Dive Brief:

• Ohio utility regulators unanimously approved proposals today from American Electric Power (AEP) and FirstEnergy to guarantee income for a group of seven coal plants and one nuclear plant through eight-year power purchase agreements.
• The decision means ratepayers will shoulder the burden of costs related to keeping the plants up and running until 2024, but the Public Utilities Commission of Ohio (PUCO) said they amended the proposals to stabilize rates and limit cost increases for consumers.
• The decision was met with disappointment among some of the state's clean energy advocates who said it was a bailout for the aging fleet and power producers who protested against the income-guarantee proposals. 

Dive Insight:

After a year of contention, PUCO agreed to guarantee income for eight years for FirstEnergy and AEP's nuclear and coal plants. While the companies argued the generation is necessary to ensure reliability and shield against futurecost increases, opponents objected to subsidizing plants otherwise uncompetitive in PJM power markets and took issue with the companies' cost projections.

After the staff of the regulatory body recommended rejection of an earlier pair of proposals from the Ohio generators last fall, both AEP and FirstEnergy amended their proposals to include more clean energy investments and other incentives, striking settlements with the staff, large energy users, and, in AEP's case, the Sierra Club. 

Many stakeholders, however, did not sign onto the deals, saying that supporting the plants would distort the power markets and that they should be shut down or sold. Throughout the proceeding, opponents described the proposals as "bailouts" and "subsidies," and out-of-state generators like Exelon and Dynegy said they could provide the same amount of power power for less.

Chairman Andre Porter described the situation as "complex" in a statement, saying it was difficult to find a balance during a shifting energy landscape. 

"The commission’s order strikes an appropriate balance between consumers’ interests in cost-effective electric service and diverse stakeholder interests,” he said in a press release. “Today’s opinion and order affirms Ohio’s commitment to encourage a modernized grid and retail competition."

To limit impacts on customers, PUCO said they froze the utilities' base distribution rates for the eight-year term of the "electric security plan" for FirstEnergy's distribution utilities. For AEP, PUCO said they "incorporated additional safeguards for consumers through enhanced PUCO oversight including regular audits." 

Regional grid operator PJM filed a brief with the commission in February requesting consumer protections if regulators approved the PPA proposals. 

Regulators also ordered FirstEnergy to submit a grid modernization plan. Opponents have promised to appeal the approval to PUCO and the courts if necessary.