FirstEnergy's Ohio subsidy case delayed as regulators set more hearings

Dive Brief:

Despite a settlement that had appeared to put the final touches on FirstEnergy's plan for operating two struggling power plants, Ohio regulators have scheduled a fresh round of hearings in January to further dig into the proposed arrangement, the Cleveland Plain Dealer reports.
Opponents of the plan say the settlement, filed this month, raised issues that were not handled in the original trial, and will still result in higher customer costs and compromise the integrity of the PJM market.
FirstEnergy has said it needs income guarantees to continue operating a nuclear and coal facility in Ohio; the utility said the proposal will cost ratepayers about $3.25/month in the first year of the arrangement, but the generator says the plan will save more than $560 million over the full eight years.

Dive Insight:

FirstEnergy officials told the Cleveland Plain Dealer they are still hoping for a decision early next year, but Ohio regulators' decision to hold more hearings means the lengthy proceeding will likely go on for a while longer. The company had been hoping for a February decision in order to allow time for power auctions.

FirstEnergy's power contracts for its utilities, Illuminating Co., Ohio Edison and Toledo Edison, close out at the end fo May. There is no deadline for the Public Utilities Commission of Ohio (PUCO) to act.

In the settlement, FirstEnergy shortened the length of proposed power contracts that the company says are necessary to keep two of its aging power plants online, as well as adding bill credits to help level out any changes to customer bills. But opponents say the settlement adds two new issues: the company's goal to redice carbon dioxide emissions by 90% by 2045; and a proposal to bring back energy efficiency programs previously terminated. Both are voluntary goals with no enforcement.

Opponents of the deal had called it a "bad bargain" for customers and a "bailout" for the company.

“This backroom deal between FirstEnergy and the [PUC] Staff remains an unreasonable bailout of aging power plants that places customers at risk of losing billions of dollars,” said Shannon Fisk, Managing Attorney at Earthjustice, which represents Sierra Club in the proceeding. “Rather than transitioning Ohio to a more competitive and cleaner energy system, this deal simply adds meaningless window dressing to a legally flawed proposal."

While rates would initially rise, FirstEnergy said low gas prices will eventually turn and customers will wind up saving more than $560 million over the plan's eight year run. Opponents say the deal will cost customers almost $4 billion over the life of the arrangement.

American Electric Power (AEP), which proposed a similar arrangement for four of its coal-generating facilities, has sought income support for the entire remaining life of the plants. Proposals from the two companies have largely been on parallel tracks, and it remains uncertain how the new round of hearings will impact AEP's own proceeding.

At a power conference in Las Vegas this week, the CEO of Dynegy, one of FirstEnergy's competitors in Ohio, slammed the settlement deal as contrary to the values of PJM's competitive market, calling on the grid operator and FERC to intervene if the deal is approved by Ohio regulators.

“You either need to be regulated company or an unregulated company," CEO Bob Flexon said. "You can’t have a market that starts combining these things.”