Energy Management

Governor’s Energy Policy Continues to Advance

Senate Bill 315, the governor’s energy policy legislation, had several changes via substitute bill this week.  Notable provisions of the legislation include: expedited, automatic approval for gas pipelines less than five miles in length, customer-sited waste energy recovery projects, and small electric transmission lines. 

The legislation is expected to move out of the Senate next week.  OMA energy counsel, Bricker & Eckler LLP, has summarized the legislation, including content in the substitute bill,  here. 

OMA Comments on CoGen Amendment

Several Ohio senators have proposed an amendment to Senate Bill 315, the Governor’s energy proposal, that would restrict combined heat and power (CHP) systems from qualifying as a renewable energy resource. 
CHP refers to co-production of electricity and useful thermal energy.  This is distinct from a waste energy recovery (WER) system which generates electricity from exhaust heat or other sources.  Like wind and solar power, both sources harness energy that would otherwise be wasted.   The intent of the governor’s proposal is to provide parity to CHP and WER with wind and solar when it comes to obtaining renewable energy credits.

An analysis by OMA energy counsel, Bricker Eckler LLP, motivated the OMA to issue a letter of concern over the amendment, noting that the governor’s proposal “simply puts CHP and WER on a level playing field with wind and solar and provides more options for Ohio customers to generate clean power.” 

OMA Members File Testimony Against AEP Ohio Rate Increases

Six OMA members filed testimony in AEP Ohio’s Electric Security Plan case, which seeks to increase rates on customers.  Representatives from Summitville Tiles, Whirlpool, the Lima Refining Company, AMG-Vanadium, the Belden Brick Company, and OSCO Industries detailed what the impact of AEP Ohio’s proposal will be on their companies.  The central provision of AEP Ohio’s plan is to manipulate the price of “capacity” that electric suppliers must pay AEP Ohio.  Capacity refers to the charge that is paid to have a power plant available to produce electricity and is passed through to customers. 

Dave Johnson, Chairman and CEO of Summitville Tile, noted “After a decade of restructuring, downsizing and right-sizing our company, we had hoped to finally be able to provide modest wage increases for our employees – many of whom have gone without wage increases for nearly a decade.  However, facing the prospect of a $100,000 per year increase in electricity costs, wage increases may have to take a back seat to electricity increases.”

The market price of capacity is going to dip to a low of roughly $17 per MW/Day on June 1st.   AEP Ohio’s proposal would, at best, keep this charge at its current price of $146 per MW/Day and at worst increase it to $355 per MW/Day.  OMA's Kevin Schmidt said, "While the likelihood of the PUCO approving AEP Ohio's $355 request is slim, keeping the status quo and forcing customers to continue at $146 is a significant problem and will deny customers the current low market rates."

This proposal has significant ramifications for customers who have already elected to shop.   Those contracts for what consumers believe to be fixed price products likely allow prices to increase to cover the costs of AEP Ohio’s capacity.  Contact Kevin Schmidt to learn more about how your company might be affected. 

Industry Leaders Talk Shale

OMA members participated in the Ohio Energy Jobs Summit this week which focused on the economic impact anticipated from Ohio shale plays. 

Ward “Tim” Timken, Jr., Chairman of The Timken Company, spoke about the importance of shale opportunities both on demand for products in the supply chain and on the positive impact on energy costs.  Doug Mathews, Vice President of Tubular Operations for U.S. Steel, detailed the ripple effect shale plays will have in revitalizing Ohio manufacturing. 

Other industry leaders included Joseph Carrabba, Chairman and President of Cliffs Natural Resources, Jody Bevilaqua, Executive Vice President of Momentive Performance Materials Holdings, and Gary Heminger, President and CEO of Marathon Petroleum Corp. 

Read coverage and view video in The Hill. 

AG Joins Challenge to U.S. EPA Mercury Rule

Ohio Attorney General Mike DeWine joined in the recent multi-state challenge to the U.S. EPA’s rule covering Mercury and Air Toxics Standards (MATS).

DeWine is concerned the timeframe in which the new MATS are to be met is too short.  The timeframe will make it difficult for regulated facilities to meet the requirements and for the state EPA to effectively confirm and monitor compliance within the three to four years allowed.  And, Ohio utilities have indicated that they will have to limit, and shut down, operations of smaller units in order to fully comply, reducing electricity supply and driving up prices. 

Governor Kasich Defends CoGeneration

This week Governor John Kasich defended his proposal to put cogeneration technologies on the same "renewable" playing field as wind energy.  Senate Bill 315, the governor's energy policy legislation, would allow waste energy recovery systems and combined heat and power systems to qualify as renewable energy within the state's renewable energy standards.  The OMA suggested these changes in a white paper submitted to the governor's office last year.
 
