Andrew Ott, PJM executive vice president, said his corporation is now completing its review of how the closing will affect the reliability of the grid, but it appears the need to ask FirstEnergy to continue operating the plants beyond Oct. 9 would be “very limited” and would only need to address potential problems on the hottest days of the year when electric use is at its peak.

Ott spoke of the dramatic shift in power generation from coal to natural gas, noting natural gas now represented about 19 percent of generation in PJM’s area. By 2018, natural gas could represent 40 percent of the generation, he said.

Asked about the recent increase in importing power into the PJM area from power plants in other state, Ott said PJM is required to open its markets by interstate commerce laws but the amount of power Pennsylvania now imports is very small. Pennsylvania remains an exporter of power, he said.

Members of the panel expressed concern about what the closings of the plants might mean in terms of the costs of electricity to local homeowners as well as the removal of coal from the nation’s energy mix as the nation seeks energy independence.

Robert Powelson, chairman of the Public Utility Commission, also spoke and expressed concerns not only about the loss of jobs but also the impact the plant closings would have on the reliability of the electrical grid.

Powelson said he had requested a meeting with Gina McCarthy, EPA administrator, to discuss options regarding compliance with environmental standards that could keep the plants operating longer.

He also noted the $650 million FirstEnergy’s predecessor, Allegheny Energy, had spent to install scrubbers on Hatfield’s Ferry in 2009 would not be paid by FirstEnergy customers but by the company’s shareholders.

Robert T. Whalen, president of the Utility Workers Union of America, Local 102, said for years Hatfield’s Ferry has been a “cornerstone” of the grid and the company should consider selling the two plants if it no longer wants to operate them.

Whalen said independent investor groups have been purchasing coal-fired plants and he knew of one group that might be interested in Hatfield’s Ferry.

Whalen also said that for years the company has done little to ensure reliability on the distribution side of the business and some of the workers losing their jobs at the plant could be employed on the distribution side as linemen and substation operators.

He also suggested the state take a hard look at whether the deregulated utility industry best serves the public interest. It may be that ensuring reliable and cost-effective power may require returning generation to a regulated entity under control of the PUC, he said.