Shurnan, McCuskevGf SlicerpLLc Attorneys at Law w 141 1 Virginia Street, East Suite 200 P.O. Box 3953 Charleston, West Virginia 25339 Telephone 304.345.1400 Facsimile 304.343.1826 www.shumanlaw.com 1445 Stewartstown Road, Suite 200 Morgantown, West Virginia 26505 Telephone 304.291.2702 Facsimile 304.29 1.2840 304-720-4027 April 26, 2013 Via Hand Delivery Ms. Sandra Squire, Executive Secretary Public Service Commission P. 0. Box 812 Charleston, WV 25323 Re: Monongahela Power and The Potomac Edison Company CASE NO. 12-1571-E-PC Dear Ms. Squire: Enclosed for filing in the above matter, please find an original and twelve (1 2) copies of the following: 1. 2. Should you have any questions concerning this matter, please do not hesitate to contact me, Direct Testimony of James L. Laurita, Jr.; and Direct Testimony of William Raney. at your earliest possible convenience. Sincerely, Charlotte R. Lane CRL,/klm Enclosures ~~~ ~ cc: Counsel of Record
Transcript
Shurnan, McCuskevGf SlicerpLLc Attorneys at Law w
141 1 Virginia Street, East Suite 200
P.O. Box 3953 Charleston, West Virginia 25339
Telephone 304.345.1400 Facsimile 304.343.1826
www.shumanlaw.com 1445 Stewartstown Road, Suite 200 Morgantown, West Virginia 26505
Telephone 304.291.2702 Facsimile 304.29 1.2840
304-720-4027
April 26, 2013 Via Hand Delivery
Ms. Sandra Squire, Executive Secretary Public Service Commission P. 0. Box 812 Charleston, WV 25323
Re: Monongahela Power and The Potomac Edison Company CASE NO. 12-1571-E-PC
Dear Ms. Squire:
Enclosed for filing in the above matter, please find an original and twelve (1 2) copies of the following:
1.
2.
Should you have any questions concerning this matter, please do not hesitate to contact me,
Testimony of James L. Laurita, Jr. Chairman of the West Virginia Coal Association
CASE NO. 12- 157 1-E-PC
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How many people do you employ in your coal mining operation?
We employ approximately 700 people under the Mepco umbrella of companies
How many in your other operations?
I am associated with several other energy related companies that employ approximately 120 additional people.
Where do you market your coal?
Mepco markets its coal to several coal fired generators in Northern Appalachia, with a majority of our sales directed to Longview Power and several First Energy stations, and a minority to other regional coal consumers.
11. Are you familiar with Harrison Power Station?
Yes I am.
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Do you sell coal to Harrison? Have you ever?
Mepco has shipped to the Harrison Power Station from time to time over the years, however it is not currently shipping to Harrison.
Does the WVCA support this proposed transaction for Mon Power to buy the remaining interest in Harrison Power Station?
Yes we do.
Explain why the WVCA is supporting this transaction.
The Harrison Power Station is of critical importance to many coal producers in Northern West Virginia, Many mines in the region which cumulatively employ
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, Testimony of James L. Laurita, Jr. Chairman of the West Virginia Coal Association
CASE NO. 12-1571-E-PC
nearly one thousand people, plus several thousand additional indirect jobs depend upon the continued operation of this facility.
15. What benefits do you see for the WV coal industry from this transaction?
Not only will the coal industry, and more importantly the employees of this industry benefit from the continued operation of this facility, but also the many thousands of support jobs that are associated with supplying the equipment, materials, and supplies that the coal industry consumes. Our transportation expenses are much lower if we supply coal to plants in close proximity to our stations, rather than shipping potentially hundreds of miles away and having to compete with coal suppliers from other states. This not only protects our industry, but lowers our total delivered cost of supply to our local stations.
16. Do you feel that energy efficiency programs can remedy the capacity deficiency on Mon PowerPE in WV?
I do not believe that energy efficiency can provide more than a very small amount of capacity savings, and would be many years in the making. All the while, capacity needs would not be met, and coal and the support jobs associated with coal mining would be at risk at a critical time for our industry.
