IEEFA Report Sees $4 Billion Hit to Ratepayers in Ohio FirstEnergy Bailout

first_imgIEEFA Report Sees $4 Billion Hit to Ratepayers in Ohio FirstEnergy Bailout FacebookTwitterLinkedInEmailPrint分享Dan Gearino for the Columbus Dispatch:A new report says consumers would pay an extra $4 billion if regulators approve a profit guarantee for FirstEnergy, a forecast that is at odds with the company’s assertion that the plan would lead to a net savings of $560 million.The report is from the Institute for Energy Economics and Financial Analysis, a Cleveland-based research group that tends to support clean-energy policies.“Rather than drag Ohio’s economy down with an additional $4 billion in unnecessary expenses, the state should recognize that markets are changing, support the development of cleaner, modern and more efficient resources,” said Sandy Buchanan, the group’s executive director, in a statement. She added that the state also should have a plan to help workers displaced by the changes.The profit guarantee would cover some of FirstEnergy’s power plants, providing additional income at times when the market price of electricity is low.The PUCO hearing did include testimony from parties that say FirstEnergy’s forecast likely is incorrect. This includes the Office of the Ohio Consumers’ Counsel, which commissioned its own study showing that consumers would see their costs increase the same amount shown in this new report, $4 billion.The different projections are a key part of the case because FirstEnergy is seeking to show that the plan is in the public interest. According to the company, consumers will see a small increase in their electricity bills in the plant’s first few years, followed by a decrease in later years, leading to a net savings.The contrast in the forecasts results from differing views about whether the electricity market will soon recover from years of oversupply and low prices. FirstEnergy’s estimates are based on the idea that prices will recover much more quickly than the institute, and others, are expecting.Full article ($): FirstEnergy profit guarantee would cost consumers billionsDarren Sweeney for SNL:Ohio ratepayers will pay approximately $4 billion under FirstEnergy Corp.’s plan to have Ohio customers subsidize four “unprofitable” power plants, a research group said in an independent analysis.The Institute for Energy Economics and Financial Analysis, or IEEFA, released its report, “A $4 Billion Bailout in the Buckeye State: FirstEnergy’s Plan Will Cost Customers for Years to Come,” just a few weeks after the Public Utilities Commission of Ohio wrapped up hearings on proposed income guarantees from FirstEnergy’s Ohio utilities and American Electric Power Co. Inc. subsidiary AEP Ohio. AEP Ohio is the trade name of Ohio Power Co.“The goal of FirstEnergy in putting forth this ratepayer-subsidized plan is to prolong the life of outdated plants in Ohio, put customers on the hook for the escalating costs of these plants and ensure future profits for FirstEnergy shareholders,” IEEFA Executive Director Sandy Buchanan said in a Feb. 8 news release promoting the study. “The PUCO should reject it.”The report was commissioned by David Schlissel, IEEFA’s director of resource planning, and Cathy Kunkel, an IEEFA energy analyst. It details the “financial and market risks” tied to the power plants at the center of FirstEnergy’s proposal — W.H. Sammis, Davis-Besse and Ohio Valley Electric Corp. assets Kyger Creek and Clifty Creek.FirstEnergy agreed to reduce its proposed income guarantee for the power plants to eight years from 15 years, cut its ROE to 10.38% and promised at least $100 million in customer credits. The retail rate stability rider, if approved, would run from June 1, 2016, through May 31, 2024. (Case No. 14-1297-EL-SSO)FirstEnergy’s Ohio utilities will buy the power from the FirstEnergy Solutions Corp. and Ohio Valley Electric plants and then sell the output into PJM Interconnection LLC wholesale energy and capacity markets, with customers receiving rate credits or charges to offset power purchase costs. The company has said “customers are projected to save more than $560 million over the plan’s eight-year term as retail power prices increase over time.”“FirstEnergy is using greatly inflated forecasts of future natural gas prices and PJM electricity market prices to justify its proposal,” IEEFA said in its study. “FirstEnergy’s proposal — under an uninflated, reasonable natural gas price outlook — would in truth result in a net cost to ratepayers of approximately $4 billion, rather than the net $561 million gain that the company promises.”IEEFA argues that its forecast is “far more probable” based on recent economic trends and market conditions, such as a “precipitous decline in natural gas prices”; the increased competition from renewable energy resources; “substantial declines” in the power generated at the coal units in the PPA; steep declines in energy market prices; “flat or relatively flat growth in electric demand in PJM”; volatile capacity market prices; and the “potential for higher operating costs and/or declining operating performance as the PPA coal-fired units age.”Full article ($): Group calls FirstEnergy’s Ohio PPA plan ‘$4 billion bailout’ in analysislast_img read more