$600-Million Bailout Rewards Ohio Utility’s Bad Bets on Coal
Ratepayers will pay up to US$600 million over three years for a bailout the Public Utilities Commission of Ohio (PUCO) unanimously approved last week for Akron-based FirstEnergy Corporation’s coal-fired power plants.
“The increases—$132.5 million annually plus a ‘gross-up’ to pay the company’s federal taxes on the new money—will be hidden on the delivery side of customer bills, meaning even customers who buy power from competitors will have to pay for it,” the Plain Dealer reports. The three-year bailout period could eventually be extended to five, and the total cost increased accordingly, at PUCO’s discretion.
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Earlier in the 24-month regulatory process, FirstEnergy “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,” the paper notes.
The Ohio Environmental Council traced the rate increase back to FirstEnergy’s bad energy supply choices in years past.
“For years, FirstEnergy doubled down on dirty energy and led the effort to kill Ohio’s clean energy standards, which made them less competitive in today’s market,” wrote Trish Demeter, managing director of the council’s energy programs. “Now their customers will be on the hook for millions of dollars for mistakes the company made, while Ohio loses jobs as we become less competitive in an energy market that is favouring cleaner alternatives.”
On page 127 and 128 of a 192-page order, “the commission explains that the purpose of the increase is to help the company avoid a credit rating downgrade that would limit its ability to borrow to make any upgrades,” the Plain Dealer reports.
The regulator estimated the deal will cost $3 per month for the average ratepayer consuming 750 kilowatt-hours over that period. But Ohio Consumers’ counsel Bruce Weston contrasted that result with the prices consumers could have paid by opting for less-expensive natural gas generation.
“Unfortunately, consumers will pay higher electric bills to subsidize their utility,” he said. “It’s time to restore the Ohio legislature’s vision for consumers to benefit from competitive pricing for electricity. The legislature should repeal the law used by utilities to charge Ohioans more than the market price.”
The state’s Alliance for Energy Choice and the Ohio Manufacturers’ Association (OMA) both spoke out against the decision. “PUCO once again granted the utility’s request for more money with no corresponding benefit to customers,” said Alliance spokesperson Todd Snitchler. “Businesses and families will again be required to pay more for the same service they already receive, with only a hope that customers will gain an upgraded grid if and when the utility elects to do so.”
FirstEnergy had sought a considerably more generous bailout totaling $558 million to $1.1 billion per year over eight years, and CEO Charles Jones hinted the company might appeal the ruling.
“Today’s decision is disappointing for our customers,” he said in a statement. “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.”
In an analysis posted by the Institute for Energy Economics and Financial Analysis, Crain’s Cleveland Business notes that the decision will now be reviewed by the Federal Energy Regulatory Commission (FERC), which previously struck down PUCO’s approval for a direct subsidy to FirstEnergy. That means further opposition to the deal is just around the corner.
“FERC likely will hear more than a few voices asking it to nix the new deal,” writes correspondent Dan Shingler. “For one thing, the [American Association of Retired Persons] has said it will alert its 1.5 million Ohio members to the deal and tell them it’s an unfair subsidization of a for-profit company at their expense.”