Wind energy advocates have recently taken aim at these changes, arguing they would undermine the economics of their own projects.  Governor Kasich's response: "Our goal ought to be a cleaner environment, and whatever moves us to a cleaner environment ought to be a part of it." 

Meanwhile, the Ohio Senate Public Utilities Committee this week moved forward on the governor's proposal.  This week the committee adopted a substitute bill that made a number of modifications, mostly dealing with natural gas pipeline regulation.  Chairwoman Shannon Jones (R-Springboro) said that additional amendments may be made next week when the committee is expected to act on the legislation. 

Five OMA Members Take Stand Against AEP Capacity Charge Proposal

Stepping into the habitat of lawyers and paid expert witnesses, five OMA members, customers of AEP Ohio, this week took the stand at a hearing at the Public Utilities Commission of Ohio to oppose AEP Ohio’s proposal to increase charges, substantially, for use of its capacity. 

It is highly unusual for customers to appear at these hearings, and an indication of the matter’s significance to manufacturers.  The cost to these five companies alone will be in the tens of millions of dollars.  The consequences for all manufacturers in the AEP Ohio operating territory:  an untold amount of investment- and job-destroying new costs.

Special thanks to the five manufacturers who took the stand to stand up for manufacturing:  Ed Forshey of AMG Vanadium in Cambridge, John Burke of OSCO in Portsmouth, Rick Walters of Lima Refining in Lima, John Siefker for Whirlpool’s Findlay facility, and Brad Belden of Belden Brick in Canton.

If you have operations in the AEP Ohio operating footprint and you have not looked into the effect of this case on your operations, do so right away.  Contact Kevin Schmidt to have the OMA run the numbers for you.

OMA Testifies in Support of Governor’s Co-Gen Proposal

The OMA’s Kevin Schmidt this week testified in support of SB 315, which is an energy policy proposal contained in Governor Kasich’s “mid-biennium review” of budgets and policies.  The bill would modify Ohio’s renewable energy requirements and energy efficiency requirements to specifically include waste energy recovery projects.  The OMA proposed this policy to the governor in follow-up to his energy summit conducted earlier this year.

Schmidt said:  “Allowing cogeneration to be included as renewable energy would create an additional revenue stream for manufacturers through long-term Renewable Energy Certificate (REC) contracts with utilities.  Including cogeneration in Ohio’s energy efficiency requirements would allow utilities to provide financing for manufacturers’ waste energy recovery projects in exchange for counting the energy efficiency gains toward the utilities’ benchmarks.”

“In both cases, the result would be to mitigate by some significant measure the capital costs of implementing waste energy recovery technologies,”  Schmidt continued.  “By facilitating private-sector investment in waste energy recovery projects, these specific provisions of SB 315 would strengthen the state’s manufacturing base, reduce our reliance on imported power, shrink our collective carbon footprint by producing carbon-free electricity generation.”

FES Strikes Back at AEP in Media

AEP Ohio launched a media strike against FirstEnergy Solutions (FES) last week.  This week FES struck back.

AEP Ohio’s message:  FES seeks “unfair and artificially low prices” to buy AEP Ohio power and sell it to its customers in AEP Ohio operating territory at a “significant profit.”   

The FES message:  “AEP is lobbying to limit your choices, raise customer prices and increase its profits.”

This uncommon media skirmish is a sign of the level of stakes in the AEP Ohio rate cases pending before the Ohio Public Utilities Commission: Those stakes are very high for manufacturers and other customers, as well as for the utilities.  Contact Kevin Schmidt at the OMA for information. 

OMA Supports Smart Energy Policy

The Ohio House Agriculture and Natural Resources Committee heard testimony this week on House Resolution 305 which urges President Obama to open up areas for oil and gas exploration on the northern coast of Alaska, grant permits for oil and natural gas exploration in the Gulf of Mexico on a timely basis, and permit the Keystone XL pipeline project.
 
In a letter of support for the resolution, the OMA's Kevin Schmidt noted that Ohio is uniquely situated to benefit from these actions: "Ohio is the seventh largest refining state in the union and ships well over $6 billion dollars in product from its petroleum refineries each year.  Additionally, Ohio is the second largest producer of steel pipe, a critical component to a safe and environmentally protective oil and natural gas industry."

Governor's Energy Policy Receives Hearings

The governor's energy policy legislation (Senate Bill 315) received a hearing this week in the Senate Energy and Public Utilities Committee.  An analysis prepared by OMA energy counsel at Bricker & Eckler can be found here. 

The legislation would broaden the Public Utilities Commission of Ohio's jurisdiction over natural gas pipelines and would include on-site generation technologies in the renewable and energy efficiency mandates for utilities.
 
Implemented correctly, the renewable and energy efficiency mandates will help Ohio's grid become more stable and resilient.  The inclusion on-site generation will benefit manufacturers who have the ability to use combined heat and power systems, waste energy recovery systems (for example, waste heat or bio digesters) and a host of other technologies that produce electricity on-site. 

