Retail Energy Buyer

Subscribe to the free weekly newsletter written just for retail energy buyers

FirstEnergy Ohio Utilities File Rate Settlement

December 9, 2015 By Cheryl Kaften

First Energy filed a third supplementation settlement on November 1 (Case No. 14-1297-EL-SSO) with the Public Utilities Commission of Ohio (PUCO) to a controversial rate request (Docket14-1297-EL-SSO) that will shift the financial risks of operating several of its generating plants away from the company’s subsidiaries – Ohio Edison, Cleveland Electric Illuminating, and Toledo Edison – and to their 2.2 million ratepayers in the Buckeye State.

The current filing – supported this time by the commission staff and more than a dozen parties to the case – abbreviates the term of the agreement from a 15-year income guarantee to an eight-year plan running from June 1, 2016, to May 31, 2024.

According to FirstEnergy, the settlement has been calculated to save the utilities’ customers “an estimated $560 million over the eight-year life of the program,” as rates increase over time.

Specifically, a typical residential customer using 750 kilowatt-hours (kWh) of electricity per month can expect to pay a monthly average of about $3.25 more for the rate provision during the first full year of the Electric Security Plan (ESP).

PUCO began hearing arguments on August 31 on the rate filing, in which Akron-based FirstEnergy claimed that energy produced by its traditional plants – one, a nuclear facility; and the others, coal-fired generators – is vital in order to maintain grid reliability and cost stability in its combined service areas statewide.

Conversely, environmentalists have argued that both plants should be shuttered – and renewable generators should take their place. What’s more, they have asserted, Ohio’s residents and businesses should not be asked to shoulder the costs of the failing generators – essentially “bailing out” power producers doomed by flawed economics.

The newest settlement outlines what the company characterizes as “ambitious steps to safeguard customers against retail price increases in future years, deploy new energy efficiency programs, and provide a clear path to a cleaner energy future by reducing carbon emissions.”

It has been signed by 16 parties, including the PUCO staff; Boston-based EnerNOC, an energy management solutions provider; and Ohio Partners for Affordable Energy, a low-income-customer advocacy group.

In a public statement, the company said “The [eight-year] rate provision will help protect customers against rising retail price increases and market volatility, while helping preserve vital base load power plants that serve Ohio customers and provide thousands of family-sustaining jobs in the state.”

The PPA includes the Davis-Besse Nuclear Power Station in Oak Harbor, Ohio; the coal-fired W.H. Sammis Plant in Stratton, Ohio; and a portion of the output of Ohio Valley Electric Corporation (OVEC) coal-fired units in Gallipolis, Ohio, and Madison, Indiana

The agreement also provides some environmental “swag” to sweeten the deal. It establishes a goal to reduce carbon dioxide (CO2) emissions across the company’s six-state footprint by at least 90 percent below 2005 levels by 2045.

“This goal,” FirstEnergy said, “represents a potential reduction of more than 80 million tons of CO2 emissions, and is among the most aggressive targets in the utility industry.”

In addition, the settlement offers more than $102 million to help low-income customers with bill payment and energy efficiency programs, along with economic development funding for Ohio communities. In total, according to the utility, these investments will take the total amount provided to Ohio municipalities and low-income customers to nearly $200 million since the companies’ first ESP was implemented in 2009.

Other key benefits proposed in the settlement include:

  • The preservation of $1 billion in annual statewide economic benefits, including tax revenues and an estimated 3,000 direct and indirect jobs created by operations at the Davis-Besse and H. Sammis power plants in Ohio.
  • Rate stability: Since 2009, residential customers’ monthly distribution rates have increased an average of only $1.31, based on typical usage of 750 kWh/month. Under the ESP, the PUCO must approve a request to file for a base distribution rate increase during the term of the plan.
  • Regular updates, including a report to be filed by November 1, 2016, as part of a Resource Diversification Program that includes energy efficiency programs and renewable energy resources.
  • A commitment to evaluate future initiatives for smart meter/smart grid technologies across FirstEnergy’s Ohio service area for PUCO consideration and approval.

However, even with benefits considered, the plan still has its detractors – among them, independent power producer and energy retailer Dynegy. The Houston-based company issued a statement on December 1 arguing, “The Public Utilities Commission of Ohio (PUCO) staff has decided to put the shareholders of FirstEnergy ahead of Ohio residents and businesses by coming to an eight-year agreement with the company on a power purchase agreement (PPA). The PPA is a subsidy that only benefits FirstEnergy, while increasing power costs for the citizens of Ohio and their businesses – negatively impacting economic development in the state, and distorting the power market for FirstEnergy’s benefit.”

The company went on to claim that FirstEnergy does not even need the money. “Recent market awards indicate that FirstEnergy is already set to receive significant revenue for capacity at all of their Ohio plants for the next three years,” Dynegy’s statement continued, adding, ” According to FirstEnergy’s own data from their recent investor presentation at the Edison Electric Institute’s Financial Conference, FirstEnergy’s fleet has been awarded more than $2.3 billion in revenues over the next three planning years from the PJM Capacity Auction with all of their generating plants clearing the most recent capacity auctions, which is significantly more than the amount expected at the time of FirstEnergy’s original subsidy request. As part of the award, FirstEnergy’s plants are now obligated to run through May 31, 2019, without the PPAs, meaning there are no risks of near-term retirements at these facilities.”

And some environmental advocates agreed. “”Those benefits will be minimal at best,” Robert Kelter, senior staff attorney for the Chicago-based Environmental Policy and Law Center told EE News. “The agreement has so many loopholes that FirstEnergy can conduct business as usual and claim they have complied.”

The PUCO is expected to rule on the settlement early next year.

Leave a reply


*