News and Analysis
This week, the Sierra Club and AEP, with a few other parties, including PUCO staff, announced a deal in the AEP case pending before the Public Utilities Commission of Ohio (PUCO), a deal that will cost consumers billions of dollars, according to the Sierra Club’s own statements before the PUCO.
The deal would shift the risks of operating AEP’s uneconomical plants to consumers. The state’s consumers’ counsel estimates this will cost consumers $2 billion over the life of the proposal.
The deal now also says AEP will install 400 megawatts of solar and 500 megawatts of wind power by 2020. No mention of costs, which will all be born by customers.
The new deal is worse for customers than the initial costly proposal. Not only will customers be mandated to subsidize uneconomical old coal generating plants, but also customers will be saddled with large costs for the solar and wind generation, which’ll be at least partly owned by the utility.
The markets for electricity in Ohio are working to the benefit of consumers. This deal is a massive setback to the consumer-friendly efficiency of those markets. If approved by the full PUCO, it will put an unnecessary and anti-competitive layer of costs on consumers, constrain competition, and dampen technological innovation in Ohio.
Last week Public Utilities Commission of Ohio (PUCO) staff stunned interested parties when they entered into an agreement with FirstEnergy in the company’s request for customer subsidies to pay for certain uneconomic generation assets, bypassing the competitive marketplace.
This week the regulators at the PUCO set a hearing schedule to consider the settlement proposal. The settlement proposal needs to be approved by a majority of the five-member commission. The five commissioners are appointees of Governor Kasich.
The hearings will commence on January 14, 2016. The OMA Energy Group has opposed the FirstEnergy rate proposal; OMA Energy Group will participate in the hearings. The Cleveland Plain Dealer reported on the development and says FirstEnergy hopes to have the settlement approved by February 10.
As of the third quarter of 2015, Ohio’s horizontal shall wells produced 15,707,339 barrels of oil and 651,193,106 Mcf of natural gas, according to the Ohio Department of Natural Resources. The quarterly production continues to set new drilling records in the Buckeye state.
Ohio’s horizontal shale wells have produced more oil and gas in the first nine months of this year than all of Ohio’s wells produced in 2014. In 2014, Ohio’s wells produced 15,062,912 barrels of oil and 512,964,465 Mcf of gas.
All horizontal production reports can be found here.
In an abrupt about face, the staff of the Public Utilities Commission of Ohio (PUCO) filed an agreement with FirstEnergy this week that’ll put the risk of operating two old and uncompetitive generating units on the backs of customers.
The agreement would provide for a power purchase agreement between FirstEnergy Solutions (the unregulated generation affiliate of FirstEnergy) and the FirstEnergy distribution company. The agreement would be in place for eight years. That is, the distribution company would be mandated to buy power from the affiliated company, rather than have the affiliated company compete in electricity auctions.
Customers in Ohio are benefiting from an electricity market place that is working to provide lower prices and more market options. This agreement, if eventually approved by the PUCO commissioners, would add a new layer of mandated costs onto customers. It is estimated to cost $3.9 billion over the eight years.
This would be a giant step backward for Ohio’s economy, and particularly to cost-sensitive manufacturers.
NERA Economic Consulting, using its proprietary energy/economy modeling software, projects U.S. electricity costs increases of between 11% and 14% annually from 2022 to 2033 under the Clean Power Plan (CPP).
The forecast assumes states will use the “mass base” compliance mechanism. It models both intra-state and regional compliance strategies.
NERA finds that annual average expenditures increase between $29 and $39 billion/year for that time period. It concludes that, by 2031, annual CO2 emissions are 36% to 37% lower than they were in 2005.
The Public Utilities Commission of Ohio (PUCO) Chief of Staff Jason Rafeld told the OMA Energy Committee this week that settlement discussions between the PUCO staff and both AEP and FirstEnergy have resulted in a potential structure for settlements in the utilities’ Power Purchase Agreement (PPA) cases. To say the least, this is a new development of significant import to Ohio manufacturers.
The PPA cases propose that the monopoly distribution utilities would lock in long-term contracts for power from certain plants owned by their unregulated subsidiaries, not competitive sourcing, thus shifting the financial risks of operating the plants to the utilities’ customers.
Rafeld was unable to discuss specifics of the structure, as they are confidential under PUCO rules. Intervenors in the cases, such as the OMA Energy Group (which opposes the costly utility proposals), have been invited to begin meeting with the PUCO staff and the utilities immediately.
In their meeting this week, OMA Energy Committee members heard presentations from Kevin Wade of Honda on a recent CHP conversion project that is projected to reduce CO2 emissions by 20 million pounds a year, and from Iryna Lendel, Ph.D., and Andy Thomas, J.D., of Cleveland State University on a recent, large study on the development opportunities of Ohio’s shale developments.
If you or a colleague are interested in energy issues that affect manufacturing, consider joining the OMA Energy Community at My OMA. Quarterly meetings are held in person in Columbus and are accessible via phone. Members receive all meeting materials whether they register for meetings or not. Here’s the 2016 meeting calendar (click to add to yours): February 25, May 26, August 25, and November 17. Meetings are from 10:00 a.m. – 1:00 p.m. and include a yummy lunch.
This week the House Finance Committee voted unanimously to approve House Bill 176, which makes a variety of changes to Ohio law including subjecting compressed natural gas (CNG) to the motor fuel tax, exempting gross receipts of CNG from the commercial activity tax, and authorizing a nonrefundable income tax or commercial activity tax credit for the purchase of new alternative fuel vehicles.
This clears the way for a potential floor vote by the full House. A similar bill was passed by the House in the 130th General Assembly but ran out of gas in the Senate.
This webinar will help you evaluate and tackle common low-cost/no-cost energy savings opportunities in compressed air systems. Members from Anheuser-Busch, Cooper Tire, and Crown Battery will share compressed-air energy-saving changes they’ve made in their plants. There is also a compressed air system metering kit that EEPN members can borrow to use on their own systems.
Ohio Attorney General Mike DeWine joined with attorneys general and regulators from 23 other states in filing a legal challenge to the Obama administration’s “Clean Power Plan.” The states filed the suit the same day on which the plan’s final rule was published in the Federal Register.
The states say the U.S. EPA “lacks authority under Section 111(d) of the Clean Air Act to force States to fundamentally restructure their electric grids … (t)he rule is also illegal because it seeks to require States to regulate coal-fired power plants under Section 111(d) of the Clean Air Act even though the EPA already regulates those same plants under Section 112 of the Act. Double regulation is prohibited by the Clean Air Act.”
The suit is before the D.C. Circuit Court of Appeals, which considers all lawsuits under the Clean Air Act.