Beyond Boom and Bust for “Clean Tech”

Amid the debate about subsidization of clean energy technology (“clean tech”) Brookings has released a report that proposes a middle course.  “Beyond Boom and Bust: Putting Clean Tech On a Path To Subsidy Independence” recommends a phased elimination of subsidies designed to accelerate technological development and cost reductions.

“Many of today’s existing subsidies and clean energy programs, after all, are poorly optimized, characterized by a boom and bust cycle of aid and withdrawal, or in need of thorough revision thanks to either recent progress in the price and performance of subsidized technologies or the mounting fiscal burden imposed by some programs,” suggests the report.  “The end of the present policy regime therefore offers the opportunity to implement smart reforms that not only avoid a potential “clean tech crash” but also accelerate technological progress and more effectively utilize taxpayer resources.” 

AEP Takes to the Airwaves

In the ongoing debate about how much AEP Ohio can charge its customers, the company took the unusual step of airing television ads against its in-state rival, FirstEnergy Solutions (FES). 

AEP Ohio seems to have created a new organization, Fair Energy Ohio, to advocate its position with the public.  On its website, Fair Energy Ohio claims:  "First Energy Solutions and other suppliers are asking the Public Utilities Commission of Ohio (PUCO) for unfair and artificially low prices (referred to as capacity charges) so they can buy AEP Ohio's power, undercut AEP Ohio's rates, and still make a significant profit through their sales to customers."

The OMA opposes AEP Ohio's position in its capacity charge case.

Free Energy Audits for Qualified Industrial Facilities

The University of Dayton Industrial Assessment Center, with funds from the U.S. Department of Energy, has helped more than 850 small- to mid-sized industries reduce energy costs.  A small team of faculty and graduate students trained in industrial energy best practices spend a day in qualified facilities and compile customized recommendations for reducing energy costs.

Typical energy savings opportunities reduce annual energy usage, cost and associated carbon emissions by 10 to 15 percent.

Here are the qualifications and contact information for this free energy assessment.

O.U. Convenes Shale Supply Chain Conference

The Voinovich School of Ohio University hosted the "Ohio Shale Energy 2012: Discovering Supply Chain Opportunities"  conference this past Wednesday in Cambridge.  The event brought together more than 500 business people interested in becoming suppliers to the shale energy industry in Ohio.  Coverage of the event can be found here. 

Governor Kasich: Climate Change a Problem

The Columbus Dispatch reported this week that Governor Kasich went off script to discuss climate change.  The governor stated, “This isn’t popular to always say, but I believe there is a problem with climates, climate change in the atmosphere.” 

This comment was made while the governor spoke about his energy policy, which includes support for: capturing waste heat, clean-coal technology and shale drilling.  Click here to read the full article. 

2011 Ohio DNR Shale Production Reports Available

The Ohio Department of Natural (DNR) resources recently released the 2011 Utica shale production report.  On its website DNR notes that the “... reported volumes of oil are lower than estimated, but higher than conventional wells” and “Gas production is significant, even with the early production numbers.”  The agency also reports that “... it is very unlikely that the wells are being produced at anything near capacity.” 

Dayton Power & Light Files its Rate Plan

Dayton Power and Light (DP&L) filed its new rate plan last Friday at the Public Utilities Commission of Ohio.  The plan would move them along the same path toward market pricing as Duke Energy Ohio and AEP-Ohio have gone in recent months. 

Over a five year timeframe, the plan would transition DP&L’s standard service offer rate, the rate customers pay if they do not shop, from a cost-based rate to a market-based rate.  A detailed memo of the plan can be found here.

In addition to market transition, DP&L is asking for at least one rider that doesn’t appear to be authorized by Ohio law.  Finally, even though DP&L would transition its pricing structure to a market-based one, it is not proposing to sell its generating assets.  The OMA is a party to this case through the OMA Energy Group. 

Click here to learn more about how you might engage to protect your energy interests. 

The electricity markets in Ohio have changed dramatically.  Read a brief whitepaper about the changes and their consequences. 

AEP Files New Rate Plan

Last Friday, AEP filed a new rate plan (an “Electric Security Plan” or ESP, in the language of the statute) that would affect its customers from the time of its approval (maybe late summer of this year) to June 1, 2015.  Its previously approved rate plan was rejected by the Public Utilities Commission (PUCO) after a public outcry against its price increases.

Counsel to the OMA Energy Group, Lisa McAlister of Bricker & Eckler LLP, summarizes the AEP filing:  “Under the plan, there are limited base generation rate increases but there is the addition of a nonbypassable “Rate Stability Rider” and new distribution rate increases that combine to increase rates on average 4.5% in the first year, and then, with the addition of the Phase In Recovery Rider in the second year, the rates increase an incremental 3.77% on average, and finally, increase an additional 0.25% in year three.”

