By Ted Caddell and Michael Brooks

Ohio’s electric industry, which has been roiled for months by American Electric Powers’s and FirstEnergy’s requests for above-market power purchase agreements, shows no sign of calming down anytime soon.

On Friday, Andre T. Porter, the chairman of the Public Utilities Commission of Ohio, announced his resignation, little more than a year after taking the position and less than a month after shepherding through the controversial PPAs.

Porter’s announcement came two days after FERC announced it would review the PPAs under the commission’s affiliate abuse test, a decision that many observers say dooms the agreements. (See FERC Rescinds AEP, FirstEnergy Affiliate-Sales Waivers; Will Review Ohio PPAs.)

The commission’s order prompted AEP CEO Nick Akins to threaten that the company may lobby Ohio legislators to reregulate the state’s power market, a position that FirstEnergy also has indicated it would support.

During an earnings call Thursday, Akins said that the company would rather sell all its generation or seek reregulation rather than submit its PPA for FERC review. The commission said that despite Ohio’s retail choice law, the companies’ ratepayers were essentially “captive” customers because the PPAs would impose on them non-bypassable distribution charges.

As a result, the commission said the PPAs would be reviewed under the Edgar test, which will require the companies to prove the lack of affiliate abuse by evidence of head-to-head competition or benchmarks such as prices that non-affiliated buyers are willing to pay. The PPAs were not subject to competition, and both Dynegy and Exelon have proposed deals that they say would save ratepayers billions. (See Next up in Ohio PPA Battle: Dynegy Weighs in.)

Opponents of the PPAs asked PUCO to reconsider its approval Monday, the deadline for responses to the orders. And in a surprise move, FirstEnergy asked PUCO to allow it to withdraw the PPA but keep a charge on customers’ bills that would provide essentially the same rate increases the PPA provided (14-1297-EL-SSO).

The surcharges would be based on estimated power production costs, not actual costs. If approved by PUCO, it would allow FirstEnergy to avoid FERC review.

“FirstEnergy’s latest gambit underscores that its bailout proposal has nothing to do with protecting customers or preserving Ohio generation, and everything to do with propping up corporate profits,” said Shannon Fisk, managing attorney at Earthjustice, a nonprofit law firm representing the Sierra Club.

Will Ohio Reregulate?

An angry Akins told stock analysts Thursday that AEP “will advocate for legislation in Ohio that would reregulate generation in the state or provide a mechanism for AEP Ohio to own and develop generation assets, including the plants included in the PPA and renewables.”

In FirstEnergy’s earnings call Wednesday, before the commission’s order, there was no mention of reregulation.

But CEO Chuck Jones told The Plain Dealer last year that he would end Ohio deregulation “in a heartbeat.” And in a Securities and Exchange Commission filing after the FERC order, the company said that it “will consider both short-term and long-term legislative and regulatory solutions in Ohio to preserve the benefits associated with the” PPA.

Former PUCO Chairman Todd Snitchler says reregulation is unlikely.

“Given how far down the road Ohio has already gone, it would be very difficult to put the proverbial toothpaste back in the tube,” said Snitchler, who is now spokesman for the Alliance for Energy Choice, a group formed to fight the PPAs.

“I believe there is no strong appetite in the legislature to move toward reregulation … now that they are seeing the outcome that the legislation intended,” he said. “And quite frankly, I think it very odd that a company such as AEP is now going to say, ‘I’m going to pick up the phone and get them to do my bidding.’”

A spokesman for Ohio House of Representatives Speaker Cliff Rosenberger told The Columbus Dispatch that “at this time, we are considering all options and are willing to have a discussion to ensure we make a decision that is best for Ohio’s future.”

State Sen. Bill Seitz (R-Cincinnati) told the Dispatch he wants an “all-hands-on-deck, high-level meeting” with the governor’s office and legislative leaders to determine next steps. “There is a limit to which we can prop them up,” he said, later adding, “I’m not saying it’s impossible. I’m saying it’s a very tall order of business.”

Akins said Thursday that legislators could choose a narrow reregulation that covers only a few power plants.

PUCO Chair Porter Leaving May 20

Porter announced he will leave PUCO effective May 20. “At this time, my wife and I have made the very difficult decision to pursue a new opportunity for our family back in the private sector,” he wrote in a letter to Gov. John Kasich.

Porter did not say where he was going, but rumors have been rippling through the utility industry that he has taken a position with an RTO.

At Thursday’s PJM Markets and Reliability Committee meeting, CFO Suzanne Daugherty addressed the rumors, saying Porter was not coming to PJM. Sources at the meeting told RTO Insider they believe Porter, an attorney, is headed to MISO.

MISO declined to comment Monday. Porter was not available for comment. PUCO spokeswoman Holly Karg said he has not indicated where he is going.

Before working at the state’s Commerce Department, Porter served as a commissioner from 2011 to 2013. His current term wasn’t scheduled to expire until April 2020.

“When I joined state government in 2011, I did so with the personal aspiration to be impactful within an allotted period of time,” Porter wrote in his letter. “At the PUCO, while working independently of the administration, I’ve led the commission in addressing some of the most challenging utility issues in recent history.”

Nominating Council

Replacing Porter won’t happen quickly, Snitchler said. A nominating council would have to come up with four names to submit to Kasich for consideration, a process that could take months. In the meantime, he said, the governor could name one of the sitting commissioners as acting chair.

In FirstEnergy’s earnings call Wednesday, Guggenheim Partners analyst Shahriar Pourezza asked about rumors of Porter’s resignation. “The timing is a little bit suspect and it’s a crucial period,” he said.

“I think Chairman Porter showed outstanding leadership during the time he was at the commission,” CEO Jones answered. Porter called Jones to inform him that he was leaving to pursue another job, the CEO said. “When job opportunities present themselves, you don’t get to pick the timing of them. So we had a good conversation, and I don’t think you should read anything into it other than what was said.”

The timing of Porter’s departure — and his arrival to the commission — was also noted in a report by UBS Securities analyst Julien Dumoulin-Smith. “We note he was effectively brought back into the role coincident with the start of the Ohio FE and AEP PPA process, and with its recent approval (and conclusion of the docket), his return to the commission appears closed,” he said.

Analysts ‘Struggling’

Jones told analysts the company would hold off on providing a second-quarter earnings guidance until FERC determined the PPA’s fate.

Analysts asked when the company expects FERC to make a decision, with Chief Legal Officer Vespoli predicting the commission will want to provide guidance before PJM’s Base Residual Auction in May.

Meanwhile, FirstEnergy Solutions President Donny Schneider acknowledged that two of the plants covered under the PPA — the W.H. Sammis coal-fired plant and the Davis-Besse nuclear plant — would be profitable even without the contract.

“Yes, for 2016, Sammis and Davis-Besse would definitely both have positive earnings-per-share impacts,” Schneider said in response to a question from Macquarie Research Equities analyst Angie Storozynski.

“We are all struggling, I think, with the impact of your PPAs on your bottom line, because we just don’t know what is the offsets from the current earnings power of these assets,” Storozynski said.

“I understand you are struggling with it,” Jones replied. “And believe me, as soon as we can give you clarification, we plan to do that. Once we have an answer from FERC, we will tell you what the value of this company is going forward with the” PPA.

FirstEnergy’s stock closed at $33.05 Monday, down 8% since FERC’s ruling. AEP was up 0.7% to $64.36.

Suzanne Herel contributed to this report.