Three of Ohio’s four investor-owned utilities, Duke, AEP and FirstEnergy, have applied to the Public Utilities Commission of Ohio (PUCO) for a power purchase agreement (PPA) rider that would either be subsidized by or provide a credit to customers based on capacity auction results.
These are non-bypassable riders, meaning that customers pay the rider whether or not they choose to shop for electric generation service. The utilities assert that these PPA riders would provide a hedge against volatile market prices and provide maintenance of diverse generation resources including continued operation of certain coal generation plants. With the exception of one industrial trade group, the proposed PPA riders were consistently criticized by other trade groups, large commercial customers, residential customers, the PUCO staff and environmental groups. Parties advocating for the rejection of the PPA riders characterized them as too costly, illegal and anti-competitive.
Two of these cases, Duke and AEP, have been decided by the PUCO. In both orders, the PUCO approved placeholder riders (with a value of zero) but disallowed any of the proposed costs. In the AEP case, the PUCO stated that it was not convinced that the specific proposals would promote rate stability or public interest. Applications for rehearing are pending in the AEP case and due May 4 in the Duke case.
The application by the FirstEnergy electric distribution utilities is pending. The evidentiary hearing begins on June 15. Unlike AEP and Duke, the FirstEnergy proposal includes a nuclear power plant in addition to coal-fired units.
The PUCO stated that factors to be employed in the evaluation of any future proposal would include financial need and necessity of the generating facility, future reliability concerns, supply diversity, compliance with current and future environmental regulations, and the impact that a closure of the generating plant would have on electric prices and on Ohio economic development.
The timing of the FirstEnergy case provides a window for all parties to refine or adjust their arguments for or against the proposal based on the two previous PUCO decisions. Having a rider in place means that the remaining chore for the utilities is persuading the PUCO to approve a different proposal. The FirstEnergy case may provide a new wrinkle in that effort.