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Ohio Retail Customers Could Be Forced to Subsidize Utilities

February 18, 2015 By Josh Kessler

Ohio utility FirstEnergy has petitioned the Ohio Public Utilities Commission (PUC) to guarantee sales from four of its aging nuclear and coal-based power plants, according to Midwestern Energy News. This would allow the company to bypass the normal rules governing auctions in a competitive energy market. Because the contracts would be guaranteed, effectively all electricity consumers in the region would have to pay for the power from the plants, including those that have selected alternate providers.

Policy Matters Ohio reports that FirstEnergy and AEP have neglected investments that would improve the performance of their power plants during the 16 years since Ohio deregulated its power markets. The companies have claimed that the plants are too expensive to operate and maintain. Rather than following standard market procedures, the company is seeking to return the plants to a guaranteed cost recovery model.

How Does This Affect Retail Energy Supply?

FirstEnergy and AEP would be able to offer their power in wholesale markets “at zero,” explained a PJM spokesperson, and still collect the market clearing price. This would crowd some competitive power providers out of the wholesale market. In turn, there would be less supply available from competitive providers to feed into retail markets. This could create short-term price increases and reduce the incentive for competitive generators to invest in the region over the long term, further reducing retail supply.

Policy Matters Ohio reports that the Office of Ohio Consumers’ Counsel estimates that this would cost consumers in excess of $3 billion over the entire 15-year power purchase agreement.  It furthermore states that FirstEnergy acknowledges that the plan would cost consumers $400 million in the next three years alone.

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