Will recent energy rulings favor customers, or utilities?

By: Thomas Suddes |

The Public Utilities Commission of Ohio handed sweet deals to FirstEnergy and American Electric Power on March 31. Or maybe, as defenders of the PUCO rulings claim, the panel handed sweet deals to customers of FirstEnergy (the Illuminating, Ohio Edison and Toledo Edison companies) and American Electric Power (Ohio Power Co). You decide.

The theory, and that’s what it is, is that Ohioans should pay more for electricity now so they may – may – pay less for electricity later. The PUCO, appointees of Republican Gov. John Kasich, reckons its decisions will, over eight years, provide FirstEnergy’s Ohio ratepayers a net credit of $256 million and AEP’s $214 million. The logic and numbers are complicated, but it’s what the PUCO projects.

Someone must not have run that math by the Ohio Manufacturers’ Association: “If implemented, (the PUCO actions) will serve essentially as new taxes on families and businesses, which will become a drag on the state’s economy,” OMA President Eric Burkland said in a statement.

FirstEnergy and AEP made some bad bets. They didn’t think natural gas prices would go so low. Their coal-fueled plants (plus FirstEnergy’s Davis-Besse nuclear plant) can’t generate power at competitive prices. But, the utilities say, natural gas prices will eventually rise, so keeping the FirstEnergy and AEP plants up and running will guarantee Ohio ratepayers cheaper-than-natural-gas-generated electricity when gas prices climb – hence, those net credits.

Why not import cheap power from other states to provide what the FirstEnergy and AEP plants now supply? The utilities’ answer: Ohio power lines can’t handle that much juice over long distances. So: Ohioans will pay more now to keep FirstEnergy’s and AEP’s (non-competitive) plants running on the if-come of rising natural gas prices – or pay even more to upgrade power lines.

Real-world result, according to Consumers’ Counsel Bruce Weston, who represents residential customers: “Several million Ohioans will pay a lot more for electricity than the market prices intended by the state legislature.” And Dow Jones Newswires’ Cassandra Sweet reported that AEP and FirstEnergy had “won regulatory approval in their home state of Ohio to shift the burden of unprofitable power plants to consumers.”

True, the Ohio Supreme Court likely will review the PUCO actions, as will federal regulators. In the meantime, the two utilities’ Ohio ratepayers might want to recall a few things:

— Three Republicans and two independents, picked by Kasich, are on the PUCO. There are no Democrats on the panel. Ohio law doesn’t require both major parties to be represented, so Republican Kasich doesn’t have to concern himself with the commission’s party balance.

— The PUCO rulings do require the two utilities to distribute more electricity generated by the sun and the wind. But the decisions are clearly victories for coal. On Jan. 7, the Boich Co. LLC, of Columbus, donated $1 million to New Day for America, a “super PAC” backing Kasich for president. That was nearly 10 percent of the $9.93 million New Day got from all donors from last July through Feb. 29. The Boich Cos., their Web site says, maintain “a coal marketing and trading operation, moving coal from coal producers to investor owned utilities.” (New Day is independent of and separate from Kasich for America, Kasich’s campaign committee, and the two committees may not coordinate.)

— According to proxy statements, FirstEnergy president and chief executive officer Charles E. Jones received total 2015 compensation of $10.02 million. AEP chair, president and chief executive officer Nicholas K. Akins received total 2015 compensation of $11.45 million.

According to Census estimates, median household income in Ohio is $48,849.

Will recent energy rulings favor customers, or utilities?