FirstEnergy Is Stymied in PUCO Bid to Subsidize Ohio Plants, But Still Gets $200M Annually

The Public Utilities Commission of Ohio (PUCO) on October 12 unanimously rejected FirstEnergy’s modified Retail Rate Stability (RRS) rider or “virtual PPA” proposal.

In a 4-0 vote (Docket No. 14-1297-EL-SSO), the commissioners ordered FirstEnergy’s Ohio utilities – Ohio Edison, Cleveland Electric Illuminating, and Toledo Edison – to establish PUCO staff’s recommended Distribution Modernization Rider (DMR) instead, and to eliminate the existing RRS rider.

“After reviewing the record in this case, the commission is denying FirstEnergy’s modified Retail Rate Stability rider, finding that it is not in the public interest,” PUCO Chairman Asim Haque said before the vote.

FirstEnergy – which had requested that Rider DMR be granted in the amount of $558 million per year for eight years – received just a fraction of that amount.  The PUCO order authorizes the companies to collect about $204 million per year over a three-year term.  The charge is expected to result in a $3 increase on monthly bills, or about three percent, for a typical residential customer using 750 kilowatt-hours (kWh) per month.

“With the new charge, total monthly bills for FirstEnergy’s residential customers are expected to be lower than they were a year ago and remain among the lowest in the state,” FirstEnergy stated.

Even so, ratepayers will feel the pain. The cost increases, “will be hidden on the delivery-side” of customers’ bills, according to the Cleveland Plain Dealer, which means that even ratepayers who buy their power from competitors will have to pitch in.

And, FirstEnergy stated, its utilities also will suffer. “Today’s decision is disappointing for our customers,” commented FirstEnergy CEO Charles Jones. “While we clearly demonstrated to the PUCO what is essential to ensure reliability for customers in the future, the amount granted is insufficient to cover the necessary and costly investments.  The decision also fails to recognize the significant challenges that threaten Ohio utilities’ ability to effectively operate.”

During the term of rider DMR, the commission has mandated that FirstEnergy will maintain its headquarters in Akron, Ohio, and make sufficient progress in grid modernization initiatives ordered by the commission, including its deployment of smart grid technology in the companies’ service territories.

“The DMR’s primary purpose is to ensure that FirstEnergy retains a certain level of financial health and creditworthiness so that it can invest in future distribution modernization endeavors,” stated PUCO Chairman. Haque. “We expect that these future endeavors will advance the electric industry in FirstEnergy’s service territory and benefit Ohio’s consumers and businesses.”

The commission’s decision caps 24 months of haggling that began in August 2014 when FirstEnergy proposed an eight-year plan that would have required its customers to subsidize losses at its Ohio power plants, according to the Plain Dealer.

The company identified its Davis-Besse nuclear plant near Toledo and the W.H. Sammis coal-fired plant on the Ohio River as two plants that could not compete against gas-fired plants in open markets. But the plants are owned by FirstEnergy Solutions, which does not operate under state regulations.

In May, FirstEnergy and other interested parties filed applications for rehearing following the PUCO’s March 31, opinion and order establishing an electric security plan. An evidentiary hearing was held at the PUCO in July and August, to enable interested parties to provide testimony on the rehearing applications.

Now, FirstEnergy said, the company is evaluating the commission’s order and considering next steps.

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