News and Analysis
A recently released study from researchers at The Ohio State University shows that consumers have been the losers under the regulatory regime of the Public Utilities Commission of Ohio (PUCO) in recent years.
“(The years of transition to market pricing have) coincided with a natural gas boom and expansions in hydraulic fracturing utilization in Ohio. The resultant low natural gas prices have reduced the profitability of utility-owned generation, predominantly coal-fired plants. These changes have driven down generation costs.
“PUCO, however, has permitted through its Electric Security Plan approval process atypical increases in riders and surcharges on household electric bills that allow utilities to recover lost profits from their corporately-separated generation businesses. In essence, households in Ohio never saw the benefits of competition, but have instead been forced to subsidize the losses of an aging coal fleet through a system of inflated riders and surcharges on their home electricity bills,” finds the study.
This research reinforces the need for the state to reform the PUCO rate-making process, as called for by the OMA and the Office of the Ohio Consumers’ Counsel.
Just months after Governor Kasich vetoed legislation that would have weakened existing clean energy standards, House Republicans have introduced a similar measure.
Together with 54 other co-sponsors, Rep. Bill Seitz (R-Cincinnati), Chairman of the House Public Utilities Committee, introduced House Bill 114. The bill revises and weakens enforcement of renewable energy standards and energy efficiency standards. With 55 co-sponsors, the bill has nearly enough co-sponsors to override a potential gubernatorial veto. The House will need to muster 60 votes to inoculate itself.
Three hearings on the bill have been held so far. This week testimony submitted by Ceres, a non-profit sustainability advocacy organization, made the case against the bill, saying: “Nestle, Whirlpool, Owens Corning and others-support clean energy standards because they help businesses cut energy costs, avoid the volatility of fossil fuel prices, and help companies stay competitive.” 3/23/2017
After months of negotiations DP&L reached a settlement with the PUCO staff and other parties in its electric security plan case (ESP III).
The Dayton utility last October had applied for a subsidy rider on customers’ bills of $145 million per year for eight years, totaling approximately $1.16 billion.
The settlement instead gives the utility a subsidy of $105 million for three years for a total of $315 million. The subsidy will be paid by a new rider on all customers’ bills in the DP&L service territory.
Carpenter Lipps & Leland (CLL), counsel for the OMA Energy Group, participated in the negotiations and secured this and other improvements.
The OMA Energy Group is a group of OMA members who have a voice in critical PUCO cases and legislation, help steer the OMA’s legal resources, and get first-hand updates and weekly members-only case summaries. Contact the OMA’s Ryan Augsburger to learn more. 3/23/2017
Public Utilities Commission of Ohio (PUCO) chairman Asim Haque has launched a new, and welcome, initiative termed “PowerForward.”
The agency announced: “PowerForward is the PUCO’s review of the latest in technological and regulatory innovation that could serve to enhance the consumer electricity experience. Through this series, we intend to chart a clear path forward for future grid modernization projects, innovative regulations and forward-thinking policies.
“Our hope is that the expertise of many stakeholders can help us better frame the grid of the future. We want to know what technologies or changes are needed, so that innovative regulations and forward-thinking policies can be developed.”
The initiative begins on April 18, 19 and 20 with a three-day “A Glimpse of the Future” series that will feature presentations examining technologies affecting a modern distribution grid; what the future grid could offer consumers; and what technologies are in development to realize such enhancements.
Ohio has been mired for years in a debate about old generating plants. This initiative gives the state an opportunity to have a conversation about developing and investing in new, innovative technologies.
The chairman has invited Ohio manufacturers to participate with their own stories and thoughts about new, or emerging, technologies. Contact OMA’s Ryan Augsburger, if you’d like to participate. 3/14/2017
The most recent State of the Market Report from Monitoring Analytics, PJM’s market monitor, says state mandated subsidies for nuclear power plants threaten the viability of competitive power markets.
The monitor states that subsidies “threaten the foundations of the PJM capacity market as well as the competitiveness of PJM markets overall.”
Subsidies “suppress incentives for investments in new, higher efficiency thermal plants but also suppress investment incentives for the next generation of energy supply technologies and energy efficiency technologies. These impacts are long lasting but difficult to quantify precisely,” writes the monitor.
