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News and Analysis

Should Consumers Subsidize Utilities?

October 17, 2014

Three of Ohio’s four investor-owned utilities have rate cases pending before the Ohio Public Utilities Commission (PUCO) that would impose nonbypassable riders on all electricity consumers to subsidize the continued operation of uneconomic generation units.

The proposals are so significant to the operation of the electricity markets in PJM (which manages the markets in Ohio and 12 other states) that its Independent Market Monitor has filed a motion to intervene.  In it, the market monitor says:  “The Market Monitor takes the position that subsidies should not be permitted to interfere with the competitiveness of PJM markets and PJM’s competition‐based market design.”

A national coalition notes:  “This amounts to a hidden tax on the state’s consumers and businesses and Ohio’s economy, and represents a threat to the realization of the competitive market’s benefits.”

To learn what you can do about this issue, contact Ryan Augsburger.

FirstEnergy Seeking a “Subsidized Turnaround?”

October 10, 2014

The Institute for Energy Economics and Financial Analysis this week released a study that paints a stark picture of the financial condition of FirstEnergy.  The study, “FirstEnergy, A Major Utility Seeks a Subsidized Turnaround,” claims FirstEnergy “turning to regulatory capture and ratepayer bailouts as it struggles to reverse a deepening spiral of debt service and revenue declines.”

“FirstEnergy’s financial condition has deteriorated since it merged with Allegheny, and its key financial metrics are on a downward trajectory. Over the past three years, it has experienced declining revenues, declining net income, declining stock price, declining dividends, and rising debt… To shore up its balance sheet, FirstEnergy has relied heavily on “one-time resources,” including proceeds from asset sales and short-term borrowings. FirstEnergy’s poor financial performance stems from the underlying condition that the company’s business – the sale of electricity – is performing poorly and not generating sufficient revenue to cover expenses,” write the researchers.

The study concludes:  “FirstEnergy’s regulatory and political strategies are aimed to squeeze as much profit as possible out of the regulated subsidiaries, while using the regulated subsidiaries and other taxpayer subsidies to prop up its failed merchant generation business. But despite the above initiatives, FE’s financial situation has not turned around, and the company is still burdened by excessively high levels of debt. FE’s reliance on subsidies and bailouts – while costly to ratepayers – will not solve the underlying downward slide of the company’s financial performance.”

AEP Wants Customers Liable for Plant Losses

October 10, 2014

AEP Ohio filed with the Public Utilities Commission of Ohio a proposal to make customers liable for losses from four more generation plants last week.  Earlier in the year, AEP had proposed the same guarantee for another entity, the Ohio Valley Electric Corporation, which it owns jointly with other utilities and which operates a 60 old plant in Ohio (and one in Indiana).

The new plan would make customers liable for losses for 2,700 megawatts of generation from the Cardinal Unit 1 in Jefferson County, the Conesville Units 4, 5 and 6 in Coshocton County, the Stuart Units 1 – 4 in Brown County, and Zimmer Unit 1 in Clermont County.

Under the proposal, AEP says it could bid all energy and capacity from the units into the PJM market and pass on any costs, or savings, to customers through a non-bypassable power purchase agreement rider.

Bill to Subsidize New Steel Plant May be Taken Up

October 10, 2014

Last week, Sen. Bill Seitz, chairman of the Senate Public Utilities Committee, told an audience of energy suppliers that a legislative proposal (SB 312) could be revised and considered during the lame duck session.

The bill would enable New Steel Company to finance its proposed pig iron plant in Scioto county by allowing a statewide rider on electricity bills to subsidize the project.

New Steel Company seeks to obtain a power purchase agreement with a utility to buy electricity generated onsite by a combined heat and power facility.

House Bill 312 permits an electric distribution utility to recover the costs of economic and job retention programs, via approved “reasonable arrangements,” from all electric utility customers in the state.  This represents a change from existing economic and job development regulations, which permit an electric utility to recover costs for such reasonable arrangements only from customers located in the utility’s certified territory or within the same holding company.

Member companies that are interested in helping to develop manufacturers’ policy position on SB 312 are urged to contact OMA’s Ryan Augsburger.

Legislative Energy Study Committee Seated

October 10, 2014

Senate Bill 310, passed earlier this year provided for a two-year freeze of Ohio’s energy efficiency standards and called for a study committee that would report back at the end of 2016 about whether the freeze should be continued.

Last month, Senate President Keith Faber (R – Celina) announced appointments to the committee including Senators Troy Balderson, co-chair, Bill Seitz, Cliff Hite, Bob Peterson, Shirley Smith, and Capri Cafaro.

This week House Speaker Bill Batchelder announced House appointments would be Reps. Peter Stautberg, co-chair, Ron Amstutz, Christina Hagan, Louis Blessing, Jack Cera, and Michael Stinziano.

The panel could commence its work as soon as this fall’s lame duck session.

OMA Members File Complaint Against FES for “Polar Vortex” Charges

October 3, 2014

On September 12, eighteen OMA members, including Whirlpool Corp., Cooper Tire & Rubber Co., Campbell Soup Co., and Navistar, Inc., jointly filed a complaint against FirstEnergy Solutions (FES) stemming from surcharges billed for the “polar vortex” pass-through event from January 2014.

The complaint asserts that FES violated Ohio statutes and Public Utilities Commission of Ohio (PUCO) rules by, among other things, engaging in unfair, misleading, deceptive, or unconscionable acts or practices in the marketing and administration of customer contracts.  The complaint also asserts that FES set forth no foundation for the calculation of the regional transmission organization (RTO) expense surcharges included in customer bills.

The PUCO is also independently conducting an investigation of the FES surcharges.