Proposed $357 Million Buyout Could Be Windfall for Coal Plant Owner, Deserves Robust Review, People’s Counsel Tells State Agency
BALTIMORE – A proposal to buy out a coal plant contract could unnecessarily strap Potomac Edison customers with a $357 million bill, the Office of People’s Counsel told the Public Service Commission in a filing this week.
Warrior Run, a coal-burning cogeneration plant located in Western Maryland owned by AES Corporation, operates under a federally required, decades-old power-purchase contract created with Potomac Edison. This contract, however, has cost customers over $1 billion more than what they could have paid by buying power through other resources, according to Potomac Edison’s own analysis.
Now Potomac Edison proposes to buy out the remaining term of the contract for $357 million, an amount that would be paid by Potomac Edison’s customers in monthly installments of about $4.6 million through the end of 2030. While it is possible that the buyout amount is less than customers would pay if the contract remains in place, this outcome is not clear. Potomac Edison is asking the Commission to make a quick decision to approve its proposal without a full review.
“The Commission should not rush to approve Potomac Edison’s proposed buyout without a full evaluation,” People’s Counsel David S. Lapp said. “Potomac Edison’s customers have already paid far more than they should have for Warrior Run. The proposal could make a bad situation even worse.”
Potomac Edison has told the Commission that its customers will pay $79 million less through 2030 under the proposed buyout than if the power-purchase contract remains in place, but that conclusion is based on assumptions that could prove flawed and should be assessed before the Commission makes a decision, OPC’s filing said.
AES and Potomac Edison agreed among themselves that the buyout agreement must be approved by the Commission by midnight on June 30 or the parties can abandon the deal. But that is just an artificial deadline AES and Potomac Edison created for the Commission, OPC’s filing points out. Given that Potomac Edison only filed for approval on April 17, neither OPC nor the Commission has enough time to evaluate whether customers will actually benefit—or be burdened with unnecessary costs.
The alleged benefits of the buyout are premised on the plant’s continued operation through 2030, but the owner of the plant has already committed to exiting coal generation by the end of 2025, OPC said. Plus, the coal plant’s age and coal’s increasing costs relative to other generation sources may mean that economics will drive retirement of the plant before 2030, OPC said.
“If Warrior Run will be retired soon anyway, the buyout contract would cause an unwarranted windfall for the coal plant owner at the expense of Potomac Edison customers,” Lapp said. “The Commission should not let AES and Potomac Edison dictate the Commission’s decision-making deadline, and it should fully evaluate the deal before strapping Potomac Edison customers with a massive bill that may be unnecessary.”
The Maryland Office of People’s Counsel is an independent state agency that represents Maryland’s residential consumers of electric, natural gas, telecommunications, private water and certain transportation matters before the Public Service Commission, federal regulatory agencies and the courts.
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