Dive Brief:

• The Public Utilities Commission of Ohio (PUCO) should reject a Power Purchase Agreement (PPA) proposal from FirstEnergy that would guarantee income for two of its aging power plants, the staff of the regulatory agency said last week. 
• FirstEnergy wants regulators to agree to a 15-year contract to purchase power from the plants — one coal, one nuclear — which it says are essential to electric reliability and prevent the state from becoming too reliant on natural gas. Opponents say the plan would shift undue risk to residential customers, undermine the unregulated market, and is not essential for reliability. 
• PUCO staff experts found that the proposal was not acceptable in its current form, but offered a number of recommendations to improve it. 

Dive Insight:

PUCO regulatory staff operate independently from the commissioners, and their rejection of the FirstEnergy proposal, announced on Friday, does not necessarily mean the regulators would rule the same way. 

It is, however, a red flag for FirstEnergy, which now must consider whether or not to revise its proposal.

Hisham Choueiki, a regulatory expert at PUCO's rates and analysis department, submitted the staff decision, according to Columbus Business First, which included  a number of suggestions to improve the proposal. Among the suggested improvements are shortening the term of the PPA from 15 years to three, and revising the provisions so company shareholders would share risk for the plants along with consumers.

Staff also recommended that FirstEnergy provide more data to allow the state to do a more rigorous examination of the proposal, the Columbus Dispatch reported.

FirstEnergy took a positive outlook on the ruling in an email to Business First. 

"Today’s filing of staff testimony is another important step in the process," FirstEnergy spokesman Doug Colafella wrote. "We agree with staff that a properly constructed purchased power agreement can benefit customers, and we will continue our discussions with staff and other parties toward reaching a positive outcome."

Hearings on the FirstEnergy proposal began at the beginning of September and will run through the end of the month. During the first week of hearings, an Earthjustice lawyer cross examining FirstEnergy officials revealed that under the proposal that any investments to the affected plants could be absorbed by ratepayers without additional regulatory approvals.

Hearings will begin in early October on a similar PPA proposal from American Electric Power. Both large commercial and industrial customers and environmental groups oppose the plans, which they call "bailouts" for aging coal and nuclear generation.