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PowerGen 2015: Dynegy and CAISO CEOs illustrate a generation industry in flux

Keynote addresses and chatter on the show floor at a major generation conference reveal a changing industry

e changing face of the U.S. electricity sector was on display at the first full day of Power-Gen International, a major conference for power generators taking place in Las Vegas, Nevada.

In their keynote addresses, the CEO of independent power producer Dynegy sharply critiqued a settlement proposal to support aging coal and nuclear generation in Ohio, while the head of the California Independent System Operator (CAISO) warned audience members that his state’s “experiment” in high renewables and distributed generation would soon become the new normal for the entire nation.

The contrasting keynotes illustrated an industry in flux, with some regions forging ahead to integrate ever-greater amounts of clean energy while others weigh whether to break with their coal-heavy pasts. Those challenges have not only just shaped the keynote speeches, attendees said, but the focus of the conference itself.

Ohio’s fight over aging power plants

Early this month, FirstEnergy announced it had come to a settlement in its attempts to secure income support for aging coal and nuclear plants in Ohio. While the generator had sought a 15-year power purchase agreement (PPA) that would guarantee income to the W.H. Sammis coal plant, the Davis-Besse nuclear plant and its share of two other units operated by the Ohio Valley Electric Corporation, regulatory staff scaled the proposal back to eight years.

FirstEnergy and American Electric Power, which has a similar proposal before the commission and is reportedly close to a settlement as well, argue that the aging coal and nuclear units are essential to maintain reliability and protect the state from becoming too reliant on natural gas.

Critics, including environmentalists, consumer advocates, and competitors like Dynegy, point out that grid operator PJM is responsible for reliability in Ohio and expects it to be secure in the coming years, even with the continued retirement of coal plants and buildout of natural gas infrastructure.

In November, as FirstEnergy and AEP negotiated a settlement with PUCO staff behind closed doors, Dynegy threatened to sue the Public Utilities Commission of Ohio (PUCO) if regulators approved the PPA proposals.

“It’s so ridiculous it’s even made it this far,” Dynegy CEO Bob Flexon said at the time. “It’s absurd that two investment-grade companies are running with their hands sticking out to the consumers and citizens of Ohio to pay them money that they don’t need. It’s the most absurd argument I’ve ever heard.”

Flexon’s antipathy toward the PPA proposals was evident in his keynote at the conference, which he prefaced with an apology to any AEP or FirstEnergy employees in the audience.

FirstEnergy has worked out “a backroom deal with PUCO staff where they’re going to get a PPA for eight years that will cost consumers $3.9 billion,” he said.

While the PPAs are not significant in terms of the number of megawatts they cover, Flexon said the proposals could change the behavior of generators in the PJM market, which he pegged as one of the best-functioning organized markets in the country.

The plan, he said, “tears away the competitive fabric of the market.”

Read full article at Utility Dive