News and Analysis
Six months after the passage of House Bill 6, the Public Utilities Commission of Ohio (PUCO) this week gave approval to FirstEnergy utilities to impose a new decoupling rider on customer bills. Under the mechanism, if annual revenue in a given calendar year is less (or greater) than 2018’s baseline revenue, FirstEnergy utilities will charge (or credit) the difference to customers through the decoupling rider.
Why was 2018 used as the baseline? Because 2018 was among the warmest summers in history. Therefore, 2018 produced some of the highest revenue for the three FirstEnergy utilities. The rider will guarantee FirstEnergy companies the same amount of revenue received in 2018.
The PUCO this week acted on several other issues that will affect manufacturers’ power bills. Make sure you are participating in the OMA Energy Group for the most comprehensive updates on PUCO activity. 1/16/2020
Wholesale electricity prices at major U.S. hubs were generally lower in 2019 than in 2018, except in Texas. The U.S. Energy Information Administration reports that average prices were 15% to 30% lower at most hubs — including the PJM marketplace that serves Ohio. Much of the price decline was due to lower natural gas prices. 1/14/2020
According to the U.S. Energy Information Administration’s latest inventory of electric generators nationwide, 42 gigawatts (GW) of new capacity additions are expected to start commercial operation in 2020. Solar and wind represent almost 32 GW (76%) of these additions. Scheduled capacity retirements (11 GW) for 2020 will primarily be driven by coal (51%). 1/15/2020
Late last year, regulators at the Federal Energy Regulatory Commission (FERC) issued a long-anticipated ruling to prevent subsidized power generation from distorting the wholesale market for electricity. In the PJM marketplace that serves Ohio customers, the ruling means the owners of Ohio’s two nuclear power plants will encounter difficulty in selling their electric capacity into the wholesale market.
See FERC’s press release on the ruling, which will likely be challenged in court.
OMA energy experts are still reviewing the complex FERC action, but our initial read suggests the minimum offer price rule (MOPR) is a giant stick against state subsidies. The ruling appears to force generators to decide whether to take a state subsidy or freely participate in the wholesale market.
Ironically, Ohio’s recently enacted House Bill 6 — which requires businesses and residential customers to subsidize nuclear generation, as well as select coal and renewable generation assets — will now deprive the nukes, OVEC, and the solar projects from competitive revenue in the wholesale market. This will make the subsidized resources either unviable or will shift more costs to ratepayers — depending on how the federal rule plays out.
Regardless, it appears that major customer impacts are in store. Plan to join the OMA Energy Committee meeting on March 12, after the dust has settled, to learn what this means for your business. 1/9/2020
The OMA’s energy counsel, Kim Bojko of Carpenter Lipps & Leland LLP, was recently appointed to the Public Utilities Commission of Ohio (PUCO) Nominating Council. The PUCO’s five commissioners regulate utility services, including electric and natural gas companies.
Meanwhile, the PUCO is searching for a new commissiner to fill a five-year term that begins April 11. Gov. DeWine will soon select the new commissioner from a list of finalists offered by the nominating council. 1/6/2020
A new study by the U.S. Chamber’s Global Energy Institute shows Ohio would lose 700,000 jobs and $245 billion in GDP over just four years if a ban on fracking were imposed in the U.S. The report is part of the Institute’s “Energy Accountability Series.”
According to the study, if such a ban were imposed in 2021, the average Ohioan would see their cost of living inflated by more than $5,600 by 2025, while Ohio’s total household income would fall $119 billion. State and local governments across Ohio would experience a loss of $20.6 billion in tax revenue.
Nationwide, a fracking ban would eliminate 19 million jobs and reduce U.S. GDP by $7.1 trillion. Natural gas prices would leap by 324%, causing household energy bills to more than quadruple. By 2025, petroleum products such as gasoline and diesel would cost roughly double what they are today. 1/2/2020
OMA Connections Partner Scioto Energy reports that Ohioans can expect lower costs for electricity generation in 2020, thanks to a 13% drop in the wholesale electricity market from this time last year. This is the result of continued strong natural gas production, as well as gas storage inventories returning to healthy levels.
While generation costs are going down, distribution and transmission costs are going up. Scioto Energy’s experts say Ohio’s controversial House Bill 6, which is now law, will bring new charges to your utility delivery invoice in order to provide generous subsidies to nuclear and coal plants. These charges, however, are not expected to hit Ohio consumers until 2021. 1/2/2020
The U.S. Energy Information Association forecasts a 2.2% decrease in CO2 emissions for 2019, once all the data is collected for the past 12 months. The decrease is due almost solely to fewer emissions from coal. This is especially noteworthy considering the U.S. continues to set records for energy use. 1/2/2020