The Public Utilities Commission of Ohio (PUCO) staff has once again supported anti-market subsidies to a large investment grade company, the cost of which will be borne by Ohio residents and businesses in favor of AEP shareholders. PUCO staff today reached an eight-year agreement with AEP on an above market power purchase agreement (PPA) that guarantees power prices significantly higher than today’s market prices. This agreement, along with the one with FirstEnergy agreed to on December 1, 2015, will result in higher power costs for the citizens and businesses of Ohio for years to come.
Similar to FirstEnergy, recent publicly-available information reveals that AEP has been awarded more than $1.2 billion in revenues over the next three planning years through the PJM Capacity Auction, with all of the generating plants covered by the PPA agreement receiving awards. This amount is more than $660 million over and above the amount expected at the time of AEP’s original subsidy request. And, as part of the Capacity Auction results, AEP’s plants are now obligated to run through May 31, 2019 even without the PPAs, meaning the risks of near-term retirements at these facilities are virtually nonexistent.
Dynegy (DYN) co-owns the Conesville, Stuart, and Zimmer Power Stations with AEP, which are included in AEP’s PPA agreement with the PUCO. Dynegy, while having an ownership share of these plants will not receive any of the above market revenues from the proposed AEP PPAs.
“Ohio has thrived through its competitive retail and wholesale markets, which AEP favored when they were adopted. This ill-advised action of the PUCO staff only hurts the citizens and competitive profile of Ohio in the long run,” said Robert C. Flexon, President and CEO, Dynegy Inc. “Dynegy will continue to fight for market-based policies that treat all forms of power generation equally through advocacy and litigation, if necessary, to prohibit these power purchase agreements from being enacted. Public policy should always put the interests of Ohioans first, not those of AEP shareholders. We continue to strongly encourage the PUCO commissioners to oppose and vote down this adverse anti-market public policy.”