Critics ask Ohio commission to rehear FirstEnergy’s power plant protection plan

Several parties – including Dynegy (NYSE: DYN), the Electric Power Supply Association and the Sierra Club – on April 29 asked the Public Utilities Commission of Ohio to rehear its March 31 approval of a power plant protection plan offered by subsidiaries of FirstEnergy (NYSE: FE).

The complex plan allows FirstEnergy to pass along in rates to customers in this deregulated state certain costs related to unregulated, in-danger coal and nuclear plants owned by FirstEnergy affiliates. FirstEnergy said this plan offers those customers stable rates at a time of great uncertainty in the power business.

Dynegy in its April 29 rehearing request said the March 31 approval has a number of issues, including:

  • the commission’s award of a subsidy to FirstEnergy Solutions (FES) to the prejudice of FES’ competitors, like Dynegy, was unreasonable and unlawful;
  • the commission’s failure to require competitive bidding for any power purchase agreement (PPA) to be included in a rate rider was unreasonable and unlawful;
  • the commission’s holding that this rate rider is authorized under state code was unreasonable and unlawful;
  • the commission’s failure to find that a stipulation (including the rider) violates state coder, which requires corporate separation between an electric utility and its generation affiliate, was unreasonable and unlawful;
  • the commission’s failure to substantively address concerns that the rider threatens competitive markets and impedes the development of new sources of generation in Ohio was unreasonable and unlawful; and
  • the commission ignored evidence that the Sammis (coal), Davis-Besse (nuclear), and Ohio Valley Electric coal plants are not closing in the near future, and therefore didn’t need this protection.

Said Dynegy: “Like its competitor FES, Dynegy is a merchant generator and owns a number of coal- and-gas-fired generating units in Ohio totaling 5,332 megawatts of net capacity. But unlike FES, Dynegy will enjoy neither guaranteed cost recovery nor a guaranteed return on and of equity, and instead must compete for sales and bear the risk of lost revenues it if does not competitively price its generation output. Simply stated, the Commission has placed FES at an unfair competitive advantage.”

The PJM Power Providers Group and the Electric Power Supply Association on April 29 jointly filed a similar rehearing request, stating at one point in the filing: “FES will be able to receive full cost recovery and a guaranteed return under its contract with FirstEnergy for the entire term and not be subject to the risk of not recovering all those costs when the power is sold into the PJM market. FirstEnergy will pay FES at a rate of “cost plus a return on equity” (10.38%) for the capacity, energy and ancillary services that each plant can provide. The payment and guaranteed return provisions transfer the market risks associated with these plants to FirstEnergy, which in return is going to use Rider RRS to transfer the market risks to its ratepayers. That is not rate stability for ratepayers.”

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.