While seeking ‘bailout,’ Ohio utilities keep cost data secret

This chart from the redacted version of testimony submitted on behalf of the Sierra Club shows that customers would incur a net loss for at least 10 years under Duke Energy's proposed power purchase agreement plan.

This chart from the redacted version of testimony submitted on behalf of the Sierra Club projects that customers would incur a cumulative loss (green line) for at least 10 years under Duke Energy’s proposed power purchase agreement plan.

As Ohio utilities seek to require the public to help pay for aging power plants, they are also fighting to keep data that could be used to evaluate those plans under wraps.

FirstEnergy, Duke Energy and American Electric Power have asked the Public Utilities Commission of Ohio (PUCO) to guarantee sales for particular affiliated plants with plans critics characterize as “bailouts.”

At the same time, the utilities are citing confidentiality claims to prevent public disclosure of large amounts of cost data and projections related to the plans.

Nonetheless, redacted materials filed by the Sierra Club in the Duke Energy case show the utility’s plan would have a net cost to consumers, even after 10 years.

The testimony directly contradicts Duke Energy’s own claim that customers would benefit from its proposed plan in the long run.

FirstEnergy is fighting against disclosure of various data to different parties in its case dealing with three coal plants and the Davis-Besse nuclear plant. Rulings in the company’s favor could hinder challengers’ preparation of similar rebuttals to FirstEnergy’s plan.

Meanwhile, the PUCO will hear oral arguments in a related case involving American Electric Power (AEP) on Wednesday.

Sierra Club members and others plan to protest against the bailout plans that same day in downtown Columbus.

Who stands to gain?

FirstEnergy, AEP and Duke Energy want the PUCO to approve plans that would shift to all their Ohio customers the financial risks for the profitability of certain power plants. Under the plans, all distribution customers would pay any difference between a long-term contract price and the prevailing market price for those plants.

Critics say approval of the plans would violate Ohio law requiring deregulation and competition in the state’s electricity generation market. In general, the law prohibits preferences for a utility’s own affiliates.

Utilities admit that customers would pay more for the first few years of the contracts. However, they claim customers would see millions of dollars in net benefits later on.

Challengers to those plans disagree.

The Sierra Club earlier this year commissioned an analysis of Duke Energy’s projections. Sarah Jackson of Synapse Energy Economics, Inc. in Cambridge, Massachusetts performed that review.

The publicly available version of Jackson’s testimony has substantial redactions, due to a protective order for Duke Energy’s confidentiality claims, which the Sierra Club agreed to.

Nonetheless, Jackson’s analysis shows that the Duke Energy plan will result in a net cost to consumers even after 10 years.

“I conclude that the [plan] may be adverse to the public interest and contrary to the State of Ohio’s transition to competitive retail markets,” Jackson testified in the Duke Energy case. “I recommend that the Commission deny the Company’s proposal to establish this rider.”

Fighting full disclosure

Now FirstEnergy has asked a different hearing examiner to excuse it from providing data sought by the Sierra Club, even though that organization has already agreed to a protective order covering financial details.

Among other things, FirstEnergy’s filings argued that the Sierra Club’s request “seeks irrelevant information and is not reasonably calculated to lead to the discovery of admissible evidence.”

The Sierra Club has insisted that the requested information is essential for its case.

“In their filing, the FirstEnergy companies did not provide sufficient cost and revenue projections, including expected environmental compliance costs, needed to thoroughly evaluate how expensive this plan could really be for their customers,” said Dan Sawmiller of the Sierra Club’s Beyond Coal campaign.

FirstEnergy has also so far refused to provide IGS Energy with materials that IGS said it needs to test the credibility of one of FirstEnergy’s leading experts, Judah Rose.

IGS is an independent natural gas and electricity supplier in the Columbus area, and it is also in the business of demand response and distributed generation and could be impacted by the outcome of the case.

“[T]he economics of this multi-billion dollar decision turn largely on Mr. Rose’s projections,” IGS argued in materials filed with the PUCO. “Before the Commission agrees to commit FirstEnergy customers to [the proposed plan] (based on Judah Rose’s forecasts), it is reasonable to test his forecast by comparing it with other forecasts Mr. Rose has produced.”

