Regulatory ruling leaves energy companies wondering what future holds
Should electricity customers have to keep paying extra each month to subsidize noncompetitive nuclear and coal plants?
This past week the Federal Energy Regulatory Commission gave a resounding “no” to that question, dealing a huge defeat to utilities who count nuclear and coal plants among their generation assets.
That includes FirstEnergy Solutions, the subsidiary of Akron-based FirstEnergy Corp., which owns the Davis-Besse nuclear plant near Oak Harbor and the Bayshore coal-fired plant in Oregon.
“What the FERC said was, no, this doesn’t make any sense to them, and they kicked further discussion back to the RTOs,” Prof. Edward Hill, a teacher of economic development, public, and finance policy at Ohio State University, said. “It said they know best where the reliability issues are in their systems.”
The FERC decision left utility and coal company executives wondering what the future will hold. It also creates a murky future for Davis-Besse with its Bay Shore plant already scheduled to close by 2020.
“It’s really unclear at this point. FirstEnergy Solutions has indicated they have some serious competitive concerns about the operation of those facilities,” said Mark Frye, an executive with Palmer Energy, an energy consulting group in Toledo.
“I think some coal plants and nukes are going to come under significant economic pressure,” he added.
Surcharges and ‘bailouts’
Davis-Besse and FirstEnergy’s W.H. Sammis’ coal-fired plant near Stratton, Ohio has been “at risk” for some time.
In 2015, FirstEnergy went to the Public Utilities Commission of Ohio to seek a new rate plan, one that would attach extra fees to consumers’ electric bills to help the two plants compete in a competitive market with low-priced, plentiful natural gas.
“The economic viability of the plants is in doubt,” Donald Moul, FirstEnergy vice president of commodity operations, testified at the time during PUCO hearings held two years ago.
That rate plan was not approved but a modified one was submitted later.
Eventually in October, 2016 the PUCO approved the modified plan, and added further changes that guarantees FirstEnergy Corp. about $204 million annually in new surcharges through 2019 with an option to receive two additional years of payments.
The plan was affirmed last August but then challenged in October by a coalition of groups opposed to the so-called “bailout.” They also appealed the decision to the Ohio Supreme Court.
Had it been approved by the FERC, it could have cost U.S. businesses and residential customers up to $10.6 billion annually, according to the Energy Innovation and the Climate Policy Initiative.
Bruce Weston, director of the Office of the Ohio Consumers’ Counsel, cheered the FERC decision.
“Proposals for subsidizing electric utility power plants — whether at the federal or state levels — are bad for the competitive electricity markets that are benefiting Ohio consumers with lower electric bills,” he said in a statement.
In a statement, FirstEnergy criticized the FERC ruling and said the measure could end up hurting Ohio’s manufacturing-based economy.
“Baseload coal and nuclear plants have long played an invaluable role in a well-functioning electric grid, yet the markets do not adequately compensate these assets,” the company wrote. “Without timely action, more of these facilities will close prematurely, jeopardizing the ability to provide clean, reliable and affordable power to customers while harming economies across the region.”
PJM Interconnection, the grid operator that oversees Ohio and 12 other states, doesn’t see an imminent threat.