Inflation has driven up the cost of many basic necessities: food, housing and energy.
What Appalachian Power’s 1.1 million customers may not have known is that for years, they’ve been paying an extra cost on their monthly bills. Not for more electricity. But for electricity that costs more to produce than available alternatives. And from a pair of 70-year-old coal-burning power plants outside the state, in a contract state regulators never approved.
Other states have walked away from the plants.
Michigan regulators last year denied a request to have consumers pay for losses at the Kyger Creek and Clifty Creek power plants, which are part of the Ohio Valley Electric Corporation, or OVEC.
“Any amount that was being paid to OVEC above market was disallowed,” said Devi Glick, an energy analyst at the research firm Synapse Energy Economics who testified in Michigan.
Ohio lawmakers earlier this year repealed a subsidy for the plants that was found to be costing consumers hundreds of millions of dollars.
The OVEC plants are currently sending electricity to Appalachian Power’s customers in West Virginia and Virginia as part of a long-term power purchase agreement. Using Glick’s analysis, adapted from the Michigan case, it is costing them tens of millions of dollars a year.
Appalachian Power paid more per megawatt hour for OVEC power than it did for market-price power in six of the past seven years, the analysis shows.
Glick calculated that Appalachian Power customers have overpaid more than $328 million since 2018, using the same kind of analysis she provided to Michigan regulators.
West Virginia Public Broadcasting performed its own independent analysis using similar data, and found nearly identical results.
“It's not serving the ratepayers’ best interests,” Glick said of OVEC. “It's in the owners’ best interest to try to just string it along as long as possible, and as long as they're allowed to.”
The Virginia State Corporation Commission, that state’s utility regulator, quietly approved Appalachian Power’s contract with OVEC in 2011, finding it to be in the public interest at the time.
Appalachian Power didn’t seek approval from the West Virginia PSC, though its service territory overlaps both states. A West Virginia PSC spokesman declined to comment and referred questions to Appalachian Power and OVEC.
Del. Evan Hansen, D-Monongalia, is minority chairman of the House Energy and Public Works Committee. He said the OVEC contract is an example of the state’s nearly exclusive dependence on coal to generate electricity.
“I think that we need a real sober look at why West Virginia's electric rates have gone up faster than any other state over the last 15 years,” he said. “It's due to an overreliance on a single energy source that has become more and more expensive compared to alternatives.”
Appalachian Power asked the West Virginia PSC for a rate increase this year, but was denied amid an intense public backlash to the rising cost of power.
Hansen’s efforts to curb the growth in electricity costs have faced high hurdles in a legislature with a pro-coal Republican supermajority in both chambers.
West Virginia Public Broadcasting asked Republicans to comment for this story. None did.
Appalachian Power said the OVEC plants provide capacity and reliability to customers. Many grid experts say electricity demand will rise dramatically in the coming years due to data center demand to power artificial intelligence.
“Electricity from OVEC continues to provide a reliable baseload generation resource, at a stable cost, for our customers,” said Debra Pannell, an Appalachian Power spokeswoman. “Removing existing generation resources from the pool could drive power prices higher and decrease reliability.”
Indiana regulators accepted that position in July, when they approved costs for the OVEC plants that Michigan regulators rejected.
Still, consumer advocates say new demand can be met with natural gas, renewables and battery storage, at a lower cost. Severe winter storms in recent years have shown that coal and gas experienced some of the worst failures.
If nothing changes, the OVEC plants will remain under contract to their owners until 2040.
In Ohio, electricity customers were set to pay close to $1 billion by 2030 to subsidize the OVEC plants, until the repeal of a controversial bill earlier this year.
“We were looking at the fairness and whether it's fair to charge consumers,” said Maureen Willis, director of Consumers Council of Ohio, which fought to scrap the subsidies. “From our perspective, it's the investors who should bear the risk, and not the consumers.”
The OVEC plants were at the center of one of the biggest public corruption scandals in Ohio history. Key officials accepted bribes in exchange for bailing out the plants.
Ohio’s former House speaker is serving 20 years in prison as a result of his conviction in the scandal. Two former First Energy executives accused of bribing the former speaker await trial.
The state’s former top utility regulator took his own life while facing trial.
“There was just real criminal wrongdoing, people accepting really crude bribes to pass a bailout for these coal plants that were built in the 1950s,” said Tony Mendoza, a Sierra Club attorney who urged the West Virginia PSC to scrutinize the OVEC contract in 2018.