Counsel continues:  “The shopping is very limited and would require the same queuing process as the ESP settlement. AEP-Ohio also proposes to…hold an energy only auction for 5% of its load immediately upon approval of the Revised ESP …, an energy only auction for 100% of its load in January 2015, and a competitive bidding process (auction) for capacity and energy for June 1, 2015.”

In a separate case before the PUCO, AEP is asking for a $355/MW-day capacity rate for all shopping customers.  In its ESP case, AEP proposes a capacity rate of $146 for customers that have already shopped, and $255 for all others, if the PUCO approves the ESP without modification.

AEP-Ohio states that if AEP-Ohio got the $355/MW-D rate, it would not request any base generation rate increase for its standard service customers and would provide a “meaningful” shopping credit.  The effect of this would, effectively, freeze customers’ ability to shop load to competitive suppliers for the duration of the ESP. 

OMA Members Testify Against AEP Capacity Charge Proposal

On behalf of the OMA, five OMA member companies presented testimony to the Public Utilities Commission of Ohio (PUCO) in opposition to the pending AEP proposal to increase its “capacity charge.”  Testifying were:  Lima Refining Company, OSCO, Belden Brick, AMG Vanadium, and Whirlpool.  These companies are a range of manufacturing operations by size, industry and electricity load.  Some of the companies have “shopped” generation load; others have not.

AEP has asked the PUCO for authority to charge all competitive suppliers of electricity to its distribution customers a price of $355/MW-day.  AEP claims that this price is its cost of capacity, and that any price less than that would be unfair and financially destructive to the company.  The current market price of capacity is $146 (market capacity prices are set by auction).  The market price will drop to $16 on June 1.  

Rick Walters of the Lima Refining Company testified:  “As a long-standing customer of AEP-Ohio, Lima (Refining Company) needs reliable service. We also understand that AEP-Ohio needs to be fairly compensated for the service it provides. However, when AEP-Ohio’s proposal is viewed in the larger context, we feel like AEP-Ohio charged market rates for capacity when the market rates were above AEP-Ohio’s costs but, now, when the market prices are at historic lows, AEP-Ohio is using “costs” to justify rate increases. Worse yet, AEP-Ohio will revert to market prices in 2015, when, as I understand it, market prices are predicted to increase again. In other words, we think AEP-Ohio's proposal lacks balance and fairness. This is particularly true when the proposal undermines our ability to manage the risk of rate impacts by shopping with a competitive supplier.”

A hearing on the matter is scheduled for April 17.  It is expected that the PUCO will act prior to May 31. 

Blast Furnace Co-Generation Bill Makes its Way to Governor

The Ohio House of Representatives passed Senate Bill 289 this week which would allow one blast furnace co-generation project in the state to qualify for renewable energy credits.  The Air Products project in Middletown will produce 110 megawatts of power using the off-gas from a blast furnace. 

The bill came under fire from wind advocates who argued that the inclusion of industrial cogeneration facilities in the renewable energy market will kill the value of Ohio renewable energy credits.

Governor’s Energy Proposal Receives its First Hearing – CoGen and Shale

Governor Kasich’s energy policy proposal, Senate Bill 315 (Jones, R-Springboro), received its first hearing this week before the Senate Public Utilities Committee.  Chairman Todd Snitchler of the Public Utilities Commission of Ohio (PUCO) and Director Jim Zehringer of the Ohio Department of Natural Resources (DNR) provided testimony.

Chairman Snitchler used the time to discuss how the proposed changes would allow on-site generation technologies, such as combined heat and power and waste energy recovery systems, to qualify for either the renewable energy standard or the energy efficiency standard, but not both.  The chairman stated that the PUCO believes that the inclusion of more technology options for utilities to meet the standards would lower compliance costs.

Director Zehringer spoke about additional regulations that were being proposed, including the first cradle-to-grave reporting system of” fracking” fluid in the nation.  The director also produced a number of visual aids on Ohio’s regulations, including well construction, Ohio drilling regulations, and one on industrial and regulatory responsibilities. 

Snapshot of Midwest Manufacturing Energy Use

The World Resource Institute (WRI) has released a study, “Midwest Manufacturing Snapshot: Energy Use and Efficiency Policies,” that for the first time estimates manufacturing subsector-specific energy use in 10 Midwest states.

Writes WRI:  “The workforce and economies of Midwestern states are more reliant on manufacturing than in any other U.S. region. Like the U.S. as a whole, during the past decade, the Midwest lost one-third of its total manufacturing workforce. With the central focus of state governments on economic development, there is a growing interest in understanding how industrial energy efficiency investments could contribute to regional economic recovery and long-term competitiveness for U.S. manufacturers.”

Detailed manufacturing energy-use and economic activity data are presented alongside state-by-state policy summaries, giving a snapshot of where energy is being used and current state approaches for reducing energy-related costs and emissions.

