From The Power Plant To Your Electric Bill: Federal Ruling Sets Stage For Big Decisions

May 16, 2016

Something as simple as flipping a switch can turn the lights on and off in your home. But there are many, major, complicated decisions that take place in order to keep those lights on. As Statehouse correspondent Andy Chow reports in part one of a three-part series, these decisions have reached a critical point that could change the landscape of the energy industry in Ohio.

“Then here’s our May bill. Looks like that’s a little higher we probably used a little more A/C during May.”

Sitting at her dining room table in her home in a suburb of Columbus, Cathy Cowan Becker sifts through the numbers printed on her monthly electric bill from AEP.

“And I’m not sure what all these charges are.”

Like many Ohioans, Cathy is finding herself with more questions than answers when taking a closer look at the different components of her bill.

“There’s something on here called a customer charge and I don’t know what that is. There’s something called a retail stability rider and I’m not sure what that is. There’s something called a deferred asset phase-in rider and I’m not sure what that is.”

All those charges Cathy’s seeing on her bill are related to various proposals that utilities have brought before state regulators.

What Cathy and the 4.7 million other Ohio customers that pay for electricity might not realize yet is that the future of their electric bills and the energy industry are approaching a monumental moment.

And a decision from federal regulators regarding coal plants may have set everything in motion.

AEP and FirstEnergy proposed plans that would guarantee profits for certain coal plants. These are coal-powered plants that might be older, not as clean, less efficient and don’t perform well in the wholesale capacity market.

FirstEnergy’s Bill Ridmann said their plan, which was dubbed a Power Purchase Agreement, would add a small increase to electric bills. That money would keep these plants afloat. Ridmann argued that allowing the plants to shut down would’ve killed jobs and sent electric bills through the roof.

“Not necessarily wanting them to be exposed to the high prices that the other participants, the other suppliers are hoping for in this market by having plants retire prematurely,” said Ridmann

But opponents, including a collection of environmental groups uniting with independent energy producers, called this a coal plant bailout that gives the big utilities an edge against competitors.

There were even dueling ads playing out on TV and Radio.

“With the proposals before the utilities commission, FirstEnergy will be able to save thousands of jobs, strengthen Ohio’s energy infrastructure and support wind energy and clean sources of power.”

“That’s what FirstEnergy wants -- pay them extra. They claim they aren’t making enough money. They want a handout and they want you to hand it to them.”

The Public Utilities Commission of Ohio approved AEP and FirstEnergy’s plans but the Federal Energy Regulatory Commission -- or FERC -- blocked the move.

Ohio’s utilities compete to sell the energy it generates at power plants into the grid known as PJM Interconnection which serves 13 different states and Washington, D.C. Joe Nichols with the Buckeye Institute, a conservative think tank, says being part of this deregulated industry means taking on a certain amount of risk. 

“What Ohio was trying to do is say just put that risk from the company to ratepayers and FERC is saying that’s not how things work we’re not going to stand for that,” said Nichols.

Dan Sawmiller with the Sierra Club’s Ohio Chapter says the feds’ ruling to essentially stop the so-called coal plant bailout leaves utilities with a lot of big decisions to make and could even change the culture of energy generation in Ohio.

“It’s time for Ohio to start planning for a responsible transition plan. We’re moving away from coal, it’s inevitable, the trend is irreversible,” said Sawmiller.

As far as AEP, FirstEnergy and Dayton Power and Light, the other major utility that generates power by burning coal -- the FERC decision leaves them in a major state of limbo.

Just a day after the outcome, AEP’s CEO told investors that they were left with two choices: either sell off their coal plants or turn away from 17 years of deregulation and take on the immense task of re-regulating Ohio’s utilities industry.

This is part one of a three-part series: From The Power Plant To Your Electric Bill. For part two Andy will report on Ohio's path to even begin deregulation and just how big of an undertaking it would be to go back.