It's Time for Integrated Resource Planning in West Virginia

WVU Center for Energy & Sustainable Development
December 6, 2012

Associate Professor of Law Jamie Van Nostrand has found that West Virginia’s utility companies do not properly consider energy efficiency or conservation as possible solutions to the need for additional resources. In a new discussion paper titled “The Case for Integrated Resource Planning in West Virginia” Van Nostrand analyzes and describes the deficiencies in the system planning approaches used by American Electric Power (and its affiliates Appalachian Power and Wheeling Power) and FirstEnergy (and its affiliates Mon Power and Potomac Edison). In the discussion paper, Van Nostrand explains why electric companies in West Virginia need to engage in rigorous long-term planning and take a critical look at the various sources for acquiring a reasonably priced and reliable electricity supply. He endorses a practice known as “integrated resource planning,” which has been widely accepted since the late 1980s as the practical means for utility companies to develop long-term resource plans.

Van Nostrand explains that “a key element of integrated resource planning is that when a utility company evaluates its options for meeting its future needs, it considers energy efficiency and conservation measures—demand-side resources—on the same footing as the addition of generating capacity—supply-side resources.” The practical result of integrated resource planning is that utilities can decide to devote more resources to offering their customers energy efficiency and conservation programs, which is cheaper in most instances than building new power plants, according to Van Nostrand.

FirstEnergy and American Electric Power are currently seeking approval from the West Virginia Public Service Commission to increase rates in order to recover the costs of their investments in existing coal plants from West Virginia ratepayers. This additional investment is $1.1 billion in the case of FirstEnergy, and $1.2 billion in the case of American Electric Power. “The costs of these plants were previously recovered in the rates of customers in Ohio. As that state moves to a competitive market, both American Electric Power and FirstEnergy are looking to recover their costs for these plants from West Virginians,” said Van Nostrand. “Without a rigorous process of integrated resource planning, “it is impossible to determine whether these plant additions are in the best long-term interests of West Virginia ratepayers.”

Van Nostrand’s discussion paper also provides support for possible legislation to require utilities in West Virginia to engage in integrated resource planning.

“Legislation was proposed last session to address this important issue, and it failed to clear the Judiciary Committee in the Senate,” said Van Nostrand. “This discussion paper shows why this legislation is needed, and how it could lead to lower energy costs for West Virginians.”