FirstEnergy Corp. is banking that power generated by these older plants will become more competitive as environmental regulations and other factors drive up power prices. But it expects its customers to share in the risk if that doesn’t happen.
Its proposal, negotiated with staff at the Public Utilities Commission of Ohio, contends that the plan would place “the state of Ohio, the companies, and their customers on the right path for the next eight years through a comprehensive, balanced, and forward-looking plan for the future.”
The proposal would guarantee a market primarily for electricity generated by the Davis-Besse nuclear plant on Lake Erie near Oak Harbor and the W.H. Sammis coal plant on the Ohio River near Steubenville, both of which FirstEnergy contends could otherwise be “at risk” of being closed down.
Power would also be purchased from the Ohio Valley Electric Corp. units in Gallipolis, Ohio, and Madison, Ind., in which FirstEnergy is part owner.
Davis-Besse’s operating license is set to expire in 2017, and FirstEnergy is asking the federal government to extend it another 20 years. The plant was temporarily shut down beginning in 2002 for two years after FirstEnergy discovered a corroded reactor head.
FirstEnergy contends that a residential customer using 750 kilowatt hours of electricity a month would pay $3.25 more monthly during the first full year, but it said it expects that to decrease from there. It projects savings of more than $560 million over the eight-year period.
But critics contend the deal, at 15 years as originally proposed or at eight years now, is bad for consumers and the environment. The Ohio Consumers’ Counsel and Northeast Ohio Public Energy Council offered a preliminary estimate that the plan would cost consumers $3.9 billion over the eight years.
“It’s almost unthinkable that, 16 years after the 1999 deregulation law, electric utilities continue to use regulation to charge Ohioans hundreds of millions of dollars above the market price for power,” said Ohio Consumers’ Counsel Bruce Weston. “Consumers should not be charged a penny more than the cost of power in the market.”
The company argues its plants continue to be needed to ensure reliable sources of power and price stability within Ohio. Their continued operation, it said, would also preserve an estimated 1,000 direct and 2,000 indirect jobs.
The company is offering up to $100 million total in credits on customers’ bills over the last four years of the eight-year “risk-sharing” period to help offset increased costs to consumers should the plants’ power be more expensive to produce than it sells for a competitive market. That market currently offers cheaper alternatives, including power from natural gas-burning plants.
There would be no credits if that power is sold at enough of a profit that customers benefit on their bills more than they would otherwise benefited from the credit.
“We used one of the most preeminent consultants in the business to look at what power prices will do over time,” said Bill Ridmann, FirstEnergy’s vice president of rates and regulatory affairs. “... It’s based on market forces, expecting that prices will go up as more units are retired and some of the environmental laws kick in.”
Among the 16 co-signers on the deal were PUCO staff, the city of Akron, large industrial users, some consumer and economic development groups, and grocery giant Kroger.
Among the opponents are competing electricity suppliers, the AARP, and environmental groups. Some of the environmentalists had hoped to see the aging nuclear and coal-fired plants retired.
“The proposed FirstEnergy settlement is a backroom deal that is unreasonable, unenforceable, and downright unconscionable,” said Trent Dougherty, managing director of legal affairs for the Ohio Environmental Council.
“It does nothing to protect the welfare of customers or the air we breathe,” he said. “Instead, this proposal locks in high electricity rates and props up dirty, uncompetitive power plants. The commission should reject this settlement which amounts to nothing more than corporate welfare.”
A new hearing and round of briefings from interested parties will be held on the proposed settlement. FirstEnergy is asking for a final PUCO decision by Feb. 10.
Its current rate plan will expire on May 31. The new rate plan would run through May 31, 2024.
As part of the plan, FirstEnergy promises to move toward electricity grid modernization, including installation of smart meters in homes and businesses; work toward reducing carbon emissions to 90 percent below 2005 levels by 2045; and agrees to pursue renewable and efficient energy.
Mr. Ridmann pointed to the support of heavy industrial users for the plan.
“We find it comforting that large industrial users pretty much agree with [our] assessment and have entered into this stipulation,” he said. “... This provides some protection against (price volatilty)."
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