Dive Brief:
- Dynegy Inc. said it will sue to halt the power purchase agreements for two of its Ohio competitors if the Public Utilities Commission of Ohio (PUCO) approves the proposals, the company's CEO said on Monday.
- Dynegy has been among the most vocal opponents against the proposals from AEP Ohio and FirstEnergy, who are seeking to guarantee income to support unprofitable coal and nuclear plants in the state, Columbus Business First reports.
- Executives from American Electric Power (AEP) and FirstEnergy Corp. argue the plants in question are essential for reliability and ensure that Ohio will have a diverse generation portfolio. The companies expect a decision on the PPA proposal in early 2016.
Dive Insight:
Whether or not to support unprofitable baseload generation is the big question for Ohio's utility regulators.
AEP and FirstEnergy's plans to guarantee income for their aging fleet would shift the risk of those plants from the utilities and their investors to ratepayers, according to opponents of the plans.
“It’s so ridiculous it’s even made it this far,” Dynegy CEO Bob Flexon told the Columbus Business Journal. “It’s absurd that two investment-grade companies are running with their hands sticking out to the consumers and citizens of Ohio to pay them money that they don’t need. It’s the most absurd argument I’ve ever heard.”
Both utilities said the aging plants are unable to compete with cheap natural gas and renewable generation in PJM's electricity market. If the proposed PPA is not approved, the companies say the grid will become too reliant on natural gas, potentially leading to reliability issues similar to those that occured during the Polar Vortex in 2014, when frigid temperatures constrained gas pipelines, spiking power prices in the market.
AEP asked the commission to approve PPAs for the remaining life of four of its coal plants, while FirstEnergy has asked for 15-year PPAs for two aging plants, one coal and one nuclear. PUCO staff rejected both proposals as not being in the interest of customers, though they also said both proposals were legal and offered feedback to improve them, including shorter timeframes for PPAs.
Critics of the proposals pointed out to Utility Dive this fall that reliability is the responsibility of PJM in the region — not the utilities — and that the grid operator does not expect any capacity shortfalls in the near future. The utilities say that despite the PJM predictions, Ohio should be concerned about allowing too much coal generation to be replaced with gas and renewables.
Dynegy, an independent power producer, entered the state's power market last year when it purchased nine power plants from Duke Energy. The company has directly urged Gov. John Kasich (R) to push back on coal plant subsidies for its rivals.
