The following article was originally published in the Ohio Capital Journal and published on News5Cleveland.com under a content-sharing agreement.
Ohio ratepayers will again shell out money for two 1950s-era coal plants next month, following a year of cents-per-month credits. Meanwhile, regulators have yet to rule on years-old challenges to millions of dollars of spending for the plants.
Critics have called the charges a bailout and have tried multiple times to repeal the coal plant provisions of House Bill 6, the 2019 law at the heart of Ohio’s ongoing corruption scandal.
The provision, in the form of a bill rider, has generated a credit for customers over the past year because of a short-term shift in economic conditions as global prices rose for natural gas and coal. Utilities say that shows the rider provides a hedge against high energy prices.
But new filings show utilities intend to start collecting money from customers again in July. And their estimates show the plants will likely lose as much as $38 million over the next six months.
Meanwhile, an analysis conducted earlier this year for the Ohio Manufacturers’ Association shows the plants have consistently lost money, and their costs could climb to roughly $800 million by 2030.
“Under the status quo, these plants were losing money for years and years and years, to the point where the utilities tried to fundamentally change the regulatory regime in the state to get to the point where they could just break even from their bad investments,” said Neil Waggoner, the Sierra Club’s federal deputy director for energy campaigns.
‘The basic fundamentals haven’t changed’
The bill rider applies to the Kyger Creek plant in Ohio and the Clifty Creek plant in Indiana, known colloquially as the “OVEC plants” after the Ohio Valley Electric Corporation that operates them. Multiple utilities — including American Electric Power, Duke Energy and AES — own stakes in OVEC, along with other companies.
Sally Thelen, spokesperson for Duke Energy, said the rider “is not a subsidy” and “functions as a hedge against volatile wholesale market conditions.” The fact that there were credits “reflects the fact that the mechanism is working as intended,” she said.
But thecents-per-month credits for roughly the past year happened largely because of the war in Ukraine and worldwide increases in wholesale gas and coal prices while the OVEC plants had contracts for some coal supplies at lower prices, according to the report by RunnerStone for the Ohio Manufacturers’ Association. The higher energy prices meant utilities had collected more from ratepayers than they needed, the report said. Hence, the credits.
“The basic fundamentals haven’t changed,” Waggoner said. If anything, stricter environmental rules will drive the coal plants’ costs even higher, he added.
Filings byDuke Energy Ohio,AEP Ohio andAES Ohio at the end of May show they plan to collect charges again from customers starting in July. Depending on the utility, the charge will be 15 or 16 cents monthly for those three companies’ residential ratepayers, with lower rates for commercial and industrial customers.FirstEnergy’s residential Ohio customers will pay 4 cents per month.
“By the utilities’ own estimates, they are set to lose $38 million from July to December on OVEC — losses they’ll charge to regular working people and businesses,” RunnerStone CEO John Seryak said, noting that this year’s charge “is being muted by the utilities truing up from past over-collections. Once that true-up is done, the rate customers pay will likely increase.”
“Ohioans have already paid for $400 million in losses for OVEC,” due to the HB 6 subsidies and prior regulatory rulings, Seryak said. “And I expect that to double by 2030.”
Delayed regulatory review
Both HB 6 and the prior regulatory rulings call for a regulatory review of the reasonableness and prudence of the OVEC plant charges. Yet the Public Utilities Commission of Ohiostill hasn’t ruled onchallenges to charges before HB 6 took effect, with the oldest case dealing with costs incurred in 2018. And HB 6 called for regulatory reviews every three years, starting with 2020’s expenses.
“The companies are free to run the plants however they please — even uneconomically,” said Trent Dougherty, a lawyer representing the Citizens Utility Board of Ohio and the Union of Concerned Scientists. “But when the ratepayers have to foot the bill for losses of revenue, the commission cannot just take the self-serving claims of the companies at face value.”
The audit for 2020 is the first one of the post-HB 6 coal bailout, Dougherty added. So, “its result will determine how all future analyses will occur.”
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