Ohio PUC Approves FirstEnergy and AEP Subsidy Plans

Setting the stage for a drawn-out fight with ratepayer groups and other generators, the Public Utilities Commission of Ohio (PUCO) on March 31 approved proposals from FirstEnergy and American Electric Power (AEP) that will provide guaranteed income to FirstEnergy's Davis-Besse nuclear plant (Figure 1) and several aging coal-fired plants belonging to it and AEP.

1. First Energy's Davis-Besse nuclear plant, which has been challenged by unfavorable market conditions, received a reprieve in the form of an agreement that will guarantee income for the next eight years. Courtesy: First Energy Corp.

The utilities say the agreements are necessary to keep the plants operating, and that their closure would imperil reliability in the state. Consumer groups charge that the deals, which will allow the utilities' distribution units to purchase power from the plants at guaranteed, above-market rates for eight years, amount to corporate welfare.

Uncertain Future for Ohio Ratepayers

The proposals have met with bitter opposition from a wide variety of quarters. Rival generators Exelon and Dynegy have said they can meet the demand at lower costs to Ohio ratepayers, while ratepayer and manufacturer groups have argued that they will drive up electric bills. FirstEnergy and AEP concede rates will go up in the near term, but insist the deals will mean cheaper electricity over the long term.

AEP says consumers will see a net savings of $214 million over the life of the deal. Opponents argue costs could increase as much as $2 billion.

In addition to Davis-Besse, the agreements will support FirstEnergy's W.H. Sammis coal plant in Stratton and AEP's Cardinal Unit 1 in Brilliant; Conesville Units 4, 5, and 6 in Conesville; Stuart Units 1-4 in Aberdeen; and Zimmer Unit 1 in Moscow; as well as AEP Ohio's 423-MW share of Ohio Valley Electric Corp. generation.

Opponents Promise Continued Fight

Despite the decision, the dispute is by no means over. Opponents of the deals vowed to continue the fight by requesting a rehearing with the PUCO and appealing to the state supreme court if necessary. In addition, PJM officials have expressed concern with the agreements, saying they may intrude on its market authority. Opponents have also requested that the Federal Energy Regulatory Commission look into the matter.

-Thomas W. Overton, JD is a POWER associate editor (@thomas_overton, @POWERmagazine).

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