Ohio Embraced Utility De-Regulation, But Were Electric Companies And Their Customers Ready?

May 17, 2016

Cathy Cowan Becker looks at electric bill in her Grove City home.
Credit ANDY CHOW / OHIO PUBLIC RADIO

Note: This is the first of three stories examining Ohio's environmental and energy future.  

Something as simple as flipping a switch can turn the lights on and off in your home. But many major complicated decisions take place in order to keep those lights on.

As Statehouse correspondent Andy Chow reports, these decisions have reached a critical point that could change the landscape of the energy industry in Ohio.

“Here’s our May bill. Looks like that’s a little higher; we probably used a little more AC during May. ... And I'm not sure what all these charges are."

Sitting at her dining room table in a suburb of Columbus, Cathy Cowan Becker sifts through the numbers on her monthly electric bill from AEP. Like many Ohioans, Cathy is finding herself with more questions than answers when taking a closer look at the different components of her bill.

“There’s something on here called a customer charge and I don’t know what that is. There’s something called a retail stability rider and I’m not sure what that is. There’s something called a deferred asset phase-in rider and I’m not sure what that is.”

All those charges Cowan Becker is seeing on her bill are related to proposals that utilities have brought before state regulators.

What will happen with coal?
What Cowan Becker and the 4.7 million other Ohio customers might not realize yet is that the future of their electric bills and the energy industry are approaching a monumental moment.

AEP and FirstEnergy proposed plans that would guarantee profits for certain coal plants. These are coal-powered plants that are likely colder, less clean, less efficient and don’t perform well in the wholesale capacity market. State regulators OK'd the plan, but the feds have said, "No." 

FirstEnergy’s Bill Ridmann acknowledges his Akron-based company's plan, called a "Power Purchase Agreement," would add a small increase to electric bills to keep these plants afloat. but he maintains that allowing the plants to shut down would have killed jobs and sent electric bills through the roof. He says FirstEnergy didn't want customers "exposed to the high prices that the other participants, the other suppliers are hoping for in this market by having plants retire prematurely.”

A bailout?
But opponents, including environmental groups uniting with independent energy producers, called this a coal plant bailout that gives the big utilities an edge against competitors.

There were even dueling ads playing out on TV and Radio.

From FirstEnergy: “With the proposals before the utilities commission, FirstEnergy will be able to save thousands of jobs, strengthen Ohio’s energy infrastructure and support wind energy and clean sources of power.”

And from the alliance: “That’s what FirstEnergy wants -- pay them extra. They claim they aren’t making enough money. They want a handout and they want you to hand it to them.”

The Public Utilities Commission of Ohio approved AEP and FirstEnergy’s plans but the Federal Energy Regulatory Commission -- or FERC -- blocked the move.

Ohio’s utilities compete to sell the energy they generate at power plants into the grid known as PJM Interconnection, which serves 13 states and Washington, D.C. Joe Nichols with the Buckeye Institute, a conservative think tank, says being part of this deregulated industry means taking on a certain amount of risk.

“What Ohio was trying to do is say, 'Just put that risk from the company to ratepayers' and FERC is saying, 'That’s not how things work; we’re not going to stand for that.'”

A transition plan
Dan Sawmiller with the Sierra Club’s Ohio Chapter says the feds’ ruling to essentially stop the so-called coal plant bailout leaves utilities with a lot of big decisions and could even change the culture of energy generation in Ohio.

“It’s time for Ohio to start planning for a responsible transition plan. We’re moving away from coal; it’s inevitable; the trend is irreversible.”

As far as AEP, FirstEnergy and Dayton Power and Light, the other major utility that generates power by burning coal -- the FERC decision leaves them in limbo.

Just a day after the outcome, AEP’s CEO told investors that they were left with two choices: Sell off their coal plants or turn away from 17 years of deregulation and re-regulate Ohio’s utilities industry.