Cold War To ‘Hot Potato’
The Kyger Creek Plant in Cheshire, Ohio, and the Clifty Creek Plant in Madison, Indiana, were built to help America win the Cold War.
In 1955, they both began sending electrons to the Portsmouth Gaseous Diffusion Plant in southern Ohio, a federal site that enriched uranium for nuclear weapons.
After the Cold War, operations at the Portsmouth plant wound down, and the U.S. Department of Energy had no need for Kyger Creek and Clifty Creek.
OVEC’s owners, including the region’s largest electric utilities, saw them as a way to provide electricity to residential, commercial and industrial customers.
The companies negotiated a contract that would remain in effect until 2040. In it, they agreed to share power produced by the plants at ratepayers’ expense without asking each state utility regulator for approval.
Appalachian Power parent company American Electric Power, First Energy, Duke Energy, and Louisville Gas & Electric and Kentucky Utilities use power from the plants.
AEP has the largest share of the OVEC contract, at 39%, through three affiliates: Ohio Power, Appalachian Power and Indiana-Michigan Power.
Mendoza calls it “wild” that the utilities could lock their customers into the contract for 30 years without asking every state regulator for approval.
“Virginia had a specific requirement that you can't enter into these long term contracts without pre-approval,” he said. “All the other states should have had that.”
Over the course of a decade, OVEC spent $2 billion on air pollution upgrades on the plants, including scrubbers to reduce sulfur dioxide emissions, and a system to control nitrogen oxide, which causes smog.
OVEC made a bet that it could pass along those costs to customers and still remain profitable by generating electricity.
The timing couldn’t have been worse.
Hydraulic fracturing, or fracking, unlocked an abundant supply of cheap natural gas, including in Appalachia.
Coal-burning power plants struggled to compete with the onslaught of gas, and many have retired in the past 15 years, on both sides of the Ohio River.
“If the shale boom had happened 10 years earlier, they would have retired these plants and replaced them with gas units at the site,” Mendoza said. “So what they did is they made a massive investment in coal, kind of, right at the last time period where it made sense to do that economically.”
Glick, the industry analyst, said the plants have frequently operated at a loss – costing more to produce power than they could sell it for in the market. Customers of multiple utilities in multiple states are paying for the losses.
She said with the complicated split in ownership and varying state regulations, no one company wants to stick its neck out and propose any changes to how OVEC operates – including its largest owner, AEP.
“The best analogy is hot potato,” Glick said.
Seeds Of A Scandal
On July 30, 2020, the U.S. Attorney’s Office in the Southern District of Ohio sent out a news release that would be shocking in any state.
A federal grand jury had indicted the Ohio Speaker of the House, Larry Householder, in a $61 million bribery scheme involving two First Energy nuclear power plants and the OVEC coal plants.
Householder wasn’t the only one in trouble. Mathew Borges, the former chairman of the Ohio Republican Party was also indicted, as was Householder’s longtime campaign and political strategist, and two lobbyists.
In the next few years, the scandal widened. Sam Randazzo, the former chairman of the Public Utility Commission of Ohio, was indicted. Then Chuck Jones, the former president and CEO of First Energy, and Mike Dowling, the company’s former senior vice president.
All were alleged to have participated in a racketeering conspiracy to bail out the nuclear plants and the OVEC plants in legislation called House Bill 6.
Householder was convicted in 2023 and sentenced to 20 years in prison. He has asked President Donald Trump for a pardon. Borges was sentenced to five years in prison. Facing as many as 20 years in prison, Randazzo, 74, took his own life in April of last year.
Trials for Jones and Dowling start next January.
The companies themselves have also faced a reckoning for their role in the scheme.
In September 2024, First Energy agreed to a $100 million settlement with the U.S. Securities and Exchange Commission over its participation in the HB 6 scandal.
In January, AEP reached an agreement with the commission to pay a civil penalty of $19 million over its role in HB 6. None of its current or former executives face charges.
In May, Ohio’s Republican Gov. Mike DeWine signed a bill to repeal the OVEC subsidies.
Just like in West Virginia, Ohio customers came out ahead in 2022. Russia invaded Ukraine early that year, sending the price of coal and gas worldwide skyward. It wouldn’t last, though.
“They lose money every year, except in really unusual events, like in 2022 when power prices are obscenely high,” Mendoza said of the OVEC plants. “It was hard not to make money if you are a power plant owner in 2022.”
In 2023 and 2024, it was back to business as usual for the OVEC plants, costing Appalachian Power customers more than $165 million combined.
