A Ratepayer-Friendly Regulatory Decision in Ohio Means One Down, Three to Go

Kudos to the Public Utilities Commission of Ohio (PUCO) for standing up for residential and business customers.

The commission last week denied American Electric Power’s request for long-term power purchase agreements for two aging coal-fired plants, the Kyger Creek Station and the Clifty Creek Station. The request, first filed in December 2013, was a bailout by any other name.

PUCO concluded that:

• AEP had failed to demonstrate how the bailout would be of public benefit;
• The proposal would have interfered with the commission’s goal of deregulation, a goal that is in the best interest of ratepayers;
• It would have meant higher rates for customers;
• It would have done nothing to further electricity-price stability, a claim AEP aggressively clung to through the lengthy bailout review;

FirstEnergy Corp. and Duke Energy have similar bailout requests pending before the commission, so the decision has implications for ratepayers for those big electric companies as well.

Duke Energy’s proposal involves its shares of the same two coal plants, so — taking the AEP denial into consideration —it is most likely dead in the water. This is happy news for Duke customers.

FirstEnergy wants a special regulatory deal, too, on two more aging plants: the coal-fired W.H. Sammis Power Plant and the Davis-Besse Nuclear Power Station. That proposal would force customers to pay for guaranteed power purchases from those plants for 15 years. The Ohio Consumers’ Counsel estimates FirstEnergy’s request alone would cost customers more than $3 billion.

The downside of the commission’s decision last week on AEP is that it leaves the door open for the possibility that similar bailout requests will be approved, since it said that purchase power agreements like this may be allowed in some circumstances.

AEP is no quitter when it comes to pursuing its strategy of shifting corporate risk from the company to its ratepayers. Last fall, it filed a separate request for bailouts of four other coal plants: Cardinal, Conesville, J.M. Stuart and W.H. Zimmer. Cardinal is solely owned by AEP, the other three are joint ventures between AEP, Duke Energy and Dayton Power & Light. In the expanded request, the companies also want customers to pay decommissioning and closing costs when the plants are inevitably retired. This request—like the others filed by Duke and FirstEnergy—is being reviewed by the commission.

The core question in each of these petitions is whether customers, large and small, will be required by the commission to guarantee the economic viability of the outdated plants by propping them up with expanded ratepayer subsidies. It’s a cynical tack that recognizes implicitly that these aging, inefficient coal-fired and nuclear power-generation facilities can’t compete on their own on the open market with newer forms of generation, low natural gas prices and falling prices for renewables.

The score, as we see it is, one down, three to go.

Rachael Belz is executive director of Ohio Citizen Action.