Read more about the Ohio data.  In the most recent year of the data, Ohio manufacturing consumed 20% of total energy used by Midwest manufacturers, more than any other Midwestern state. 

AEP to Hold Forum Today on New Rate Case

AEP-Ohio plans to hold a forum at the Public Utilities Commission of Ohio (PUCO) today to discuss its modified rate plan.  AEP-Ohio’s previously approved rate plan was revoked by the PUCO recently after customers complained to the PUCO of large and unexpected rate increases.

The OMA will be attending the event and intervening in the rate case.  Contact Kevin Schmidt at the OMA to share concerns and get more information. 

AEP Confirms it Will Shutter Plants

In response to U.S. EPA regulations, AEP confirmed with regional power grid operators that it will be shutting down power plants that generate more than 4,600 megawatts.  AEP was required to notify the grid operator of these plant shut downs so the upcoming capacity auction would reflect the reduced supply from the plants. 

The auction will set capacity prices for 2015.  Capacity is a component of generation price and reflects the cost to have power plants available to generate electricity to meet market needs.

Senate Passes Even Narrower Blast Furnace CoGen Bill

The Ohio Senate passed Senate Bill 289 this week to allow one blast furnace cogeneration project to qualify as a renewable energy resource under Ohio’s renewable energy portfolio standard.  This would allow this project owner to sell renewable energy credits (RECs) to enhance the project economics.

The legislation sparked a debate with wind energy advocates who noted that these projects could oversupply the marketplace for RECs.  In response to these concerns the legislation was narrowed so that only one blast furnace in Ohio could qualify. 

A brief summary of the legislation prepared by OMA energy counsel at Bricker and Eckler can be found here. 

FirstEnergy to Keep 800 MW of Generation Operational

FirstEnergy recently announced that it will put on line 800 megawatts (MW) of natural gas fired generation in Eastlake, Ohio to help ensure reliable electric service in its Ohio service region.  Earlier this year, FirstEnergy had announced that its generation holding company would retire six older coal-fired power plants, including the Eastlake plant.

The plant shut down  plans are in response to U.S. EPA’s continued crack down on affordable coal-fired electricity.  The plant shut downs are sparking growing fear of future supply shortages.  

Energy Policy Included Mid-Biennium Review

The MBR will address a package of proposed energy reforms.  Legislative hearings on these measures will commence next week.  The administration hopes for passage before the summer recess.

Specifics have yet to be introduced in bill-form, however Governor Kasich released a summary document outlining 10 energy  “pillars" that include: shale; electricity generation; electricity transmission and distribution; cogeneration/waste heat recovery; workforce training; compressed natural gas (CNG)/ alternative fuels; energy efficiency; coal; regulatory reform; and renewables.

Pillar 4 proposed to qualify cogeneration technologies as “renewable energy source” and allows electric utilities to use cogeneration to meet “alternative efficiency standards.”  Pillar 6 calls for Ohio to join a multi-state agreement to develop a regional CNG refueling infrastructure.  Pillar 8 proposes spending $30 million for coal research on carbon capture. 

PUCO Acts on AEP Rate Case

By order issued Wednesday, the Public Utilities Commission of Ohio (PUCO) required certain AEP customers to pay higher than market rates for AEP "capacity" through May 31st.   The effect of this order is to protect AEP from its retail competitors for three and one-half months.
AEP had asked the commission to set a capacity rate of $255 per megawatt day.  This is more than double the current market rate of $116, set by annual regional auctions (the rate is set to go to $16 on June 1).  "Capacity" rates are charges for use of a utility's infrastructure.
Exempted from this order are the first 21% of load of each customer class that shops (the industrial class block is apparently full), and customers in governmental aggregation groups approved on or before November 8, 2011.

The commission ordered hearings to begin no later than April 17 to determine a long-term compensation mechanism for capacity.

Also, the commission said it "expects that AEP-Ohio will look to recent commission precedent for guidance in formulating its modified ESP in considering how to best ensure its customers have market-based standard service offer pricing in an efficient and expeditious manner."  This seems to tell AEP to look to the recently approved Duke case for direction.

OMA energy counsel Bricker & Eckler LLC, prepared a summary of the actions which can be found here.

Please contact Kevin Schmidt to find out how you might participate in this process moving forward. 

Pipeline Developer at Odds with Ohio

A developer of an ethane pipeline is trying to avoid state jurisdiction and push thousands of barrels of ethane a day to Texas.  Rather than feed Ohio industry, Houston-based Enterprise Products’ planned pipeline would start in Pennsylvania and run through Ohio to transport the resource to Texas where it says the demand is the greatest.

Ethane comes out of the ground along with natural gas and is a valuable product in plastics manufacturing.  If ethane is considered a gas, Ohio has jurisdiction over the development of the pipeline; if it is considered a liquid, Ohio does not.  Since ethane is only a liquid under pressure the state is asserting jurisdiction.  