17. Do you feel that renewable generation production such as wind and solar can remedy the capacity deficiency of Mon PowerPE in WV?
Absolutely not. Renewable energy although becoming lower cost, is still significantly higher in cost and is heavily subsidized. Ultimately someone has to pay for that subsidization. As to capacity, renewables are not base load power supply. That is, they cannot supply the power needs 24/7, and are intermittent in nature. The capacity factors of renewable energy are generally less than 30% in this region. A capacity shortfall means we need the capacity to call on energy when we need it. By their very nature, renewables cannot provide constant supply, and therefore should not be considered as capacity particularly when - h a n & r & x ~ e ;-;emdd-win+er-r&g& whei+wkea&t+mde~ora-- hot muggy day when there is no wind. In addition, renewable generation assets
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Testimony of James L. Laurita, Jr. Chairman of the West Virginia Coal Association
CASE NO. 12-1571-E-PC
have not been shown to have the operational life as coal and gas generating assets have been demonstrated to have.
Our state and our country needs reliable and low cost base load energy, and coal has always, and will continue to provide low cost and reliable energy that is critical for maintaining our high standard of living, our national security and global competitiveness. There is a place for renewable energy in every portfolio, however we should use them where they make the most sense for supply, geographically and regionally. Here in WV they cannot in their very nature become a major component of our base load supply if we want reliable and affordable energy.
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Do you think Mon Power-PE’s customers will benefit in the long run from this transaction?
Absolutely. Low cost and reliable energy produced from this station will place the people of this region in a distinct advantage to other states whose energy costs are higher and predicted to increase.
Do you think the State of WV will benefit in the long run from this transaction?
Yes, the taxes associated with the resource industries in this state provide 60% of the tax base. Supporting this station will ensure a continued significant tax revenue stream for the state, as well as employment for thousands. Also, reliable & low cost energy attracts manufacturing & the good paying jobs associated with it.
Please give us your perspective on the state of the West Virginia Coal industry today.
The coal industry is definitely under significant pressure. I have been in this business for over 35 years and have never experienced the number of pressure points we are seeing today. ~~ ~ ~~~~~~ ~~~~~~~~~~~~~
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Testimony of James L. Laurita, Jr. Chairman of the West Virginia Coal Association
CASE NO. 12-1571-E-PC
21. What are the challenges you see?
We are seeing unprecedented and nearly constant regulatory changes fiom the Federal Government the last four years. Particularly from the EPA, Office of Surface Mining, and MSHA. I have a staff of over twenty engineers and environmental professionals today, and twenty years ago I had one. These fast paced and frequent regulatory changes do two things: they raise the costs of our production, and they push the less sophisticated and capitalized companies out of the market. The coal industry has met these challenges and will meet them in the future. Coal is and will continue to be a reliable, low cost source of energy.
Many say that low cost natural gas is our biggest challenge, however we have competed with low cost gas before, and we have always survived and we will again. rising again, because they have to, and they are nearly double the price they were this time last year, and with the increase in natural gas prices to more sustainable levels, coal’s share of total generation has increased fiom 2012 levels displacing the temporary gains in generation share from natural gas when the unsustainably low gas prices occurred.
The gas prices we saw in 2012 were unsustainably low. Gas prices are
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Coal prices tend to be more steady and reliable because we have to keep our people employed and our mines pumped, ventilated, and maintained, and therefore our industry tends to require long term sales agreements to justify investment. Long term agreements tend to bring both parties, the supplier and consumer to the table to work out equitable arrangements. Gas on the other hand, once the well is drilled, can be easily be shut in by the producer if the prices are not attractive. Gas wells do not in of themselves require hundreds of people like a mine, pumping, ventilating, and maintaining the well whether it is producing or not. Gas is a liquid commodity from the stand point that it is traded daily or under short term arrangements relative to coal, and therefore the prices tend to be more volatile. They are fundamentally two different base load supply fossil fkels.
