Appalachian Power’s president and COO Charles Patton talked exclusively with the Coal Valley News on Tuesday about the company's future plans. He talked about the role of coal and customer rates, as well as the company's overall 10-year strategic plan. PHOTO/FRED PACE
MADISON – Appalachian Power’s president and COO Charles Patton made a visit Tuesday to West Virginia’s coalfields in Madison to talk about the company’s future.
“We want to get out in the communities and talk about our company and its future course,” Patton said in an exclusive interview with the Coal Valley News. “As the company plots its future course, it is contemplating several changes in its generation mix.”
Patton said the generation of electricity is by far the largest single cost for a utility and its customers.
“Generation, including fuel costs, typically represent up to 70 percent of a residential or commercial customer’s bill,” he said.
Over the past few years, the increased costs of coal and increased costs of burning coal under new U.S. Environmental Protection Agency (EPA) regulations caused a rapid increase in residential and commercial customer’s electric bills.
“Our company has been thrust into the political and regulatory limelight as it has navigated these increasing rates, caused almost solely by increasing generation costs,” Patton explained.
So by 2015, Appalachian’s plan calls for closing four older and smaller plants where Patton says environmental retrofit is uneconomical.
“Plants that already meet existing and anticipated EPA rules will remain part of our company’s 10-year strategic plan, but no new coal plants are likely in the foreseeable future,” he said.
By 2015, coal will drop to 71 percent of Appalachian’s fuel mix. Today it represents approximately 74 percent of the company’s fuel mix.
Natural gas will be the bridge fuel to America’s future, according to Patton.
“It is likely to be the only source of new fossil-based generation,” he said. “Shale gas is increasingly accessible in close proximity to our service territory. Lower prices now and a positive outlook for sustained low prices make gas generation a much more attractive option than it was just a few years ago.”
So Appalachian’s plan to have sufficient generation to meet all current and near term needs includes:
• In early 2002, the company added the Dresden Plant, a natural gas-combined cycle plant located in Dresden, Ohio.
• Two units at Clinch River Plant will be converted from coal-fired to natural gas-fired units.
• The company plans to increase its coal-fired generation by purchasing at a discount from Ohio Power 80 percent of the capacity of Mitchell Plant, located in Moundsville, and the remaining two-thirds of one unit at Amos Plant in Winfield, which is the only portion of that plant not already owned by Appalachian.
“These generation assets are being made available because of Ohio’s move to competition and the required restructuring of our peer AEP company Ohio Power,” Patton added.
Patton predicts this plan will stabilize rates for customers.
“Our plan to replace and increase Appalachian’s generating capacity is a cost-effective solution that will have little or no effect on customer rates,” he said. “Basically, we will move from being a renter, in which we are buying electricity from others, to an owner.”
Although the plan calls for less use of coal and more use of natural gas, coal will remain a major part of the company’s future, Patton says.
“Because all of the coal-fired plants in Appalachian Power’s plan already meet current and anticipated environmental regulations, we will not have to make expensive investments in additional environmental controls,” he said. “This will keep customer rates down and allow us to continue the use of coal well into the future…another 30 years or more.”
One complicated factor to the plan is regulatory approvals. The plan could be in limbo until July, when Ohio regulators decide on the plan to sell to the company. Also, Appalachian must file its proposal with the Federal Energy Regulatory Commission, the West Virginia Public Service Commission and the Virginia State Corporation Commission.
“Regulators must decide if our planned purchases and construction projects are prudent expenditures or if an alternative strategy will better serve customers,” Patton said. “This could change our overall strategy. We hope everything is approved. We believe our plan is the best and most cost-effective solution that will have little or no effect on customer rates.”