Power groups want FERC to block power plant support plan of Dayton

The Electric Power Supply Association, PJM Power Providers Group and Retail Energy Supply Association (collectively calling themselves the “Indicated Trade Associations”) on Sept. 15 filed at the Federal Energy Regulatory Commission a limited protest to Dayton Power and Light’s Aug. 25 application for approval to turn its mostly coal-fired power plants over to AES Ohio Generation LLC.

Dayton and AES Ohio Generation (called “Ohio Genco” for short) are both units of AES Corp. (NYSE: AES). Dayton would divest the power plants under a plan approved by the Public Utilities Commission of Ohio to deregulate power generation in the Ohio market. Regulated electric utility subsidiaries in Ohio of American Electric Power (NYSE: AEP) and FirstEnergy (NYSE: FE) have already divested their power plants.

Said the trade groups: “As a general matter, the Indicated Trade Associations support the separation of DP&L’s generation assets from its transmission and distribution assets, consistent with their longstanding position that breaking up vertically-integrated utilities can be good for competition and good for consumers. The Indicated Trade Associations are concerned, however, about potential cross-subsidization that may result from the Transaction in light of a pending proposal before the Public Utilities Commission of Ohio (the ‘PUCO’) under which DP&L would provide subsidies to Ohio Genco for the continued operation of these same generation assets following the consummation of the Transaction. Such an arrangement would cause the Transaction to result in precisely the sort of ‘cross-subsidization of a non-utility associate company’ that is prohibited by Section 203(a)(4) of the FPA. The Commission should, therefore, condition its approval of [this application] appropriately to prevent that or any similar cross-subsidization.”

The groups added: “DP&L proposed its third Electric Security Plan (‘ESP III’) in a February 22, 2016 application to the PUCO. In the ESP III Application, DP&L explained that the PUCO has ordered it to divest its generation assets to an affiliate by January 1, 2017, but claimed that ‘[d]ue to adverse conditions in the energy and capacity markets, and a series of new and upcoming environmental regulations,’ those assets ‘are at risk of closure, and will remain at risk’ following the divestiture. In order to ‘allow [these] at-risk generation plants to remain operational’ after the divestiture, DP&L proposed the so-called ‘Reliable Electricity Rider’ (the ‘RER’). Under the RER, DP&L would, on an annual basis, calculate the ‘variance’ between (1) the projected revenue requirement for the divested assets, and (2) revenues those assets are projected to earn from the sale of energy, capacity and ancillary services in the markets administered by PJM Interconnection, L.L.C. That ‘variance would be transferred between DP&L and Ohio Genco’ and ‘billed to all customers on a nonbypassable basis.’ DP&L proposed that the RER be in effect for a 10-year term commencing January 1, 2017.”

Dayton and Ohio Genco have requested that FERC establish a period of not more than 21 days for comments on the application and issue an order within 45 days of the date this application is filed. The transaction is scheduled to close on or before Jan. 1, 2017.

Prior to Feb. 1, 2016, Ohio Genco operated under the legal name of DPL Energy LLC. Its existing generation assets are capacity resources within the PJM region and are bid into markets administered by PJM. The generation assets owned by DP&L to be transferred are:

  • Stuart Units 1-4, 35% ownership, 808 MW summer rating (DP&L share), Coal
  • Stuart Diesel, 35% ownership, 3 MW summer rating (DP&L share), Oil
  • Killen Unit 2, 67% ownership, 402 MW summer rating (DP&L share), Coal
  • Killen CT, 67% ownership, 12 MW summer rating (DP&L share), Oil
  • Conesville Unit 4, 16.5% ownership, 129 MW summer rating (DP&L share), Coal
  • Miami Fort Units 7-8, 36% ownership, 368 MW summer rating (DP&L share), Coal
  • Zimmer Station, 28.1% ownership, 371 MW summer rating (DP&L share), Coal
  • Hutchings Turbine Unit 7, 100% ownership, 25 MW summer rating, Gas
  • Tait CT Units 1-3, 100% ownership, 256 MW summer rating, Gas
  • Tait Diesel, 100% ownership, 10 MW summer rating, Oil
  • Monument, 100% ownership, 12 MW summer rating, Oil
  • Sidney, 100% ownership, 12 MW summer rating, Oil
  • Yankee Street CT Units 1-7, 100% ownership, 101 MW summer rating, Gas
  • Yankee Solar, 100% ownership, 1 MW, Solar

Said the Aug. 25 application, filed under a section of the Federal Power Act (FPA): “FPA Section 203(a)(4) provides that the Commission will authorize a proposed transaction if it determines that the transaction ‘will be consistent with the public interest, and will not result in cross-subsidization of a non-utility associate company or the pledge or encumbrance of utility assets for the benefit of an associate company, unless the Commission determines that the cross-subsidization, pledge, or encumbrance will be consistent with the public interest.’ In addition to its review of cross-subsidization issues, the Commission reviews three factors when it determines whether transactions are consistent with the Section 203 public interest standard: (i) the effect on competition; (ii) the effect on rates; and (iii) the effect on regulation. As demonstrated in this Application, the Transaction will not have an adverse effect on competition, rates, or regulation, and will not result in the cross-subsidization of a non-utility associate company or a pledge or encumbrance of utility assets for the benefit of an associate company. The Transaction meets the public interest standard, and the Commission should approve the Transaction.”

The Ohio Consumers’ Counsel also raised a Sept. 15 protest at FERC, saying: “This case raises concerns for captive retail electric customers, when considered in connection with a state case where consumers in the Dayton, Ohio area may ultimately be required to subsidize the unregulated generation affiliate of the Dayton Power & Light Company (‘DP&L’ or ‘the Utility’). DP&L has asked the Public Utilities Commission of Ohio (‘PUCO’) to require captive retail customers to pay approximately $600 million to subsidize its affiliate, AES Ohio Generation, L.L.C. (‘AES Ohio Generation’). These subsidies would cost the average DP&L residential customer approximately $581 (at 1,000 Kwh/month), over the 10-year term of the proposed program. These subsidies would be harmful to DP&L’s captive retail customers and would distort the wholesale generation markets that give consumers the benefit of competitive markets.”

Like the power groups, the Consumers’ Counsel wants conditions placed on any FERC approval of the power plant transfers. “FERC should condition any approval of DP&L’s Asset Transfer Application in this docket on prevention of any adverse effects of the proposed subsidies on DP&L’s captive Ohio retail consumers by requiring the Utility to submit its Ohio RER charge proposal for FERC review subject to its FPA Section 203 authority,” the counsel wrote.

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.