FirstEnergy wants to add another $464 million to customers bills during the next 31 months in order to make sure Davis-Besse and the coal-fired Sammis plants survive competition with cheap electricity made by gas-fired power plants.
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FirstEnergy Corp. said it will cost $600 million to replace steam generators at its Davis-Besse nuclear reactor near Toledo. The cost would be considered a legacy cost in the company's proposed rate plan having customers pick up the difference between market prices driven low by natural gas-burning competitors and coal and nuclear plants. The deal would also help the company keep operating its R.W. Sammis coal-burning plant on the Ohio River. The company spent $1.8 billion on pollution controls at Sammis COLUMBUS, Ohio -- If costs soar unexpectedly in the next 15 years for FirstEnergy's last coal-fired power plant in Ohio or its Davis-Besse nuclear plant, customers rather than the company would be stuck paying the extra bills under the utility's proposed rate plan.
And the Public Utilities Commission of Ohio would have little to say about it.
Two hours of persistent cross examination by Sierra Club lawyer Shannon Fisk, of the environmental law firm Earthjustice, during this first morning of what will be at least six weeks of hearings before a PUCO judge revealed that fact.
The revelation came while cameras rolled -- over the objections of FirstEnergy lawyers -- for a National Geographic documentary about coal and climate change. The film is the second year of a series entitled "Years of Living Dangerously."
Eileen M. Mikkelsen, director of rates and regulatory affairs, testified that the PUCO could ask for information from the Illuminating Co., Ohio Edison and Toledo Edison but could not directly ask for anything from plant owner FirstEnergy Solutions, which now owns the power plants.
Nor would the PUCO be able to audit the expenses of FES, though it will be able to audit what the companies are paying FES for the power they would buy -- and immediately sell into wholesale markets.
Because of this, customers would have to make up the difference between the currently cheap market price of power and whatever it cost Davis-Besse and Sammis to generate electricity.
The PUCO could, however, look at what the companies paid to FES and then determine whether the purchase had been "reasonable," said Mikkelsen. If the agency declared an expense unreasonable, and the decision survived an appeal to the Ohio Supreme Court, what customers would pay in future years could be lower.
Joseph Oliker, regulatory lawyer for IGSEnergy took up Mikkelsen's cross examination during Monday afternoon and tried to establish that in the case of a dispute over what the distribution companies paid FES, the PUCO would have to appeal to the Federal Energy Regulatory Commission because the transaction between the local companies and FES would technically be a wholesale transaction.
Mikkelsen said she did not know.
In other words, Oliker said in a brief interview later, the PUCO would have little control over how much the Illuminating Co., Ohio Edison and Toledo Edison would pay for the power.
The two old power plants are expensive to run, not only because of their fuel, but also because of the billions of dollars FirstEnergy has had to spend upgrading them. Those costs are reflected in the cost of producing the electricity.
The three distribution companies buying the power from the plants would then pass on the costs to all of their customers through an extra charge on the delivery side of the bill.
All customers would pay that charge, even those who buy their energy from other power companies and have it delivered by the FirstEnergy local delivery companies.
The convoluted arrangement is designed to make sure FirstEnergy and its shareholders are paid no matter what wholesale market prices are between June 1, 2016 and May 31, 2031.
And customers also would be on the hook for about half of any improvements or upgrades FirstEnergy Solutions makes at the plants -- including a rate of return of just over 11 percent, Mikkelsen testified under questioning.
The 15-year "power purchase agreements" are tucked into FirstEnergy's pending three-year rate plan the PUCO must act on by the end of next May.
Sierra Club's Fisk's questioning Monday morning produced another number, an extra $464 million that customers would pay in the first 31 months of the power purchase contracts. That breaks down, according to the company, to an average residential customer paying a little more than $70 extra during the first three years.
FirstEnergy has said, and Mikkelsen reiterated Monday, that during the 15 years the power purchase agreements would save consumers more than $2 billion. That estimate is based on projections of another witness FirstEnergy will put on the stand later.
Opponents, including the Ohio Consumers' Counsel and the Northeast Ohio Public Energy Council, hired their own expert who projected customers would pay an additional $3 billion if the power purchase agreements are approved in the rate plan.
FirstEnergy Chief Executive Officer Chuck Jones has said the purchase agreements are a way to make sure the big plants can survive in the face of the cheap power now available from gas-fired power plants. But Mikkelsen, under cross examination by attorney Fisk, could not say for certain that without the power purchase agreements the company would definitely close the two power plants.