By Ted Caddell

FirstEnergy said Tuesday it has reached a proposed settlement with Public Utilities Commission of Ohio staff that would provide guaranteed income for eight years for two of the company’s merchant generating stations and for the portion the company owns of two other plants.

FirstEnergy has said that it needs the income guarantees, in the form of power purchase agreements for its Davis-Besse Nuclear Power Station, the W.H. Sammis coal-fired plant and its share of Ohio Valley Electric Corp.’s generation output, to keep them profitable. Without the guarantees, it said, it might have to retire the plants, threatening system reliability.

Sixteen parties, including PUCO staff, a low-income advocacy group, Ohio Partners for Affordable Energy and other civic groups, signed on to the proposed settlement filed with the commission Tuesday (14-1297-EL-SSO).

But several other organizations, including the Office of the Ohio Consumers’ Counsel (OCC), have refused to sign on to what they decried as a “bailout” and joined in a motion to reopen the record.

“PUCO’s staff decision to move forward with a backroom deal to bailout FirstEnergy’s aging power plants is insulting to Ohio utility customers,” said Daniel Sawmiller of the Sierra Club of Ohio, which dropped out of the settlement negotiations in protest last week.

FirstEnergy’s first proposal, which PUCO staff rejected earlier this fall, called for income guarantees for 15 years. This proposal seeks income guarantees for eight years.

According to the proposal, ratepayers would pay FirstEnergy if its generators were not profitable based on their capacity and energy sales in the competitive market. The company contends that in the long run, the plants will be able to produce power more cheaply, and any income over cost would be returned to ratepayers.

It estimates that under its new proposal, residential ratepayers would pay an extra $3.25 to $3.50 a month during the first year. Over the eight years of the plan, the company says, it will produce savings of about $560 million.

“The settlement filed by FirstEnergy’s Ohio utilities — Ohio Edison, The Illuminating Company and Toledo Edison — outlines ambitious steps to safeguard customers against retail price increases in future years, deploy new energy efficiency programs, and provide a clear path to a cleaner energy future by reducing carbon emissions,” the company said in a statement.

The proposal also includes a “goal” to reduce carbon dioxide emissions from FirstEnergy’s generating fleet by at least 90% below 2005 levels by 2045 regardless of whether EPA’s Clean Power Plan survives court challenges.

It also promises $102 million in assistance to low-income customers and energy efficiency programs.

Sawmiller blasted the proposed settlement.

“Over months of public hearings, there was no credible evidence presented that this bailout furthers any public interest. The shortened timeline has an even more negative impact, front-loading the handout to FirstEnergy and its shareholders while saddling customers with a cost that could run into billions. This deal provides no path for transitioning to a cleaner, more affordable clean energy economy and should be flatly denied by the PUCO.”

The Consumers’ Counsel and the Northeast Ohio Public Energy Council (NOPEC) also opposed the agreement.

“OCC and NOPEC’s expert preliminarily projects that the new PPA proposal will cost consumers approximately $3.9 billion,” reads a joint statement from the two groups. “And the settlement’s impact on Ohioans’ electric bills does not end with the PPA charges: the settlement contains a virtual holiday wish list of favorable ratemaking for FirstEnergy.”

Chuck Keiper, NOPEC executive director, noted that some of those that signed on to the agreement would receive payments from FirstEnergy in exchange.

“The use of financial inducements to obtain buy-in of some intervenors for pennies on the dollar compared to the billions we project the utility will collect from other customers is, frankly, a terrible way to develop public policy,” he said. “It is our sincere hope that the PUCO commissioners will do the right thing and reject this settlement,” he said.

Consumers’ Counsel Bruce Weston also was critical of the settlement agreement. “Consumers should not be charged a penny more than the cost of power in the market,” Weston said in a statement. “FirstEnergy’s proposal comes at a time when Ohioans already are paying more for electricity, on average, than consumers in 32 other states,” he said.

The PJM Power Providers Group (P3) and the Electric Power Supply Association also criticized the deal, with P3 President Glen Thomas saying PUCO staff’s “about face” represents “corporate welfare at its worst.”

“If FirstEnergy is so sure this is a good deal for consumers, they should make public the information underlying its claims and provide iron clad corporate guarantees that consumers will actually receive the promised net benefits,” said EPSA President John Shelk.

Although PUCO staff approved the settlement, it still needs approval of the commission. FirstEnergy said it expects the commission to hold hearings on the proposed settlement early next year.

But it may face tough going.

Earlier this year PUCO’s new director, Andre Porter, criticized FirstEnergy and American Electric Power, which has a similar proposal before the commission, for raising the threat that reliability will suffer without income guarantees for their generation. “Let’s stop attempting to scare Ohioans,” Porter said at the time. “We’re going to continue to have reliable power” with or without guarantees, he said.