FirstEnergy settles with some parties on its power plant protection plan

FirstEnergy Corp.‘s (NYSE: FE) Ohio utilities, including Ohio Edison, on Dec. 22 filed a joint stipulation agreement demonstrating what the company called broad support for Powering Ohio’s Progress, the proposed Electric Security Plan (ESP) currently pending before the Public Utilities Commission of Ohio.

The proposed stipulation reflects the diverse interests and concerns of 15 signatories, including parties that represent residential, commercial, industrial and low-income customers, as well as organized labor and schools. The agreement supports FirstEnergy’s proposed ESP that outlines plans for its Ohio utilities – Ohio Edison, Cleveland Electric Illuminating and Toledo Edison – to provide electric service to customers for a three-year period from June 1, 2016, through May 31, 2019. 

Parties to the settlement include the City of Akron, Ohio Energy Group, Council of Smaller Enterprises, Cleveland Housing Network, Consumer Protection Association, Council for Economic Opportunities in Greater Cleveland, Citizens Coalition and Nucor Steel Marion.

“The proposed settlement reflects broad support for our ongoing efforts to keep electric rates affordable for businesses and consumers in Ohio,” said Leila Vespoli, Executive Vice President, Markets and Chief Legal Officer at FirstEnergy. “Our ESP will help assure reliable electric service and protect jobs by keeping vital baseload power plants available to serve Ohio customers. It will also help safeguard customers from rising retail prices from expected energy and capacity price increases in future years.”

The plan includes a 15-year Economic Stability Program that supports the state’s economic future by helping ensure that critical baseload power plants remain available to serve electric customers.  Additional benefits include:

  • Freezing base distribution rates through May 31, 2019. Since 2009, residential customers’ distribution rates have increased an average of only 40 cents per month, or 1 percent, based on typical usage of 750 kilowatt-hours per month.
  • Preserving $1bn in annual statewide economic benefits, more than $52m annually in local and state property and payroll taxes, and an estimated 3,000 direct and indirect jobs created by operations at the Davis-Besse nuclear plant, the W.H. Sammis coal plant and Ohio Valley Electric Corp.’s (OVEC) Kyger Creek and Clifty Creek coal plants.
  • Helping ensure key baseload electric generation remains available to serve Ohio customers and power Ohio’s economy.
  • Continuing to provide generation supply to non-shopping customers through a competitive bid process.

Plan opponents include the PJM Independent Monitor

Joseph E. Bowring, the Independent Market Monitor for PJM Interconnection, filed Dec. 22 testimony opposing the FirstEnergy plan to protect the Davis-Besse, Sammis, Kyger Creek and Clifty Creek plants through the proposed Retail Rate Stability Rider (Rider RRS) charge to ratepayers. “Rider RRS would transfer all responsibility for paying all the historic and future costs associated with the Davis-Besse Nuclear Power Station (‘Davis-Besse’) and the W.H. Sammis Plant (‘Sammis’) (the ‘Plants’) and FirstEnergy’s share of the output of two generating plants owned and operated by Ohio Valley Electric Corporation (‘OVEC’) from FirstEnergy to the ratepayers of the Companies,” Bowring wrote. “The OVEC plants are the Kyger Creek Plant in Cheshire, Ohio and the Clifty Creek Plant in Madison, Indiana.

“Rider RRS is not consistent with competition in the PJM wholesale power market. Rider RRS would constitute a subsidy analogous to the subsidies proposed in New Jersey and Maryland, both of which were found to be inconsistent with competition inthe wholesale power markets. Rider RRS would shift responsibility from FirstEnergy for all historical and future costs to the ratepayers of the Companies. The Companies are requesting that the plants and the contracts be returned to the cost of service regulation regime that predated the introduction of competitive wholesale power markets. Rider RRS would require that the ratepayers of the Companies subsidize the costs of the plants and the contracts to the benefit of the Companies. The logical offer price for these resources in the PJM capacity market, under these conditions, would be zero. A zero offer would be rational because this would maximize the revenue offset to the customers who would be required to pay 100 percent of the costs of this capacity. This would have an anti-competitive, price suppressive effect on the PJM capacity markets.”

A witness for the Ohio Consumers’ Counsel, James Wilson, also said in Dec. 22 testimony that the Rider RRS should be denied, since it would improperly shift power plant costs to ratepayers.

Tyler Comings, a Senior Associate with Synapse Energy Economics, said in Dec. 22 testimony filed on behalf of the Sierra Club: “The construct of Rider RRS itself is inappropriate. Ohio has chosen a de-regulated system to insulate customers from the performance or non-performance of individual units. By forcing the Companies’ customers to accept this rider, the customers effectively become the owners of the units; however, they would get virtually none of the benefits of ownership, such as control over costs and strategic decisions, and would not be entitled to the type of regulatory oversight that protects customers in a regulated system.”

Comings noted that the three involved coal plants face risks due to environmental rules in the works, like the those covering disposal of coal combustion residuals, the Section 316(b) Cooling Water Intake Structures at Existing Facilities rule and tighter National Ambient Air Quality Standards.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.