Illinois and New York have created nuke subsidies. FirstEnergy is proposing a $300 million a year subsidy for its two old, uneconomic nuclear facilities. 3/14/2017
A recent whitepaper produced by OMA indicates that deregulation has dramatically lowered the generation rates offered to Ohio customers as cost-based ratemaking has been replaced by competitive market-based auctions.
Combined, shoppers and non-shoppers saved more than $16 billion from 2011 to 2015 due to Ohio’s move away from electric generation monopolies and to competitive markets.
There are additional documented benefits of deregulation including substantial investment in Ohio’s energy infrastructure. Eight new natural gas-powered plants are in various stages of construction throughout Ohio. Four more are in various planning stages.
Improvements in energy efficiency and reliability have been secured. Reserve margins of capacity are steadily in the 20 percent range, which is in excess of the 15 percent target established by PJM Interconnection, the grid manager.
Read the whitepaper, Competitive Markets for Electricity Deliver $3 Billion a Year in Savings to Ohio Electricity Consumers. 3/7/2017
According to the Office of the Ohio Consumers’ Counsel, from 2000 to 2016, Ohio’s electric utilities collected $14.67 billion in above-market charges from all customers regardless whether the customers were purchasing generation supply from a competitive supplier. Most of these charges were approved by the Public Utilities Commission of Ohio (PUCO) to help the utilities manage through the transition from regulated pricing to market-based pricing.
Utilities continue to prevail in PUCO cases, however, resulting in new non-bypassable riders on customers to generate revenue needed to ameliorate the utilities’ (or their parent companies’) cash-flow problems and/or improve their profitability. In late 2016, the PUCO issued two rulings authorizing the collection of more than $1 billion of ratepayer money to prop up the corporate earnings of FirstEnergy and allowing an “unknown” amount for subsidies for unregulated AEP Ohio generation. In addition, Dayton Power & Light has a pending PUCO case that if approved would cost its customers another $625 million dollars over five years.
As consumers’ generation charges are dropping in the market as a result of electric generation deregulation, their non-generation charges, which in some cases include dozens of nonbypassable riders, are on the rise – eating away at customers’ overall savings with no corresponding benefits. These riders function as a new tax on families and businesses and are a drag on the state’s economy.
Read more in this recent OMA whitepaper: Ohio’s Electric Utilities’ Above-Market Charges Are Anti-Competitive For Ohio’s Consumers. 3/7/2017
This week, the OMA Energy Efficiency Peer Network (EEPN) toured a combined heat & power installation at Solvay Specialty Polymers USA, LLC in Marietta.
The EEPN schedules plant tours several times a year for members to see energy innovations.
If you’d be interested in joining the EEPN, just send an email to OMA’s Denise Locke, with your contact information.
Thank you, Solvay Specialty Polymers, for your generosity! 3/9/2017
This week OMA’s energy counsel, Kim Bojko, of Carpenter Lipps & Leland, argued before the Supreme Court of Ohio on behalf of the Appellants requesting that it overturn a Public Utilities of Ohio (PUCO) order that awarded Duke $55.5 million from customers for cleanup costs associated with two former manufactured gas plants that have not been in operation for 50-89 years.
Bojko stated that the PUCO improperly applied the ratemaking statutes in Ohio that do not permit recovery of expenses associated with plants that were not used and useful in rendering service to Duke’s distribution customers during the test year.
OMA and the Office of the Ohio Consumers’ Counsel, among others, appealed the PUCO decision three years ago. The court will render a decision in the near future.
On an investor call this week, FirstEnergy indicated that the company experienced a loss of $6.2 billion in 2016 on sales of $14.6 billion. CEO Chuck Jones discussed the possibility of bankruptcy for FirstEnergy Solution(FES), the generation-owning subsidiary of the company.
The company took a large write-down of its Ohio and Pennsylvania generating assets. FES is now valued at $1.6 billion. It’s total long-term debt is $3 billion.
The CEO said FirstEnergy aims to exit the generating business by 2018. It will sell or close the plants, he indicated.
Meanwhile, the company is seeking legislation that would provide very large customer-paid subsidies for its two Ohio nuclear plants. Obviously, such subsidy mandates would make the plants more valuable to a purchaser. Just as obviously, the subsidies would punish ratepayers with no benefit. 2/23/2017