Dive Brief:
- State regulators in Ohio have delayed a decision on proposals to guarantee income at struggling power plants in the state, indicating that a settlement may have been reached with both American Electric Power and FirstEnergy.
- The Public Utilities Commission of Ohio (PUCO) was set to make a decision next month, but staff recommended delaying the decision until January as the parties appeared to be nearing agreements.
- Even if the proposals are approved, Columbus Business First reports they would likely be challenged in court by the Sierra Club and Dynegy.
Dive Insight:
It's been about two years since AEP and FirstEnergy initially proposed guaranteeing the income of their aging merchant generation, but a decision may finally be near. Even if the proposals are approved, they are still likely to face legal challenges, as Dynegy threatened to sue if the agreements are approved even if the timespan of the PPAs is shortened, while the Sierra Club would likely head to court as well.
Last month, officials at AEP indicated they expected a decison by the end of the year, likely in the form of a settlement.
FirstEnergy has asked the commissioners to approve 15-year PPAs for a coal and nuclear facility, which they say will be unprofitable without the support of ratepayers. AEP requested the commission approve a PPA for existing baseload generation, but it wants income guarantees for the remaining life of four of its coal plants.
Both utilities have said the aging plants are unable to compete in the PJM market, thanks to low natural gas prices. If the aging plants are retired, the utilities argue the grid will become too reliant on natural gas generation, which could lead to reliability issues similar to those seen in the Polar Vortex of 2014, when cold temperatures constrained natural gas pipelines, leading to a severe spike in power prices.
A settlement may include limitations on the length of the agreements. Earlier this year, PUCO staff rejected FirstEnergy's proposal, a recommendation that is not binding on regulators. In that decision, PUCO staff recommended the company shorten its PPA proposal to three years. The AEP Ohio president called three years "too short" to make investment decisions.
Earlier this year, PUCO staff rejected a similar PPA proposed by AEP, but in doing so found the agreements would be legal – setting up the current proposals being debated.
Correction: An earlier version of this post stated that Ohio regulators rejected a FirstEnergy power plant proposal earlier this year. That is incorrect. PUCO staff issued a rejection of FirstEnergy's proposal, recommending a shorter timeframe for the PPAs among other changes, but that decision is a recommendation for regulators, not a final decision.