Governor Previews Energy Legislation

In the first of a series of meetings, this one in Cleveland, Governor Kasich previewed elements of energy legislation to be introduced in the General Assembly in March with a June target for passing the package.

The governor outlined ten “pillars” of the proposed energy policy:  shale, generation, electricity transmission and distribution, workforce training, compressed natural gas (CNG) &alternative fuels, cogeneration/waste heat recovery, energy efficiency, coal, regulatory reform, and renewables.  

Battle Looms Over AEP-Ohio's Rates

In the wake of the Public Utility Commission of Ohio (PUCO) decision last week to revoke the previously approved AEP-Ohio (AEP) rate plan, AEP has filed motions both at the PUCO (motion) and at the Federal Energy Regulatory Commission (FERC) (motion) seeking permission to charge "cost based" rates for its capacity rather than "market" rates.  Capacity refers to the cost that a utility incurs to have power plants available to serve its customers.  It makes up an important portion of the generation rate.
 
In its filings, AEP claims that if its requested relief is not granted the result will be "confiscatory," as it will be required to supply its capacity to third-party competitor suppliers below cost.  In a Columbus Dispatch article this week, AEP indicated that without cost-based capacity rates,  it will be forced to consider all options - including laying off employees, stopping investments in Ohio, and potentially moving its headquarters.
 
In response to AEP's motion, FirstEnergy Solutions, a third party supplier, filed a challenge to AEP's request noting that until January 1, 2012, AEP has historically charged customers market rates for capacity.  FES argued: there is no mechanism in law for AEP to "cherry pick" portions of the rejected rate plan and that its request should be denied. 

The PUCO agenda does not have the issue docketed for next week. 

New Ohio Shale Study: 65,000 New Jobs by 2014

A new study of the potential economic effects of the Ohio oil and gas shale beds finds:  "By 2014 the incremental economic activity in the state of Ohio from that year’s expected expenditure of $6.4 billion in oil and gas field development is expected to result in 65,680 jobs and $3.3 billion in labor income, or an average income of $50,225 per job."

The study modeled economic impacts through 2014.  The estimated results:  "The models indicate that outputs are expected to amount to nearly ten billion dollars per year by 2014, with another $500 million in tax revenue generated.  It is expected that these numbers are likely to continue in this range in the years following 2014, although leasing and midstream infrastructure activity will significantly slow down."

The researchers, a team from Cleveland State University, The Ohio State University and Marietta College, believe the estimates are conservative and will change as more data from the Utica formation becomes available.  03/01/2012

PUCO Hits Reset Button on AEP Rate Case

In the face of an outcry from a segment of AEP-Ohio ratepayers, the Public Utilities Commission of Ohio (PUCO) yesterday rejected AEP-Ohio’s “Electric Security Plan” settlement.

AEP-Ohio had sought authority to spin off its generating assets into a separate, new affiliate, leaving the existing entity as a “wires-only” company that provides distribution and transmission services.  Throughout the case, AEP-Ohio represented that it would bid all of its generating assets into a regional auction (PJM’s RPM base residual auction). 

However, the filings made by AEP-Ohio at the Federal Energy Regulatory Commission in the last few weeks reveal that AEP-Ohio actually intended to transfer some assets to other affiliate companies and might not bid into the regional market auction. 
The PUCO said that because of AEP-Ohio’s contradictory statements, the PUCO could not be sure that the settlement was in the public interest.  Thus, the PUCO revoked the authority for AEP-Ohio to transfer its generating assets.

The PUCO also found that two provisions intended to provide a gradual transition to market-based rates for larger customers who have higher load factors (use electricity more consistently) actually disproportionately impacted smaller, lower load factor customers.  The PUCO noted that AEP-Ohio represented during the hearing that smaller customers’ actual rate increases would not exceed 30%.  However, “the actual impacts suffered by a significant number of GS-2 customers (lower load factor customers) appear to have vastly exceeded AEP-Ohio’s representations at hearing.”

For these reasons, the PUCO rejected the settlement and ordered AEP-Ohio to file new tariffs by February 28, 2012, that reset the rates back to those in effect in 2011 with several exceptions: the new, higher fuel adjustment rider will apply; the environmental investment carrying cost rider will apply at 2011 levels; and, the prior capacity price for shopping customers will apply (the market or PJM RPM price). 

The result of this change is that AEP-Ohio customers may shop load to competitive providers freely, accessing current favorable market prices.

The OMA welcomed the decision:  “Starting over from the beginning is a prudent course of action given the magnitude of what’s at stake and the critical need in Ohio for competitive electricity rate structures. “ 

Mysterious Clean Energy Ballot Issue Takes Step Forward

Attorney General Mike DeWine said the group "Yes for Ohio's Energy Future" got the required minimum number of signatures and wrote a “fair and truthful” summary of the proposed constitutional amendment.  This means the group can begin collecting the signatures needed to have the language placed on the November ballot.  The ballot issue would allow Ohio to issue $1.3 billion in bonds to fund clean energy infrastructure.
 
