Independent Houston-based power company Dynegy, which owns 10 power plants in Ohio, says it can supply electricity to FirstEnergy and American Electric Power customers for less money than the rate increases FE and AEP are seeking to subsidize their aging power plans. Or, Dynegy would use that rate increase to build a fleet of new gas-fired power plants burning Ohio shale gas.
Smoke stacks rise from behind coal piles at the coal-fired Sammis power plant in Jefferson County's Stratton, Ohio. FirstEnergy Corp. has asked the Public Utilities Commission of Ohio to agree to a rate plan designed to support continued operations at Sammis while stabilizing Northeast Ohioans' electricity rates, but opponents say the plan will end up costing ratepayers, not saving them money as FirstEnergy contends. Now Dynegy, an independent power company, has offered power at half the price or for the same increase, to build new gas-fired plants in Ohio. HOUSTON, Texas -- Dynegy, an independent power company with 10 Ohio power plants, is offering to supply electricity for the next eight years to FirstEnergy and American Electric Power customers for less money than either of them are asking.
FirstEnergy and AEP each have unprecedented cases pending before state regulators for approval of special deals allowing them to charge customers extra money just to subsidize their old coal-burning, and in FirstEnergy's case, the Davis-Besse nuclear plant, to keep them operating for the next eight years.
The cases have drawn national attention because Ohio's electric industry is no longer regulated and local distributing companies such as Ohio Edison and the Illuminating Co. buy their power through very competitive wholesale auctions open to all power generating companies. The special deals would short-circuit that practice.
Opponents, including Dynegy and other independent companies, as well as the Ohio Consumers' Counsel and the Ohio Manufacturers' Association, have argued either that the special charges are unnecessary or that AEP and FirstEnergy have underestimated the true cost, and if the old plants are that inefficient they ought to be shut down.
Dynegy, which already has 130,000 Ohio customers under retail contract, is now proposing wholesale contracts to sell its Ohio-generated electricity to the Illuminating Co., Ohio Edison, Toledo Edison and AEP's Ohio Power at a total cost of about $5 billion over the next eight years.
That's about half of what American Electric Power and FirstEnergy opponents say the special deals would cost customers in extra fees.
"Dynegy's first proposal saves Ohio consumers and businesses $5 billion by providing the same amount of power promised under the FirstEnergy and AEP power purchase agreements at lower prices, $2.5 billion each in the FirstEnergy and AEP territories, over the eight-year term of the proposed [contracts]," the company said in a statement released Tuesday morning.
But if the Public Utilities Commission is determined to approve the extra charges, Dynegy is offering to use that extra money to expand its five Ohio gas-fired plants to generate enough extra power to replace FirstEnergy's David-Besse and coal-fired W.H. Sammis, as well as the portions of nine plants AEP thinks need extra subsidies to compete in wholesale markets now dominated by power companies with natural gas-fired power plants.
The gas plant expansions would create new construction jobs and use Ohio's growing natural gas reserves, Dynegy argues.
"Further, this investment would help Ohio meet its obligations under the [U.S.] Clean Power Plan and improve reliability rather than relying on assets staying around longer than their useful life," the company said.
Dynegy intends to file a formal proposal with the Public Utilities Commission of Ohio soon, said spokesman Micah Hirschfield.
"The PUCO is tasked with approving or rejected the power purchase agreements, and our proposal gives commissioners additional reasons to reject them along with providing them alternatives . . . ," he said.
FirstEnergy said Dynegy "misses the point about having a diverse set of fuels available to produce electricity in Ohio," which the company believes is important for price stability.
"Dynegy's proposal offers few specifics and provides no assurances that its power plants in the region will continue operating over the long-term. Dynegy is a power marketer from Houston with an established track record of entering and exiting competitive markets," said Douglas Colafella, FirstEnergy spokesman, in an email.
"While its brand of investors may be willing to tolerate its "boom and bust" approach to energy markets, this approach fails to deliver on two key policy goals in Ohio - energy stability and economic stability.
American Electric Power dismissed the proposal both the proposal and Dynegy's viability.
"There is no basis for Dynegy's claims of cost savings. They are suggesting that they can provide generation at a lower cost based on inflated assumptions that do not reflect current market realities. If approved as proposed, AEP Ohio's PPA and Electric Security Plan are going to immediately benefit residential customers by reducing their monthly bills," said spokeswoman Melissa McHenry in an email.
"The viability of any long-term commitment from Dynegy for generation, investment or jobs in Ohio should be questioned. They've filed for bankruptcy twice before and continue to struggle financially."
Dynegy's proposal follows a similar offer made a week ago by a competitor. Chicago-based Exelon, which operates 17 nuclear reactors, recently filed a proposal at the PUCO offering to supply the power generated by Davis-Besse and Sammis at a cost $2 billion under the FirstEnergy proposal. Exelon also guaranteed its electricity would be "emission free," meaning not generated by coal or gas.