News and Analysis
AEP this week announced the sale of three of its Ohio plants, and one in Indiana. The assets went for $2.2 billion. The plants have a capacity of 5,200 megawatts.
The Ohio plants are the gas-fired Waterford Energy Center and Darby Generating Station and the coal-fired James M. Gavin Plant. The purchasers are private equity firms Blackstone Group LP and ArcLight Capital Partners LLC.
AEP indicated it is focused on its regulated business, and not merchant power. The company has several other merchant power plants in Ohio that were not included in the sale. 9/15/2016
In a welcome development, the Cleveland Plain Dealer editorialized this week: “FirstEnergy should not get something for nothing from its customers.”
The editorial notes the Ohio Consumers’ Counsel filing: “When all is said and done, [Ohio] consumers could be charged up to nearly $8.9 billion [over nearly eight years] to support the financial integrity of FirstEnergy Corp.”
The paper references a Bloomberg story that FirstEnergy “wants compensation of as much as $568 million (a year) for the added impact of salaries, vendor purchases and local employee spending in Akron.” The company says that, if customers don’t pay that subsidy, Akron could lose its corporate headquarters.
The Plain Dearler: “No one wants to see Akron lose a headquarters. But it’s not the responsibility of Ohio ratepayers to insulate FirstEnergy’s stockholders from the possibility that decisions made by FirstEnergy’s managers could invite a corporate takeover.”
Well said. 9/8/2016
AEP CEO Nick Akins tells Bloomberg TV that AEP is in the “final stages” of selling its Ohio generating units. He reports “robust interest” in the assets.
Meanwhile, he indicates the company is working with the Ohio legislature to “restructure” the Ohio electricity markets. To AEP, “restructuring” means having new AEP generation (solar, wind, natural gas) paid for by consumers via non-bypassable riders, even if the consumers buy their electricity from an AEP competitor.
Watch the Bloomberg TV interview with the AEP CEO here. 9/8/2016
Recently, Ohio manufacturers, and other electricity consumers, won an important case at the Supreme Court of Ohio, which invalidated a surcharge that the Public Utilities Commission of Ohio (PUCO) had approved for DP&L. The court’s decision invalidated the rider because it enabled DP&L to recover “transition revenue.” Transition revenue under Ohio law was to end in 2005 (“transition” refers to the system’s transition from regulated generation to a competitive market).
On August 26, the PUCO acted to essentially overturn the customer-benefiting decision of the Supreme Court. Following the PUCO’s logic, if a utility suffers an adverse ruling on appeal that benefits customers, the utility could then counteract the effects of the court’s ruling by simply requesting to terminate its current rate plan and revert back to a prior one, or any combination thereof, whichever is more favorable to the utility.
For customers, it is: Heads the utility wins, tails the customers lose. There appears to be basically no way to win a legal appeal, if this PUCO action holds.
You can read the details in this memo from Carpenter, Lipps & Leland, OMA energy counsel. 8/30/2016
PJM Interconnection’s wholesale electricity markets produced competitive results during the first six months of 2016, according to the 2016 Quarterly State of the Market Report for PJM: January through June, according to Monitoring Analytics, LLC, the Independent Market Monitor for PJM.
The market monitor found that energy market prices decreased significantly from the first six months of 2015 as a result of lower fuel prices and lower demand. The load-weighted average real-time price was 36% lower in the first six months of 2016 than in the first six months of 2015, $27.09 per MWh versus $42.30 per MWh.
PJM average real-time load in the first six months of 2016 decreased by 5.3% from the first six months of 2015, from 90,586 MW to 85,800 MW.
Energy prices in PJM in the first six months of 2016 were set, on average, by units operating at, or close to, their short run marginal costs. This is evidence, said the market monitor, of generally competitive behavior and resulted in a competitive market outcome. 8/30/2016
Howard Petricoff, the newest commissioner on the Public Utilities Commission of Ohio, visited with the OMA Energy Committee this week. He provided a look at his background and perspectives on the work of the commission.
The OMA was a big supporter of Petricoff’s appointment by Governor Kasich. 8/25/2016
Pictured: OMA Energy Committee Chair, Brad Belden, VP Administrative Services, The Belden Brick Co., PUCO Commissioner Howard Petricoff, and OMA energy counsel, Kim Bojko, Carpenter, Lipps & Leland LLP
For AEP’s Ohio Power customers, the Phase-In Recovery Rider (PIRR) was recently increased by an average of $0.003211, from $0.004072 to $0.007282 per kWh. (The PIRR for Columbus Southern Power customers of AEP Ohio’s is unchanged at $0.)
Here is a detailed memo from OMA energy consultant, Runnerstone LLC, which includes the projected incremental costs to small, medium, large and extra large power users over the lifetime of the rider increase, estimates from $8K to $8M, depending on usage.
OMA Energy Group applied for rehearing of the PUCO order, stating that “The Commission erred by violating the prohibition against retroactive ratemaking when it authorized AEP Ohio to collect carrying charges at its weighted Average Cost of Capital through the Phase-In Recovery Rider for a past period beginning in September 2012.”
The PUCO has yet to issue an entry on rehearing addressing the retroactive ratemaking concerns raised by OMA Energy Group and other parties. 8/25/2016
AEP reports to investors that its Ohio operations produce its highest rate of return on equity. For the year ending June 20, 2016, Ohio produced an ROE of 13.3%. That compares, for example, to Kentucky at 6.5%, Oklahoma at 8.6%, and Texas at 9.4%. 8/25/2016
AEP is approaching the legislature with a proposal to protect its plants from competition. It apparently is seeking to have a bill passed in the first quarter of 2017 that would place surcharges on customers to finance the plants. Customers would not be able to “shop around” the charges.
This is the latest effort by Ohio utilities to distort Ohio’s competitive electricity marketplace, and to deprive consumers of its benefits.
Read more in a story in Columbus Business First.
The OMA Energy Efficiency Peer Network (EEPN) will hold a one-hour webinar on Friday, September 16, from 10:00 – 11:00 a.m. – Measuring & Reporting Energy Savings in Manufacturing Facilities. OMA manufacturing members welcome.
Forty percent of Ohio manufacturers have established energy reduction goals. And increasingly, manufacturers’ suppliers are being asked to set energy goals and to measure and report progress. But with changing production levels, weather, and energy prices, it’s difficult to set, measure, and report on energy savings goals.
This webinar will provide a basis for measuring energy savings while factoring out changes in price, weather, and production.
Our subject matter expert is Dr. Kelly Kissock, Ph.D, P.E., Professor and Chair, Department of Mechanical and Aerospace Engineering, University of Dayton (UD).
Dr. Kissock has led the UD Industrial Assessment Center for the past 20 years, during which time the center has provided 476 no-cost energy audits to small and medium manufacturers. Dr. Kissock is credited with pioneering the measurement of energy savings in manufacturing facilities. His work is widely regarded and is used by U.S. EPA’s EnergyStar Portfolio Manager as well as the Evaluation Verification Organization, which publishes on energy savings measurement and methods.