Our nation’s biggest challenge is our Federal Government trying to pick winners and losers in our energy supply. If we do not allow the free markets to ultimately decide and conversely play favorites, we will eventually find ourselves with not only volatile and high cost energy, but more importantly, a potential severe & o f l z g e 7 ~ p ~ ~ p p p p p ~ ~~p~~~~ ~~~~~~~~p ~ ~p~~ ~
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Testimony of James L. Laurita, Jr. Chairman of the West Virginia Coal Association
CASE NO. 12-1571-E-PC
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What are the opportunities?
We have an opportunity to capitalize on the world’s growing appetite for energy, and take advantage of the shale gas revolution here to support transportation and manufacturing, and export LNG. We are finally in a position to become energy independent. We created the Federal Department of Energy for that specific purpose over thirty years ago, but we have not been successful doing so. We have an opportunity to do so now, and we must do so to become more secure. The large and abundant coal reserves in Northern West Virginia lend themselves to being a reliable low cost steam coal, so let’s protect and preserve that vital resource by helping to keep the Harrison plant operational for the long haul.
Explain again how you see this proposed transaction benefitting the State and the industry.
Moving the Harrison Power Station assets into Monongahela Power will ensure that we have a long term low cost energy source for decades to come in Northern WV. Additionally, thousands of highly skilled, high paying jobs will be protected and preserved ~- for many years. How do you put a price tag enthat? This s t a e has been the envy of most of the nation because we have low energy costs, are paying our bills, and have relatively low unemployment.
Does this conclude your testimony?
Yes, thank you.
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PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON
CASE NO. 12-1571-E-PC
MONONGAHELA POWER COMPANY and THE POTOMAC EDISON COMPANY Petition for Approval of a Generation Resource Transaction and Related Relief
CERTIFICATE OF SERVICE
Service of the foregoing “Direct Testimony of James L. Laurita, Jr. Chairman of
the West Virginia Coal Association” was served upon the following by United States
mail, postage prepaid, this 26th day of April, 2012:
Sandra Squire Executive Secretary Public Service Commission 201 Brooks Street Charleston,-lJV 25301
Christopher L. Callas, Esq. Counsel, Mon Power and PE Jackson Kelly, PLLC P. 0. Box 553 Charleston, WV 25332
William V. DePaulo, Esq. Counsel, WV Citizen Action Group 179 Summers Street, Suite 232 Charleston, WV 25301-2163
Gary A. Jack, Esq. Senior Corporate Counsel Monongahela Power Company 500 1 NASA Boulevard
-Fkirnmn~Ww-Vv-26%4-
Susan J. Riggs, Esq. Counsel, WV Energy Users Group Spilman Thomas & Battle P. 0. Box 273 Charleston, WV 2532 1-0273
Patrick K. Maroney, Esq. Counsel, Utility Workers Union Maroney, Williams, Weaver & Pancake,
608 Virginia Street, E. Charleston, WV 25301
PLLC
Scott J. Rubin, Esq. 333 Oak Lane Bloomsburg, PA 178 15
Zachary Fabish, Esq. Counsel, The Sierra Club 50 F Street, N. W., Sth Floor Washington, DC 20001
David B. Hanna, Esq. Thomas N. Hanna, Esq. Counsel for IOGA Hanna & Hanna, PLLC P. 0. Box 3967 Charleston, WV 25239
Mike Becher, Esq. Counsel, The Sierra Club Appalachian Mountain Advocate P. 0. Box 507 Lewisburg, WV 24901
Jacqueline Lake Roberts, Esq. Consumer Advocate Division 700 Union Building 723 Kanawha Blvd., E. Charleston, WV 25301
Timothy L. Hairston, Esq. Recording Secretary I.B.E.W. Locate 2357, AFL-CIO P. 0. Box 346 Dellslow, WV 2653 1-0346
Richard L. Gottlieb, Esq. Counsel, WV Oil & Natural Gas Assoc. Lewis, Glasser, Casey & Rollins, PLLC P. 0. Box 1746 Charleston, WV 25326-1746
Vincent Trivelli Counsel for WV State Building &
Law Office of Vincent Trivelli, PLLC 178 Chancery Row Morgantown, WV 26505
Construction Trades Council, AFL-CIO
Charlotte R. Lane (WV Bar No. 2135) Shuman, McCuskey & Slicer, PLLC P. 0. Box 3953 Charleston, WV 25339 Telephone: (304) 345-1400 Facsimile: (304) 343- 1826
PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON
CASE NO. 12-1571-E-PC
MONONGAHELA POWER COMPANY and THE POTOMAC EDISON COMPANY
Petition for Approval of a Generation Resource Transaction and Related Relief
Testimony of William Raney on behalf of the West Virginia Coal Association
CASE NO. 12-1571-E-PC
1.