The group pushing the ballot issue remains mysterious and questions are emerging about its language.  Among the quirks in the language include a newly created Ohio Energy Initiative Commission that would be incorporated in the state of Delaware and specific language prohibiting the Ohio General Assembly from passing laws directing the funds. 

Study Highlighting Ohio's Energy Efficient Lighting Industry Released

The Natural Resources Defense Council (NRDC) released a study entitled "Better Bulbs, Better Jobs" this week that identified Ohio as worldwide leader in the development and production of energy efficient lighting.  The study profiled seven Ohio businesses that research and manufacture energy efficient light bulbs and noted Ohio has gained 1500 jobs in the industry. 

$1.3 Billion for Clean Energy Bonds Proposed

A group called “Yes for Ohio’s Energy Future” is pursuing an amendment to the Ohio Constitution which would allow the state to issue $1.3 billion dollars in debt to fund “clean energy” projects.  The group will need to collect 385,253 valid signatures to get the issue on the ballot. 

The Columbus Dispatch reports that the petition asks Ohioans to approve issuing bonds beginning next year and running through 2023 for the purpose of funding infrastructure, research and development of “clean-energy initiatives.” 

Chesapeake Energy Addresses OMA Energy Committee

The OMA Energy Committee this week heard from Matt Hammond of Chesapeake Energy and Rick Simmers of Ohio Department of Natural Resources about the development of Ohio’s shale resources.  Hammond provided a detailed presentation on the industry, how fracking works, and the opportunities in Ohio. 

Full committee materials can be found here. Join the OMA Energy Management community to receive meeting notices and materials. 

U.S. EPA Publishes Final Utility MACT Rule

The National Association of Manufacturers (NAM) reports that U.S. EPA published the final Utility MACT rule this week.  The NAM also reported that Senator Inhofe introduced a resolution that would repeal the regulation. 

The rule has been cited by numerous utilities as the reason for shutting down coal-fired power plants.  The rule will result in increased electricity prices by decreasing the supply of electricity, as well as requiring billions of dollars in environmental control technologies at the surviving plants. 

An American Coalition for Clean Coal Electricity study on the economic effects of this rule can be found here.

PUCO To Modify AEP Rate Case, Again

The Public Utilities Commission of Ohio (PUCO) issued a press release today stating it is working on a plan that will address the large price increases certain small businesses are experiencing under the current AEP rate plan. 
Chairman Todd Snitchler stated, “My fellow commissioners and I are deeply troubled by what we have heard from business owners, elected officials, and the governor on this issue...  Now that we have a full understanding of the impacts, we are actively developing a plan to resolve the rate impacts faced by affected General Service 2 customers.” 

The OMA supports this latest PUCO action on the AEP rate case. 

Senate Considers Blast Furnace CoGen Bill

The Senate held sponsor testimony on Senate Bill 289 this week which would add blast furnace co-generation to the definition of renewable energy.  Making blast furnace co-generation a renewable resource gives project developers additional financing tools through the sale of renewable energy credits. 

The OMA supports a broader inclusion of co-generation technologies in the renewable energy definition in order to benefit a range of industrial applications. 

Shale Gas Community Costs – Lessons from North Dakota

Everyday there is growing excitement about the economic potential of shale gas plays from the Marcellus and Utica gas reserves buried deep under eastern Ohio.  As energy companies gain approvals to extract, refine, and transport the gases, policymakers need to consider costs of an oil and gas boom on a community. 

North Dakota has benefitted from significant oil production in recent years; its local leadership has catalogued lessons learned.  The mayor of  Watford City, located near the epicenter of the activity, details 10 Things We Wish We Knew.  In a presentation to the North Dakota State Senate, the mayor says cost challenges to city services, infrastructure and education are close to a breaking point.  A study by Minot State University and Dickinson State University catalogs skyrocketing housing costs, housing shortages, overwhelmed emergency response demands, and impacts to the community lifestyle in general!

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Renewable Energy Repeal Receives a Hearing

Senator Kris Jordan's (R-Delaware) legislation to repeal the state's advanced and renewable energy mandate received a hearing this week in the Senate Public Utilities Committee.  Senate Bill 216 is a complete repeal of the law requiring utilities to invest incrementally in renewable and advanced energy.  The senator argued the repeal is necessary because the mandate will raise rates; renewable energy advocates contend that the mandate supports innovation and expansion of a promising renewable energy industry.
 
As a consumer protection, the mandate in current law contains a 3 percent cost cap, meaning a utility does not need to comply if compliance would increase costs to customers by more than 3 percent. 

