Columbus-based American Electric Power wants a special deal similar to what FirstEnergy has negotiated with state regulators -- subsidies for its uneconomic coal-fired plants to help them meet competition from natural gas. Customers will pay for the deal with higher monthly bills.
American Electric Power would develop at least 400 megawatts of solar power by 2021 as part of a deal negotiated with the PUCO staff in exchange for approval of a plan raising monthly electric bills to subsidize the continued operation of the company's coal-fired Ohio power plants over the next several years before they are converted to natural gas or closed by 2030. AEP in 2013 tried unsuccessfully to persuade the PUCO to pass on the cost to consumers to build a 49.5 megawatt solar array similar to this one in Spain. Isofoton of Spain would have built it. COLUMBUS -- Ohio's two largest legacy utilities are fighting challenges from cheaper competitors that use natural gas by asking the state to approve subsidies, paid for by customers, to keep their older plants operating through 2029.
Akron-based FirstEnergy Corp. filed its request two weeks ago. On Monday, Columbus-based AEP followed suit.
If approved by the commissioners of the Public Utility Commission of Ohio (PUCO), the deals would represent a significant retreat from Ohio's previous push for a deregulated utility market.
In essence, the two companies argue that consumers will be better off in the long run if they subsidize legacy coal and nuclear plants to keep that power available, even though currently it is much cheaper to produce electricity from natural gas. Consumer advocates disagree.
AEP said its proposal would save consumers $721 million over the eight-year life of the agreement. Ohio Consumers' Counsel Bruce Weston predicted that the deal would cost consumers an extra $2 billion.
AEP said it would transition several of its generating units from coal to natural gas, and would develop wind and solar power totaling 900 megawatts.
Some environmental groups, however, argued that that the proposal would keep Ohio chained to older technologies and derail competitive markets that have developed over the last 16 years.
"It's a sad day for AEP's consumers when, sixteen years after the 1999 deregulation law, the government is being asked to impose charges on consumers for a bail-out of deregulated power plants," said Weston, in a prepared statement.
"Consumers should not be charged a penny more than the cost of power in the market. AEP's proposal comes at a time when Ohioans already are paying more for electricity, on average, than consumers in 32 other states."
The AEP agreement would have Ohio Power, the regulated delivery company in Ohio, buying electricity from the coal burners for the next eight years, at prices guaranteed to keep those generating units profitable. The company would convert some of its plants to burn gas and close others by 2030.
To some extent, arguments about the deals' costs and benefits depend on the future price of natural gas. If coal-generated power continues to be more expensive than power from gas, customers would pay the extra costs.
If over time gas prices rose significantly, power from coal and nuclear plants could become cheaper than power from natural gas. But it can also be argued that coal's combustion cleanup costs and the complexity of nuclear plants makes them inherently more expensive that gas-fired plants.
The AEP proposal comes just two weeks after FirstEnergy sought a similar power purchase agreement committing the Illuminating Co., Ohio Edison and Toledo Edison to buy power from the Davis-Besse nuclear power plant near Toledo and the company's last Ohio coal-burning plant on the Ohio River, W.H. Sammis.
Weston predicted that the FirstEnergy deal would cost customers nearly $4 billion extra over the next eight years. The company said the arrangement would save customers $560 million.
The two proposals differ in some ways. AEP has agreed to close two of its old coal-burning plants by 2029 and 2030 if they cannot be converted to gas. FirstEnergy made no such deal. AEP also has agreed it will try for a second time to build solar farms, particularly in Southeast Ohio.
That was enough for the Sierra Club to drop its opposition to the plan. The club walked out of talks with FirstEnergy and threatened future lawsuits.
The Ohio Environmental Council, however, called AEP's proposal "shortsighted and a raw deal for people and their health."
Some independent power companies, including Direct Energy and Interstate Gas Supply, also signed off on the AEP deal.
Most independent power producers are opposed. On Monday, they announced they had formed a new umbrella group to fight the plan. They called the group The Alliance for Energy Choice.
The alliance retained Todd Snitchler, former chairman of the PUCO, to organize a campaign to convince the PUCO's voting members to reject the two deals.
"If FirstEnergy's deal is a corporate bailout, AEP's deal is a corporate handout," Snitcher said.
Customers have already paid an extra $7 billion to FirstEnergy, he added, an amount the company demanded when it agreed in 1999 to allow the state to embrace deregulation and force the old utilities to compete with outsider power companies.
One alliance member, Dynegy, vowed again to fight the plans if they are approved, in court if necessary.
Dynegy co-owns some of the coal-fired boilers in AEP's plants. Under the agreement, Dynegy would not receive an extra subsidy for its boilers.
Two industry associations, the PJM Power Providers Group (P3) and the Electric Power Supply Association (EPSA) immediately condemned the AEP proposal as "a contagion" and "noxious corporate welfare."
In both the FirstEnergy and AEP cases, the PUCO staff analysts initially rejected the utility proposals but then endorsed amended versions of them, after hard bargaining behind closed doors.
Edited by the author to clarify the Sierra Club's position on the AEP proposal.