Ohio's biggest businesses aren't just making their voices heard in FirstEnergy Corp.'s request to shift the risk of running its Ohio coal and nuclear power plants to ratepayers.
FirstEnergy's (NYSE:FE) proposal before the Public Utilities Commission of Ohio has gathered national media attention in recent weeks centered around a common narrative: The coal-reliant utilities of the past are struggling with a changing, unregulated power market.
AEP has sought guaranteed rates for some of its older plants, including one near Conesville, Ohio.
AEP has sought guaranteed rates for some of its older plants, including one near… more
PHOTO COURTESY AEP
FirstEnergy and Columbus-based AEP both are seeking long-term power purchase agreements with their affiliate companies that they say would make sure the plants wouldn't retire prematurely. The plants aren't competitive in Ohio's unregulated marketplace.
Like with FirstEnergy's proposal, companies that use a lot of power generally oppose the AEP plan too. The Ohio Manufacturers Association and Industrial Energy Users –Ohio, both made up of large manufacturers with big electric bills, are urging the commission against the request.
Ohio Energy Group, whose members in AEP's service territory include AK Steel Holding Corp. (NYSE:AKS), Ford Motor Co. (NYSE: F), Timken Steel Corp. (NYSE:TMST) and Worthington Industries Inc. (NYSE:WOR), does not call for an outright rejection but proposes several ways for the commission to lessen the potential burden on ratepayers.
Kroger Co. (NYSE:KR) and Wal-Mart Stores Inc. (NYSE:WMT) oppose AEP's proposal as well. Wal-Mart's expert called AEP's proposal "simply not appropriate," mirroring the company's concerns from the FirstEnergy case.
Recent Ohio power plant purchaser Dynegy Inc., (NYSE:DYN) a critic of the PPAs, filed testimony urging the commission to reject the plan. So did Dublin-based IGS Energy Inc.
Notably, other opposition is coming from the group responsible for "promoting a robust, competitive and nondiscriminatory electric power market" in the regional grid that includes AEP and FirstEnergy territories. PJM Interconnection is the 13-state grid operator for states in the Midwest and Northeast, including Ohio. Its goal is to ensure reliability – and keeping plants open and reliable is one of the main reasons utilities give for their proposals.
"AEP has not demonstrated and cannot demonstrate why customers should bear these costs and take these risks, if a well-informed generation owner is not willing to do so," testified Joseph Bowring, who has led PJM's independent market monitoring activities since 1999.
Ned Hill, the former Cleveland State University dean now at Ohio State University, testified on behalf of the Ohio Manufacturers' Association Energy Group. He sums up one of the main issues – risk displacement – of the intervenors' arguments found in pages upon pages of testimony.
"It would shift the financial risk of operating generation plants onto AEP-Ohio’s ratepayers, placing the risk of market failure squarely on AEP-Ohio’s distribution consumers," Hill said in testimony.
AEP Ohio President Pablo Vegas says the proposal will help stabilize energy costs for ratepayers, and act as a hedge against up-and-down prices.
The PUCO is expected to issue its ruling on FirstEnergy's ongoing case near the start of 2016. It might not be at this position had the PUCO not said a smaller, similar AEP request was legal by the PUCO. The commission in February said such power purchase agreements are legal– a key open question up until that point – but ruled that AEP's request was not beneficial for customers.
AEP is set to begin its own evidentiary hearing Sept. 28. Friday was the deadline for intervenors to submit their take on the case.