“FirstEnergy is responding to the motions appropriately as part of the Commission’s proceeding,” said company spokesperson Doug Colafella, in response to a request for comment about the IGS dispute and other pending discovery issues.

FirstEnergy’s brief, filed yesterday, claims that other forecasts that might impeach Rose’s credibility are irrelevant. FirstEnergy also argues that producing the forecasts “would allow IGS to pry into third parties’ confidential business affairs.”

Meanwhile, FirstEnergy has asked the PUCO to exempt it from document requests submitted by the Electric Power Supply Association and PJM Power Providers Group. FirstEnergy’s December 8 motion claimed those requests were “an improper attempt by competitors to obtain confidential information.”

Competitors’ own positions could suffer if FirstEnergy plants win a competitive advantage as a result of the case. The Electric Power Supply Association and PJM Providers Group have said they will agree to a protective order, so that any confidential information would not be used in future bids.

More importantly, their brief filed yesterday said, the requested spreadsheets, work papers and other information would show what the Davis-Besse and W.H. Sammis plants’ real costs are, how they fared in PJM’s competitive capacity auctions, and whether Ohio ratepayers should have to bear the burden for ensuring that FirstEnergy gets paid costs plus a rate of return for those plants.

“Because the Companies [FirstEnergy’s subsidiaries] have represented that these plants are facing questionable economic viability, the credibility of these claims must be tested,” said the groups’ brief.

The Office of the Ohio Consumers’ Counsel (OCC) and the Northeast Ohio Public Energy Council (NOPEC) have also hit roadblocks in getting information from FirstEnergy.

FirstEnergy has insisted on, and the hearing examiner has so far agreed with, strict secrecy for “competitively sensitive confidential materials.” Both OCC and NOPEC have asked the full Commission to reverse that decision.

Among other things, OCC and NOPEC noted that the terms would prevent their own in-house experts from reviewing and advising on the case.

“This limited access is a new policy that severely handicaps parties’ ability to challenge any charges,” OCC and NOPEC said in their joint brief.

Another “novel issue,” they said, is whether the hearing examiner wrongly accepted FirstEnergy’s characterization of NOPEC as a close affiliate of a competitor. NOPEC does not in fact own any electricity generation plants. Rather, it is a “government aggregator.”

In other words, NOPEC negotiates for and buys electricity on behalf of residents in various member municipalities. At least until 2019, FirstEnergy Solutions is itself the only electricity supplier for NOPEC, the brief for NOPEC and OCC said.

FirstEnergy’s response brief, filed yesterday, accused OCC and NOPEC of “misrepresentations and half-truths.” FirstEnergy also denied that the more restrictive confidentiality sought in its case was a departure from precedent. Other cases “involved different issues and different facts,” it said.

OCC and NOPEC disagreed. Their brief argued that their ability to challenge FirstEnergy is seriously hampered by the current limitations.

Hearings and arguments

The hearing examiner in the FirstEnergy case has scheduled a prehearing for Thursday, Dec.18, to consider some of the pending discovery disputes.

The day before — Wednesday, Dec. 17 — the PUCO will hear oral arguments in a related case involving AEP.

Also on Wednesday, members of the Sierra Club and others plan to protest the utilities’ proposed “bailout” plans outside the PUCO offices on Broad Street in Columbus.

Regardless of how the PUCO cases turn out, it seems unlikely that the public will learn all the financial details behind the utilities’ plans anytime soon.

The utilities’ plans would cost customers “hundreds of millions of dollars in the first few years alone,” said Sawmiller.

The Sierra Club is a member of RE-AMP, which publishes Midwest Energy News.

 

UPDATE:

Duke Energy Ohio had been an intervening party in support of FirstEnergy’s plan, but on December 18 it withdrew from that case. The move came after the hearing examiner presiding over the prehearing conference that day suggested that, because Duke was a party, IGS Energy could use discovery to get an analysis that expert witness Judah Rose performed for Duke in another case several years ago.

IGS Energy has said it needs that and other previous analyses to test Rose’s credibility to make projections that support utilities’ claims in the FirstEnergy case. Duke’s move does not preclude the possibility that IGS or others might seek to obtain the information through other means.

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