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What is your name?
William B. Raney.
What is your occupation?
President of the West Virginia Coal Association.
How long have you held this position?
21 years.
How many coal companies are members of the WVCA?
37 named producing Companies, which includes all their subsidiaries. 248 Non- producing companies (land companies, equipment companies, law firms, utilities, 3- nd-other-comp anies_that_suppl_~theWestVirninia coal industry in some way). In 20 12, our member companies accounted for more than 86% of the coal produced in West Virginia.
How many employees work for your members’ coal companies?
There are four at the Association. In so far as our members, it is difficult to provide a specific number, but it totals in the thousands. As close as I can get is to use the total employment reported for the coal industry in April, 201 3 of 26,60 1 and the fact that our producing members’ account for 86% of the state’s total production, our members could account for approximately 22,800 directhontracting jobs. That number, however, does not include the non- producing members’ employees.
What is the estimated yearly payroll of these Companies?
Again, very difficult to quantify, but if our producing members’ provide 22,800 direct/contracting jobs and the average annual wage for those jobs is $68,500, our
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Testimony of William Raney on behalf of the West Virginia Coal Association
CASE NO. 12- 157 1 -E-PC
producing members could account for approximately $1.6 billion in wages. However, that does not consider the wages paid to the employees of our non- producing member companies.
7. How many tons of coal do your member companies mine each year?
Approximately 11 1,000,000 tons.
8. Approximately how much in yearly taxes do your member companies pay?
Again, very difficult to quantify, but I will provide a general observation about the severance tax revenues for the State from our members. In 2012, the coal industry accounted for approximately $490 million in severance taxes, with our producing members’ 86% contribution to the State’s overall production it can be estimated that our producing member companies paid approximately $42 1.5 million in severance taxes, alone, That does not include corporate net income, regular income, property, franchise or sales taxes. Nor, does in include any taxes paid by
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9. What kind of taxes do your member companies pay?
As mentioned above, severance, corporate net income, regular income, franchise, real & personal property, sales and in addition bel, explosives, workers’ compensation old fund, special reclamation fund and black lung.
10. Explain where your member companies sell their coal.
To thermal and metallurgical customers in West Virginia and 26 other states as well as 33 foreign countries.
11. Have these markets changed over the years? Describe. ~~
The domestic markets have weakened for both thermal (steam) and metallurgical coal while the export markets for both types of coal have grown. Steam coal
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exports are at an all-time high. West Virginia utilities use approximately 32 million tons of coal each year for electricity generation, of which approximately 16 million tons is coal mined in West Virginia.
Testimony of William Raney on behalf of the West Virginia Coal Association
CASE NO. 12-1571-E-PC
Are you familiar with Harrison Power Station?
Yes.
Of the coal bought by Mon Power-PE at Harrison, how much is produced in West Virginia?
100%.
Does the WVCA support this proposed transaction for Mon Power to buy the remaining interest in Harrison Power Station?
Explain why the WVCA is supporting this transaction.
Harrison Power is critically important to the companies producing coal in central and northern West Virginia, since they provide 100% of the coal used at Harrison.
What benefits do you see for the WV coal industry from this transaction ?
As stated in our December 27, 2012 letter, this proposal will help ensure West Virginia residents and businesses have a continued supply of reliable, low-cost electricity for years to come.
Do you feel that energy efficiency programs can remedy the capacity deficiency on Mon PowerPE in WV?
