Dive Brief:
- Ohio utility regulators have rejected a proposal from American Electric Power (AEP) that would have guaranteed income for two aging coal plants it has stakes in, Columbus Business First reports.
- The Public Utilities Commission of Ohio (PUCO) ruled Wednesday that AEP Ohio's plan to guarantee income from the coal plants through special power purchase agreements (PPAs) is legal, but not in the interest of customers. The plants, in southeastern Ohio and Indiana, are operated by the Ohio Valley Electric Corporation, a company with large utility shareholders, including AEP.
- The decision is especially significant given that FirstEnergy and Duke have similar proposals under consideration at PUCO, as well as AEP, which has another larger, guaranteed income plan for some of its other coal plants.
Dive Insight:
AEP is one of the largest investor-owned utilities in the nation, and in Ohio its generation fleet is heavily reliant on coal. The company first proposed a plan to guarantee income from two of its plants in 2013, saying that without additional ratepayer support, the aging plants would soon become unprofitable and have to shut down, threatening electric reliability.
Those proposals were soon followed by similar plans from FirstEnergy and Duke in the state, as well as a complementary plan from AEP aiming to subsidize four larger coal plants. FirstEnergy wants PUCO to allow them to sign special, profit-guaranteeing PPAs for both nuclear and coal plants in the state.
Environmentalists and consumer advocates expressed support for PUCO's decision, calling the utilities' plans "bailouts." Observers have worried that guaranteeing income from the old coal plants would slow the transition to a low-emission generation fleet and hurt renewables and natural gas in capacity market auctions.
Not all generators were on board with AEP's proposal. Dynegy, which is looking to purchase nine power plants from Duke in Ohio, recently lobbied Gov. John Kasich (R) directly to push against the coal plant subsidies for its rivals. If the generation purchases from Duke are approved, Dynegy would be a direct competitor of AEP and other Ohio power companies.
The decision, which subsidy-backers hoped would set a precedent for other coal plant income guarantees, could push AEP closer to selling its unregulated merchant generation fleet.
Over in Illinois, Exelon is looking to the state legislature to guarantee income from its aging nuclear fleet in the state. The company says it expects a bill on the matter this week.