Ohio lawmakers mull perpetual subsidy for OVEC coal plants

Dive Brief:

A bill introduced in the Ohio House would provide perpetual subsidies for two coal plants run by Ohio Valley Electric Corp. (OVEC), which is owned by a group of utilities from across the state, the Columbus Dispatch reports.
American Electric Power, which owns the largest share of the company, is already receiving support for its share of the plants' output thanks to a decision by state regulators, but the utility said it wants to "fortify" that decision through legislation.
House Bill 239 would guarantee income for all of the plants' owners for the remaining years of the plants' operation. AEP currently has to have its subsidies renewed periodically.

Dive Insight:

AEP customers are already paying about $2 per month to support the OVEC plants, according to the Columbus Dispatch. While other subsidy proposals in Ohio have proven contentious, Ohio Valley Electric's atypical beginnings may make it easier to find common ground.

Rep. Rick Carfagna (R), a co-sponsor of the legislation, told the Dispatch OVEC is "for lack of a better term, an anomaly."

The plants were built in the 1950s to supply energy to a now-defunct uranium enrichment site. But the two coal facilities remain in operation, owned by AEP and other investor-owned utilities like FirstEnergy, Duke Energy and Dayton Power and Light. Combined, they provide almost 2,400 MW of power.

The proposed legislation would ensure utility owners of the plants they receive income even when energy prices fall below levels necessary to recoup operating costs.

AEP Chairman, President and CEO Nick Akins hinted in April that this legislation might be in the pipe—though he had indicated it might not be introduced until the third quarter of the year. The company is continuing efforts to restructure power markets in Ohio, but the OVEC support is not meant to be broad re-regulation.

"What this is not, is the total re-regulation of the Ohio generation," Akin said of the subsidies, during his company's earnings conference call last month. "That went out the door when we sold generation and took the write-downs last year."

AEP and FirstEnergy each were pressing for ratepayers to support nuclear and coal plants that were uneconomic. While the Public Utilities Commission of Ohio previously approved subsidies, federal regulators subsequently nixed those deals, propelling the utilities to put some of the fleet up for sale.