Ohio power giants push back on energy overhaul bill

By Nick Evans
Ohio Capital Journal

Ohio lawmakers are mulling broad changes to the state’s energy system to encourage new power generation facilities. The Ohio House and Senate versions of the bills eliminate long-criticized coal plant subsidies and so-called “electric security plans” which allow utilities to charge customers for system upgrades and basic upkeep like trimming trees near power lines.

But energy giants like Duke Energy, AES Ohio, and AEP Ohio are pushing back, defending the aging coal plants and insisting electric security plans are crucial to their balance sheets.

AES Ohio, which used to be Dayton Power and Light, argued that if electric security plans are out, state regulators need to improve the primary rate making process. Sharon Schroder, a senior director with AES, explained rates come in two flavors. The base rate looks backward at past investments and electric security plans look forward “enabling utilities to make timely, regular investments in their distribution systems.”

Schroder suggested that when utilities file a rate case, they should be able to account for several years of forecasted investments with annual audits to ensure the company has followed through.

“It provides assurance that every year we’ll be opening up our books and truing-up to the actual, so it requires a proof review every year,” she explained.

But with the bill placing a 275-day cap on rate cases, state Sen. Shane Wilkin, R-Hillsboro, asked “What is the difference between that and a rate case every year?”

Schroder argued annual cases would be less transparent because companies would be previewing one year of plans instead of multiple years.

Duke Energy’s Amy Spiller made a similar argument for multi-year rate plans and insisted dropping electric security plans would make investing in improvements cumbersome.

“Simply eliminating ESPs without implementing a new way forward would intensify an already investment-stifling situation,” she argued. “Base rate cases are expensive. They take years to plan, to negotiate, to either settle or litigate, and they can be appealed.”

AEP Ohio President and COO Marc Reitter insisted ESPs are “an essential tool” and that they’re actually more responsive than the traditional rate setting system.

“Riders require the utility to justify every dollar spent in prudence audits every year as a condition of recovery from consumers,” he said. “This is in contrast to a base case, where the utility justifies only a ‘test year’ and the PUCO has little prudence oversight between cases.”

State Sen. Kent Smith, D-Euclid, referenced a 2022 Ohio Capital Journal story about FirstEnergy’s Distribution Modernization Rider. The company collected nearly half a billion dollars with that surcharge, but an audit conducted for state regulators couldn’t show how the company spent that money.

Although FirstEnergy didn’t show up in person, the company submitted testimony criticizing the elimination of ESPs.

Wilkin repeatedly pressed speakers to explain the difference between annual rate cases and a multi-year proposal with annual audits. No one offered a clear answer. Speaking after the hearing, committee chair Sen. Brian Chavez, R-Marietta, acknowledged the appeal of planning a few years down the road, but seemed puzzled at the companies’ request.

“We don’t understand the differences of how the bill stands versus what they’re proposing, he said, “So we’ll keep talking to them.”

OVEC
The utilities also objected to provisions repealing subsidies for a pair of Ohio Valley Electric Corporation (OVEC) coal plants. The OVEC plants are more than 70-years-old and one of the plants is in Indiana. Several Ohio power companies are stakeholders in the co-op.

State lawmakers approved surcharges propping up the OVEC plants as part of House Bill 6 — the 2019 measure at the center of the largest corruption case in Ohio’s history. Those subsidies have cost Ohio consumers more than $439 million already.

Environmentalists criticize the continued funding of coal plants because of their contribution to climate change. In written testimony, Cathy Becker from Save Ohio Parks noted link between burning fossil fuels and increase in extreme weather.

But without a hint of irony, Reitter argued the OVEC plants are “essential” to avoiding disruptions because of those weather events.

“This is especially important during time extreme weather conditions which our state seems to be experiencing frequently,” he said.

He added that without riders to fund his company’s costs, the arrangement “will cause financial harm to AEP Ohio’s balance sheet.”

Schroder, meanwhile, argued AES Ohio “has repeatedly attempted to divest its ownership interest in OVEC, but to date, has been unsuccessful.”

And Spiller insisted Duke Energy shouldn’t be on the hook for lawmakers’ change of heart.

“Duke Energy Ohio has since made business decisions that rely upon the existence of the (OVEC subsidies) through the statutory sunset of December 31, 2030,” she said. “And abruptly repealing this part of state law — in fact, abruptly repealing any part of state law, regardless of the business involved — without providing a means of redress or alternate remedy, sends a chilling message to the business community, and would stifle economic development.”

Sen. Chavez expects to hold another hearing on the proposal next week but couldn’t say whether he expected to the put it to a vote.