Exelon Intervenes in FirstEnergy Rate Case

by | Jan 15, 2016

In a filing (Docket No. 14-1297-EL-SSO) submitted to the Public Utilities Commission of Ohio (PUCO) on December 30, Exelon Generation (ExGen) – the largest operator of nuclear power plants in the United States – intervened in the ongoing, contentious FirstEnergy rate case – asserting that it could offer ratepayers a better deal.

“I will show that a guaranteed eight-year offer from Exelon Generation … for 100 percent emissions-free power that we make today will provide well over $2 billion in savings to Ohio families and businesses, as compared to the grossly lopsided deal offered by FirstEnergy Ohio,” said Exelon Director of Regulatory & Government Affairs Lael Campbell, noting that “ExGen will hold this offer open for 180 days and will bid into the competitive process at a price no greater than this offered price.”

FirstEnergy also has proposed an eight-year plan, filed on November 1 with PUCO, which it claims has been calculated to save the utilities’ customers “an estimated $560 million over the … life of the program,” as rates increase over time. That’s obviously less than the $2 billion in savings that ExGen has estimated.

What’s more, the FirstEnergy proposal had been controversial from the start, because it will shift the financial risks of operating several of its generating plants away from the company’s subsidiaries – Ohio Edison, Cleveland Electric Illuminating, and Toledo Edison – and to their 2.2 million ratepayers in the Buckeye State. Thus, customers would find themselves guaranteeing the income of the Davis-Besse Nuclear Power Station in Oak Harbor, Ohio; the coal-fired W.H. Sammis Plant in Stratton, Ohio; and a portion of the output of Ohio Valley Electric Corporation (OVEC) coal-fired units in Gallipolis, Ohio, and Madison, Indiana.

In addition, Campbell characterized concessions that were part of the FirstEnergy proposal, including a commitment to reduce emissions and to modernize the grid, as “nothing more than window dressing designed to hide from the public an out-of-market contract.”

PUCO began hearing arguments on August 31 on the rate filing, in which Akron-based FirstEnergy claimed that energy produced by its traditional plants is vital in order to maintain grid reliability and cost stability in its combined service areas statewide.

Now ExGen has informed the commission that it wants to restructure the entire proposal for the better. Specifically, Campbell said, he had asked ExGen to develop a quote for an eight-year bundled fixed price for energy and capacity, delivered to ATSI – American Transmission Systems, Incorporated, a FirstEnergy subsidiary  – from 100 percent zero-carbon resources, with ExGen maintaining all of the PJM Interconnection capacity performance risk.

“I requested a maximum fixed price,” he stated, “to which ExGen would commit for a fixed quantity product of anywhere up to 3,000 megawatts – the combined nameplate capacity of the [Davis-Besse and W.H. Sammis plants].”

Rather than substituting ExGen’s plan for FirstEnergy’s proposal, Campbell said, “We urge the Commission to hold a competitive process and obtain a PPA to include [a Retail Rate Stability Rider] that provides the best value to Ohio customers.”

This process, he stated, would “wash away the stain of this affiliate backroom deal where FirstEnergy has positioned its regulated utility to benefit its [competitive subsidiary] First Energy Solutions exclusively by coupling the proposed power purchase agreement with settlement ‘goodies’ provided by the regulated utility.”

Although the ExGen offer would include power sourced from out-of-state resources, Campbell said that factor was of no consequence. “What matters is what Ohio customers end up paying. The billions of dollars in competitive savings will occur in Ohio, where families and businesses will enjoy lower electricity costs.”

The proposal will be considered at a new round of hearings later this month. If the ExGen plan is warmly received, it may benefit some of that company’s nuclear plants, which currently are less than profitable, including the Quad-Cities Nuclear Generating Station in Illinois.

The current developments also are being monitored by Dynegy, which may submit its own plan if it sees an opportunity.

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