News and Analysis
This week, the Public Utilities Commission of Ohio (PUCO) held oral argument “for the limited purpose of enabling the Commission to clarify the legal and policy implications related to the AEP’s proposed Power Purchase Agreement (PPA) rider.”
Under this proposed PPA rider, AEP customers, rather than AEP shareholders, would assume the economic risk of operating several large generating units of the company for many years. Here is an executive summary of the case and an analysis of potential costs to manufacturers.
Additional intervenors who presented arguments opposing Rider PPA included the Ohio Consumers’ Counsel, Industrial Energy Users-Ohio, The Kroger Company, Ohio Partners for Affordable Energy/Appalachian Peace and Justice Network, the Retail Energy Supply Association, Exelon/Constellation New Energy, and the Environmental Law and Policy Center/Ohio Environmental Council.
As the 130th General Assembly winds down, a legislative amendment that would saddle customers with remediation costs of long-obsolete “manufactured gas plants” (MGPs) remains at bay. Manufacturers have been dogged in their opposition to the proposal that has twice before surfaced during this General Assembly.
The issue remains on appeal at the Ohio Supreme Court which is expected to rule in 2015.
OMA opposes customer-paid remediation of MGPs. Congratulations to members who engaged against MGP.
The study committee established by SB 310, which froze the state’s energy efficiency and renewable energy standards for two years, heard testimony from Public Utilities Commission of Ohio (PUCO) Chairman Tom Johnson again this week.
Johnson answered a number of questions the committee members had asked at the committee’s previous hearing, and submitted extensive documentation.
Regarding a question of the cost-benefit analysis of the energy efficiency standard, Johnson testified: “The PUCO has reviewed each utility’s energy efficiency and peak demand reduction program and determined that, thus far, the programs of each utility are cost effective. In other words, the total energy cost savings of the customers, in the aggregate, exceeds the total costs of the program.”
Representatives of Columbia Gas, the leading proponent, engaged members of the OMA Energy Committee earlier this year. Subsequently, OMA worked to improve the bill through a series of amendments, adopted in recent weeks, that will protect manufacturers’ costs.
PJM this week announced final changes to it’s Capacity Performance proposal, which would significantly overhaul electric capacity markets. It is PJM’s second major revision of it’s proposal in as many months. PJM’s Capacity Performance initiative is rooted in generator performance issues during the 2014 polar vortex, during which 20% of PJM’s electric generators failed.
Capacity prices, established by PJM markets, can range from 4% to 40% of a manufacturer’s electric bill.
Capacity Performance will be transitioned in over a number of years, to be fully implemented for the 2020/21 delivery year.
Reversing a previous decision, PJM will continue to pay for Demand Response (DR) and Energy Efficiency (EE) resources in the near term. Inclusion of DR and EE in capacity markets lowers the price of capacity for all ratepayers, and produces revenue for participating manufacturers. Additional impacts are summarized in this memo from OMA energy consultant, RunnerStone.
The OMA Energy Group had submitted comments to PJM on its Capacity Performance proposal. A detailed report of PJM’s proposal and the cost and reliability implications for manufacturers will be provided at the OMA Energy Committee meeting on February 25, 2015. Register here.
Federal regulators continued “scoping” meetings in Ohio this week to consider the planned Rover pipeline to be developed by Energy Transfer.
OMA Energy Committee Chairman Brad Belden delivered testimony in support of the new pipeline that will traverse Ohio to transport natural and gas liquids from the Utica and Marcellus shale plays.
Supportive companies are urged to file a letter of support. Contact OMA’s Ryan Augsburger for information or assistance on how to participate in the comment process.
This week, the Public Utilities Commission of Ohio (PUCO) granted AEP’s pending motion for oral argument “for the limited purpose of enabling the Commission to clarify the legal and policy implications related to the AEP’s proposed Power Purchase Agreement (PPA) rider.” Oral argument will take place following the PUCO meeting on December 17, 2014.
The PUCO’s decision to grant AEP’s oral argument request may signal that the commission has questions, is ensuring that due process has occurred for appellate purposes, or has not yet made a determination on AEP’s request to establish a PPA rider to be paid for by customers.
Under this proposed PPA rider, AEP customers, rather than AEP shareholders, would assume the economic risk of operating several large generating units of the company for many years.
The Michigan Public Service Commission released a study that shows the state’s energy efficiency standard (branded “Energy Optimization” there) produced almost $4 in savings for every dollar spent.
The report summarized its analysis: “Energy Optimization (EO) funding can be viewed as expenditures with a significant positive net-present-value (NPV) due to substantial reductions in the future utility cost-of-service resulting from energy savings. Aggregate Michigan EO program expenditures of $253 million by all natural gas and electric utilities in 2013, are expected to result in lifecycle savings to customers of approximately $948 million on a NPV basis. This means that for every dollar spent on EO programs in 2013, customers should expect to realize utility cost-of-service benefits of $3.75.”
In a similar finding to studies in other jurisdictions (such as Indiana recently), the report indicates: “(T)he EO program benefits will potentially reduce future costs of service to all utility customers, whether or not those customers made energy efficiency improvements through a utility efficiency program.”
A recent study by Cleveland State University shows that an increase in energy costs have a direct effect in lowering manufacturing productivity.
The study finds: “An increase in the industrial electricity price by 1 cent per kilowatt-hour is likely, in 99% of cases, to decrease average manufacturing productivity in the five selected states,4 on average, by $2,527 of annual gross state product per employee. The productivity change associated with the industrial electricity price change has low elasticity: 2.2%/16.3%=0.13. The measure of elasticity below 1 is known as inelastic response. This means that for 1% increase of industrial electricity prices, manufacturing productivity drops by 0.13%.”
The OMA has submitted the study to state and federal officials to demonstrate the likely effect of electricity cost increases caused by proposed environmental regulation: less productivity, less economic output, fewer jobs.
PJM’s president and CEO, Terry Boston, says it is.
The publication Platt’s reports: “Transmission enhancements within PJM allow the grid operator to move power within its region better than a year ago, and improved coordination among generators and natural gas pipelines should ease gas supply concerns of some generators, Boston said…
With winter approaching, “we’re in much better shape than last year,” including the addition of dual-fuel capabilities at some power plants, Boston said. Adding the ability to burn fuel oil or some other fuel at a gas-fired power plant probably is less expensive for plant owners than signing firm gas supply contracts to ensure the facilities will be available during winter peak demand season, he said.”