CHARLESTON, W.Va. -- Appalachian Power's president defended his company's plans to spend more than $1 billion to purchase portions of two West Virginia power plants, saying it is in the best long-term interest of customers.
The state Public Service Commission began a multi-day hearing on the matter Tuesday. Charles Patton was the first witness and spent several hours answering questions from commissioners and attorneys for parties that had intervened in the case.
Under the proposal, Appalachian Power would purchase the two-thirds ownership stake in Unit 3 of the John E. Amos power plant in Poca and half of the 1,600-megawatt generating capacity of the Mitchell Plant in Moundsville, currently owned by fellow American Electric Power subsidiary Ohio Power.
Ohio is currently deregulating its energy markets, forcing Ohio Power to become more competitive with its pricing.
Environmental advocates have said the sale, which could top $1 billion, amounts to AEP simply dumping its more-costly coal-fired assets onto Appalachian customers in West Virginia, Virginia and Tennessee.
But Patton said the transaction would help Appalachian Power deal with a shortfall in its power-generating capacity.
He said the company has for years been forced to supplement local power demand by buying electricity from other companies. But the price of that power has fluctuated dramatically, he said, increasing costs for consumers.
With several power plants set to retire in 2015, Patton said the decision to buy the Mitchell and Amos units was necessary to boost the company's generating capacity and avoid going to the market for more power.
"We wanted to get off that merry-go-round and acquire assets we could own ourselves, so we could control our own destiny," he said.
PSC Chairman Michael Albert questioned Patton about environmentalists' claims that the transaction is simply AEP's way of dumping plants onto West Virginians.
Considering proposed U.S. Environmental Protection Agency regulations and President Barack Obama's recent push for more action to combat climate change, Albert asked if the company had appropriately valued the potential regulatory costs consumers could be forced to absorb in the future.
Patton said he was confident that even a tax on carbon emissions would make the transaction more favorable than other options.
He said other commodities like natural gas, which many power companies have switched to for its current low price, also face the same price swings and regulatory risk that coal does.