“It's like you're using these antique cars to perform normal commuting and driving, and passing those costs on to the ratepayers,” Glick said. “And it's not happening very efficiently.”
‘A Necessity Of Life’
In April, Trump signed a series of executive orders intended to boost the production and consumption of coal.
In May, the U.S. Department of Energy took the unusual step of ordering a coal plant in Michigan to stay on the grid through the summer instead of shutting down. In August, the department extended its order to November.
Trump’s moves have proved popular with lawmakers in West Virginia, whose support of coal is generally unwavering.
In August, Charlotte Lane, the chair of the West Virginia PSC and a former First Energy lobbyist, wrote to Lee Zeldin, administrator of the U.S. Environmental Protection Agency, in support of his effort to roll back Biden-era limits on carbon dioxide emissions from power plants.
The Biden EPA rule would require costly changes to the OVEC plants or shutting them down.
“The closing of the fossil-fuel, and particularly coal-fired generation, has already, and will continue to, severely reduce the reliability and resilience of the electric grid,” Lane wrote. “If allowed to go forward, the existing rule will cost customers and the economy billions of dollars, and threaten the health and welfare of customers for whom electricity is a necessity of life.”
Despite federal policy shifts to boost coal and throttle the development of renewables, the market trends are not likely to flip back in coal’s favor.
At its peak nearly two decades ago, coal generated half the country’s electricity. By last year, its share had fallen to 16%, pushed aside by natural gas and also wind and solar.
West Virginia is the nation’s No. 2 coal producer behind Wyoming, but it is more reliant on coal for generating electricity than any state.
Appalachian Power has three coal-burning power plants in West Virginia. Together, they can produce multiple times the electricity the OVEC plants contribute to Appalachian Power.
The Kyger Creek and Clifty Creek plants pay workers who mostly live in Indiana and Ohio. The property taxes they pay go to communities in those states – not West Virginia.
Hansen, the West Virginia delegate, said the state could make other choices.
“I think this issue is another example of doubling down on coal because it's requiring ratepayers to pay for electricity generated by old, inefficient, coal-fired power plants that's more expensive than electricity that could have been purchased off the grid,” he said.
A Missed Opportunity?
The PSC had a chance to rein in the OVEC costs in 2018, when the Sierra Club’s Mendoza challenged the expenses during an Appalachian Power fuel cost recovery case.
The Sierra Club presented evidence that Appalachian Power customers were paying tens of millions a year more than they should have for electricity from the OVEC plants. It would have been cheaper to buy electricity from PJM, the mid-Atlantic regional market that includes West Virginia and Virginia.
The Sierra Club asked the commission to disallow Appalachian Power from recovering those uneconomic costs.
In 2019, the commission declined to take any action. It hasn’t revisited the issue since and wouldn’t comment.
Mendoza said the commission expressed little interest at the time in looking at the OVEC costs, “and so we at Sierra Club have focused on other states.”
Public anger over rising electricity costs likely influenced a more recent order from the PSC. In August, it told Appalachian Power to freeze customers rates. The company had asked for a $250 million increase in base rates – nearly $24 a month for the average residential user.
The commission received more than 5,000 public comments against the proposal. School boards, county commissions and a majority of the Charleston City Council joined the chorus.
Hansen said state leaders are aware of the discontent over rising electricity costs. But, he said, their solution is to find ways to use more coal, rather than turn to cheaper sources.
“I think there were so many objections filed with the Public Service Commission that they realized they had to do something a little bit different,” he said. “But the utilities are going to continue to come back with more requests for rate increases, and they're just following the policies that have been set by the legislature.”
Hansen and other Democrats offered a bill earlier this year that would have capped electricity rates. It never got a hearing. By contrast, Virginia lawmakers enacted a bipartisan bill this year to lower Appalachian Power bills. It was signed into law by Republican Gov. Glenn Youngkin.
Hansen said he plans to reintroduce legislation that would more clearly define what it means for the PSC to serve the public’s interest. That, he said, holds the potential for keeping the PSC accountable for the decisions it makes – including its hands-off approach to the OVEC plants.
“I think we need that type of legislation for cases just like this to make sure that the commission is making decisions in the best interest of West Virginians,” he said.
This story was produced by the Appalachia + Mid-South Newsroom, a collaboration between West Virginia Public Broadcasting, WPLN and WUOT in Tennessee, LPM, WEKU, WKMS and WKU Public Radio in Kentucky and NPR.