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I
. ’ Testimony of William Raney on behalf of the West Virginia Coal Association
CASE NO. 12-1571-E-PC
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Do you feel that renewable generation production such as wind and solar can remedy the capacity deficiency of Mon PowerPE in WV?
No.
Do you think Mon Power-PE’s customers will benefit in the long run from this transaction?
Yes, as stated in our December 27, 2012 letter to the Commission.
Do you think the State of WV will benefit in the long run from this transaction?
Yes, it will be significant from a tax revenue’ and employment standpoint.
Now, let’s turn to future projected prices of coal.
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What are your projections for the next 10 years?
While not very good at doing the “crystal ball” thing with the coal market, we can only hope that the price for our product remains strong and high enough to cover the costs of mining West Virginia coal.
What conclusions do you draw from this historic data and the projections?
The additional costs imposed on the producers as well as the utilities in this country and region by federal government laws, regulations and policies have caused the price of our product (steam coal) and electricity to increase and we expect that to continue, although less dramatically than the last ten years.
Does this conclude your direct testimony? ~~
~~ ~ _ _
Yes.
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PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON
CASE NO. 12- 1 5 7 1 -E-PC
MONONGAHELA POWER COMPANY and THE POTOMAC EDISON COMPANY Petition for Approval of a Generation Resource Transaction and Related Relief
CERTIFICATE OF SERVICE
Service of the foregoing “Direct Testimony of William Raney on behalf of the
West Virginia Coal Association” was served upon the following by United States mail,
postage prepaid, this 26th day of April, 2012:
Sandra Squire Executive Secretary Public Service Commission 201 Brooks Street r L M t n , nnr 3 ~ 2 n 1
Susan J. Riggs, Esq. Counsel, WV Energy Users Group Spilman Thomas & Battle P. 0. Box 273 c- 7537.1-07.73 > * * v r a . r J J V L
Christopher L. Callas, Esq. Counsel, Mon Power and PE Jackson Kelly, PLLC P. 0. Box 553 Charleston, WV 25332
William V. DePaulo, Esq. Counsel, WV Citizen Action Group 179 Summers Street, Suite 232 Charleston, WV 25301-2163
Gary A. Jack, Esq. Senior Corporate Counsel Monongahela Power Company 5001 NASA Boulevard Fairmont, WV 26554
~~~~~~
Patrick K. Maroney, Esq. Counsel, Utility Workers Union Maroney, Williams, Weaver & Pancake,
608 Virginia Street, E. Charleston, WV 25301
PLLC
Scott J. Rubin, Esq. 333 Oak Lane Bloomsburg, PA 17815
Zachary Fabish, Esq. Counsel, The Sierra Club 50 F Street, N. W., 8th Floor Washington, DC 2000 1
David B. Hanna, Esq. Thomas N. Hanna, Esq. Counsel for IOGA Hanna & Hanna, PLLC P. 0. Box 3967 Charleston, WV 25239
Mike Becher, Esq. Counsel, The Sierra Club Appalachian Mountain Advocate P. 0. Box 507 Lewisburg, WV 24901
Jacqueline Lake Roberts, Esq. Consumer Advocate Division 700 Union Building 723 Kanawha Blvd., E. Charleston, WV 25301
Timothy L. Hairston, Esq. Recording Secretary I.B.E.W. Locate 2357, AFL-CIO P. 0. Box 346 Dellslow, WV 2653 1-0346
Richard L. Gottlieb, Esq. Counsel, WV Oil & Natural Gas Assoc. Lewis, Glasser, Casey & Rollins, PLLC P. 0. Box 1746 Charleston, WV 25326- 1746
Vincent Trivelli Counsel for WV State Building &
Law Office of Vincent Trivelli, PLLC 17 8 Chancery Row Morgantown, WV 26505
Construction Trades Council, AFL-CIO
Charlotte R. Lane (WV Bar No. 2135) Shuman, McCuskey & Slicer, PLLC P. 0. Box 3953 Charleston, WV 25339 Telephone: (304) 345-1400 Facsimile: (304) 343-1826
