PJM to Analyze AEP, FirstEnergy PPAs; Critics Join Forces
PJM said Thursday it will weigh in on the controversial power purchase agreements American Electric Power and FirstEnergy negotiated with the staff of Public Utilities Commission of Ohio.
General Counsel Vince Duane told the Markets and Reliability Committee that PJM will analyze how the PPAs — which essentially re-regulate 6,300 MW of generation — will affect the region’s wholesale electricity market.
AEP Ohio reached a settlement Dec. 14 with PUCO staff and others on an eight-year power purchase agreement. FirstEnergy announced a settlement with PUCO staff for a similar eight-year PPA on Dec. 1.
“Our job is not to make policy decisions — or to try to prevent lawmakers and regulators from making choices that advance valid state and local interests, even where such choices might complicate PJM’s functions,” Duane said, reading a statement. “It is our job, however, to express our views on regional reliability and the performance of the wholesale electricity markets in assuring that objective in the least-cost manner. This responsibility includes assessing the potential for state policies to negatively impact this objective and informing policymakers of the trade-offs that can arise from their policy objectives.
“The record in Ohio shows that PJM’s markets have, since their inception, succeeded in providing reliable, competitively priced wholesale electricity. Our markets and regional transmission expansion planning process will ensure that wholesale electricity remains reliable and competitively priced in Ohio,” Duane said.
Duane’s comments appeared to rebut the arguments AEP and FirstEnergy have presented to Ohio regulators — that the PPAs were needed to protect ratepayers from volatile natural gas prices and the reliability risks of plant retirements. Wall Street sees the PPAs as a way to prop up the finances of the companies’ aging, uneconomic generators.
Duane said the analysis will be released by spring. “Our hope is that this analysis can help to inform the public debate so that regulators and policymakers understand fully any trade-offs that may arise through the policies they may be considering.”
However, that could come after the Ohio commission rules on whether to accept the settlements negotiated by its staff.
A PUCO administrative judge has ordered hearings on the FirstEnergy settlement beginning Jan. 14. The judge ruled that the settlement raised new issues not covered during a seven-week trial this fall.
Impact on Customers
AEP’s deal provides guaranteed income for the output of the company’s 2,671-MW ownership share of nine plants, as well as its 423-MW contractual share of Ohio Valley Electric Corp.’s (OVEC) generating fleet, until May 2024.
AEP said the agreement would raise a typical residential customer’s bill by 62 cents per month. but save consumers $721 million over its 8-year life.
Opponents say AEP’s projections assume an unlikely increase in natural gas costs in the later years. The Ohio Consumers’ Counsel has predicted that the deal would cost consumers an extra $2 billion.