Dive Brief:

• FirstEnergy's rate proposals in Ohio continue to make headlines, and this week the state's Supreme Court heard arguments into whether state regulators erred in allowing the company to extend its rate plan in 2012 with cost increases for higher generation costs.
• Consumer advocates argued regulators failed to fully explain the why the extension of the company's Electricity Security Plan (ESP) would benefit consumers more than requiring the company to buy power on the open market. 
• The issues in the case, the Toledo Blade reports, are similar to those animating another high-profile regulatory proceeding involving FirstEnergy. The company is currently asking the Public Utilities Commission of Ohio to sign off on a proposal that would guarantee income for its generation in the state, and has indicated it will need a decision by March 31, just ahead of deadlines to procure power for the summer.

​Dive Insight:

The Blade reports that state Supreme Court justices in Ohio heard arguments this week on whether Ohio regulators acted appropriately in allowing FirstEnergy to extend a rate plan in 2012 that phased-in higher generation costs the company said were necessary due to new federal air regulations. 

A regulatory attorney told the justices that the extension was put in place to ease price impacts on Ohio customers. The Northeast Ohio Public Energy Council, a consumer advocate, argued that regulators did not appropriately justify that the plan was more beneficial than purchasing power on the open market.  

“What we’re looking for is a ruling that this can’t happen again in the future,” argued Madeline Fleisher, counsel for the Environmental Law and Policy Center. “This issue will come up again if you don’t deal with it."

In fact, the issue of whether FirstEnergy should get protection from the open power market is in front of the PUCO now. FirstEnergy is looking to guarantee income at its Davis-Besse Nuclear Power Station in Oak Harbor and the W.H. Sammis coal-fired plant in Stratton, along with its portion of the output of Ohio Valley Electric Corporation units in Gallipolis, Ohio, and Madison, Indiana. 

Last month, FirstEnergy struck a 16-party settlement deal in the case, shortening the length of the income guarantees for its plants from 15 to eight years. But despite the deal, regulators called for more hearings on the proposal this month after some intervenors argued the settlement raised new issues in the case. 

It's a controversial plan, with many calling it a bailout of the company's less-efficient generation. And while there is debate over the proposal's long-term impacts, at least initially FirstEnergy has said it will cost more — customers can expect to pay about $3.25 more per month in the first year of the power purchase agreements. But the company expects rising natural gas prices in the future to mean that the PPAs will save customers about $560 million through the life of the deal. 

The utility has asked for a decision by the end of March, the deadline before it most procure power for the month of June. American Electric Power, which is pushing a similar proposal for its aging coal generation in the state, recently came to a settlement with the Sierra Club and other parties to shut down other coal plants and invest in renewables in exchange for income supports.

Just before the new year, Illinois-based Exelon complicated the FirstEnergy case by offering to sell 3,000 MW of carbon-free generation into Ohio markets, a move it claims can save $2 billion as an alternative to the FirstEnergy proposal. Both the FirstEnergy and AEP case are still in front of Ohio regulators.

Correction: An earlier version of this article stated that the case before the Ohio Supreme Court regarded whether state regulators erred in allowing the utility to procure capacity without going to the open market. That is incorrect. The case centered on whether regulators provided proper justification for the extension of FirstEnergy's current ESP.