FirstEnergy Announces EPA Compliance Strategy - Shutter Plants

FirstEnergy announced that its subsidiaries in multiple states will shut down power plants to respond to U.S. EPA's relentless assault on affordable coal.  In its press release FirstEnergy said that the plant shut downs will eliminate approximately 10% of its total electricity supply.
 
American Electric Power and Duke Energy Ohio both announced plant closures planned for next year in response to the U.S. EPA's war on coal. 

In response to the FirstEnergy announcement Senator Rob Portman issued a press release saying, "There is no reason Ohioans should have to choose between holding onto a good paying job and protecting the environment."  Legislation authored by Portman would require U.S. EPA to measure the economic costs of regulations before promulgating rules.  The Regulatory Accountability Act of 2011 passed the U.S. House in bipartisan fashion last year. 

PUCO Expands Shopping in AEP Territory

The Public Utilities Commission of Ohio (PUCO) issued an order this week that is intended to expand the opportunity for manufacturers and others in the AEP-Ohio territory to shop for competitive retail electric rates.
In the order the PUCO said that aggregation programs passed by government jurisdictions in  the November 2011 election and earlier are not subject to any shopping limitations.  This action has the effect of expanding the 21% cap that AEP had placed on its shoppable load for 2012.

The PUCO order enables mercantile customers (those using 700,000 kWh of electricity or more a year) to opt in to aggregation programs passed by jurisdictions in which they are sited.  Prior to the order, many such consumers were closed out of the 21% shopping block, and stood in a queue to shop in 2013 and beyond.  Since market rates are below the standard utility offer, this order can provide much needed energy savings, particularly to the job producing manufacturers.
 
The OMA, through its subsidiary the OMA Energy Group, is analyzing the effect of this order and will be in a position to provide specific advice to members in the coming weeks. It is unclear how AEP will respond legally to the order.   If your facility is situated in AEP territory, and your city, county, municipality, township, or village has in place or passed an aggregation program referendum this past November, contact the OMA's Kevin Schmidt to learn if you might have an option to receive a competitive offer for electric service. 

Shale Gas: Ohio Competes for Chemical Cracker

Ohio, West Virginia and Pennsylvania are engaged in a contest to lure a $2 billion ethane cracker plant planned by Shell Chemical.  This week West Virginia enacted legislation to slash taxes on machinery, equipment and real estate for 25 years for large-scale investments.  The following day, the West Virginia governor flew to Houston to court Shell with the new tax incentives.  Ohio Governor Kasich had already travelled to Houston to tout Ohio’s competitive tax structure. 

“Manufacturers are well aware that Ohio permanently eliminated tax on all forms of personal property in 2005.  West Virginia's new tax incentive plays catch-up with Ohio,” commented the OMA’s Ryan Augsburger. 

The project has been estimated to mean 2,400 direct jobs and more than 12,000 indirect jobs.  Join the OMA Energy Management Community to follow Ohio's shale gas developments. 

Fracking Fluid Disposal Moratorium Proposed

Representative Bob Hagan (D-Youngstown) introduced legislation (House Bill 418) this week which would impose a moratorium on the disposal of fracking fluid in deep injection wells.  This proposal is in reaction to the theory that earthquakes can be triggered by injection well activity.  There is already proposed legislation to place a moratorium on Ohio “fracking.”

A recent study by Quinnipiac University reported that Ohioans are split on the issue.  While Ohioans overwhelmingly support the development of shale resources, when questioned about fracking specifically a majority of those polled said they needed more information.  The full poll can be found here; the fracking questions start at question 39. 

Governor Pushes Additional Taxes on Oil and Gas

Governor Kasich announced his intention to push for new taxes and fees on the oil and gas industry.  Specifically, the Governor is advocating for “impact fees” to help cover the costs of maintaining local infrastructure and expanding the state’s severance tax, a tax on entities that consume the state's natural resources, to encompass natural-gas liquids.

The Governor stated, “At some point, these counties are going to benefit, but in the early years, when it comes to the erosion of roads and infrastructure, we need to make sure that these locals are going to be in a position to manage their infrastructure.”

It is likely that these modifications will be included in the mid-year budget review  bill expected sometime in March.  

OMA Energy Group Pushing for Improvements to AEP Rate Case

The OMA Energy Group is asking the Public Utilities Commission of Ohio (PUCO) to make improvements to its recent decision on AEP-Ohio’s rate plan for 2012-2015.  Specifically, the Energy Group is asking the PUCO to allow manufacturers to have greater access to cheap market prices.

The Energy Group’s application for rehearing argues that manufacturers, the largest economic contributor to Ohio’s economy, should be able to access the residential shopping block if that block is not fully subscribed by residential customers.  In some instances GS-2 customers, smaller users that may use power unevenly, are experiencing large price increases.  Providing these customers with shopping opportunities will help keep small manufacturers in AEP-Ohio’s service territory competitive.