By Suzanne Herel and Ted Caddell
The Public Utilities Commission of Ohio staff has proposed a new rider for FirstEnergy that would allow the recovery of $131 million annually from ratepayers for three to five years in order to maintain the company’s investment-grade credit rating.
“Staff believes the long-term financial health of FE will have benefits for the Ohio regulated distribution facilities, as well as the state of Ohio in general,” PUCO’s Joseph Buckley testified Wednesday (Case No. 14-1297-EL-SSO).
Buckley cited Moody’s Jan. 20 credit opinion saying that the company could receive a rating downgrade without an increase in revenues allowing it to generate cash flow from operations equal to at least 14% of its debt. He said staff believes that three years is enough time for FirstEnergy to address its finances, and that it could request an extension of the rider if necessary.
The Distribution Modernization Rider would require FirstEnergy to maintain its corporate headquarters and most of its operations in Akron or forego the credit. The agreement also would be terminated if the company or its subsidiaries were to undergo a change in ownership.
Critics of FirstEnergy’s attempts to win subsidies from Ohio regulators objected.
“While the staff frame their proposal in terms of grid modernization, the apparent absence of any requirement that FirstEnergy invest the money on modernizing the grid means that this new proposal is effectively just another corporate bailout,” Earthjustice, representing the Sierra Club, said in a statement.
Dick Munson of Environmental Defense Fund called it “an unnecessary subsidy.”
In April, FERC ruled that an eight-year power purchase agreement PUCO approved for FirstEnergy, and one for American Electric Power, would be subject to federal review. (See FERC Rescinds AEP, FirstEnergy Affiliate-Sales Waivers.)
FirstEnergy then returned to PUCO with a modified proposal that included a customer charge to help protect its aging, mostly coal-fired power plants (14-1297-EL-SSO). (See AEP, FirstEnergy Revise PPA Requests to Avoid FERC Review.)
PUCO staff said last week that modified proposal should be rejected in favor of the recommended rider.
Doug Colafella, a spokesman for FirstEnergy, said Friday, “The filing of staff’s testimony is another step in the regulatory process. We will continue to work with the commission and other parties to achieve an outcome that will protect our customers and communities.”
The Sierra Club and EDF are among a number of parties asking FERC to intervene in the matter. (See FirstEnergy Foes Ask FERC to Step in Again in Ohio Dispute.)
On Thursday, FERC Chairman Norman Bay responded to a letter from U.S. Sen. Joseph Manchin (D-W.Va.) explaining the commission’s role in the dispute (EL16-33, EL16-34). Manchin, a staunch supporter of his state’s coal mining industry, had asked FERC on April 20 to “allow [Ohio’s] prudent action to stand.”