By Suzanne Herel

PJM last week joined more than a dozen other parties in calling for a FERC review of power purchase agreements that would provide FirstEnergy and American Electric Power a guaranteed return for their struggling generating stations in Ohio.

“If approved, the [PPAs] will create incentives that will likely lead to these generation units being offered, unless checked, in a manner that could harm the overall competitiveness of the PJM markets,” PJM said in comments supporting complaints by the Electric Power Supply Association and independent power producers.

“This outcome could impact significantly PJM’s administration of the wholesale markets in its region and affect the mission entrusted to these markets — assuring efficient, long-term resource adequacy,” PJM said.

EPSA, the Retail Energy Supply Association, Dynegy, Eastern Generation and NRG Energy asked FERC in January to revoke the waivers it granted AEP and FirstEnergy regarding affiliate power sales to ensure a Section 205 review of the eight-year PPAs (EL16-33, EL16-34). (See Dynegy, NRG Ask FERC to Void Ohio PPAs.)

They also are requesting an expedited decision, given that the Public Utilities Commission of Ohio could rule in coming weeks. And they contend that the results could impact PJM’s 2019/20 Base Residual Auction, to be held in May.

‘Premature’ Attack

Before the comment window closed Feb. 23, the complaints garnered the support of more than a dozen parties, including the Pennsylvania Public Utility Commission. No one submitted comments supporting FirstEnergy, but the Ohio Energy Group — industrial customers including Alcoa, Ford, GE Aviation and TimkenSteel — wrote in support of AEP.

“The complaint represents a premature collateral attack on a proposed PPA that is not yet finalized and that could substantively change as a result of state commission decisions,” the group said. PUCO is able to protect its own customers from any “affiliate abuse,” and there is no “definitive evidence” that the proposed PPA would distort the PJM markets, it said.

AEP and FirstEnergy filed similar responses, saying allegations of market distortion are unfounded.

“The PUCO is undertaking a comprehensive review of the impact of AEP Ohio’s proposal on Ohio retail customers,” AEP said. “This is precisely the reason why the commission should adhere to its longstanding policy and defer to the PUCO’s resolution of the retail rate matters that form the basis for the complaint.”

Because Ohio is a retail choice state, the companies argue, customers there are not “captive.”

“The commission should reject the complaint on the merits, given that complainants have alleged no change in law in the state of Ohio that alters the basis on which the commission granted FirstEnergy a waiver from the affiliate transaction requirements,” FirstEnergy said.

Retail Choice Irrelevant

The plaintiffs say the state’s policy on retail choice is irrelevant because the PPAs would be funded by surcharges on all customers in AEP and FirstEnergy’s service territories, regardless of whether they take provider of last resort service from the utilities or purchase from a competitive supplier.

Among those supporting EPSA’s complaint was a coalition of 10 northwest Ohio communities.

“This is the first any of us has ever intervened at FERC — and that alone shows our resolve to oppose this awful PPA. It will cost Northern Ohio at least $3 billion,” said the Northwest Ohio Aggregation Coalition.

“When all the jargon is stripped away, the FirstEnergy PPA requires regular people to pay an extra month’s electric bill each year for eight years. It is not for the electricity that they use,” the coalition said. “Instead, the money that people need for school clothes and medical co-pays will go solely to bail out the company’s aged and inefficient coal and nuclear plants.”

Hardwood Flooring and Paneling Inc. in Middlefield, Ohio, said the PPA would cost it an additional $105,834 over eight years to pay for the 2.1 GW the business uses annually.

“That is real money that could be used on more productive purposes [such as] updating our equipment, increasing our inventories and building a new finishing plant for our hardwood flooring products — all of which bring more taxable income to the state of Ohio,” Vice President Barbara Titus wrote.

Ohio Citizen Action wrote on behalf of its 30,000 members, which the group said will be harmed.

The Pennsylvania PUC said it intervened because of “a concern that the FE affiliate PPA, as currently structured, represents a potential threat to the continued efficient function of PJM’s wholesale capacity markets, especially with regard to the upcoming 2019/2020 Base Residual Auction (BRA).

“More precisely, FE’s affiliate PPA presents the risk of potential subsidization of generation facilities that would otherwise be retired, resulting in conveyance of incorrect price signals in the next and subsequent capacity market auction auctions.”

The Ohio Manufacturers’ Association Energy Group, representing about 1,400 companies, said the manufacturing sector is one of the top electricity consumers in the state.

“Any impacts arising from future increases to electricity prices will have a significantly negative effect on their businesses,” it wrote.