Exelon launches power play to derail FirstEnergy proposal in Ohio

By Jeffrey Tomich | 01/05/2016 07:17 AM EST

The nation’s largest nuclear operator, Exelon Corp., thinks a revised plan proposed by FirstEnergy Corp. in Ohio is "grossly lopsided" and a raw deal for consumers.

But in case state regulators disagree, Exelon, which owns no power plants in Ohio, is willing to "put its money where its mouth is" and agree to a similar, eight-year agreement. The kicker: It claims it can undercut FirstEnergy’s proposal by $2 billion and deliver emissions-free power.

In testimony filed Dec. 30 with the Public Utilities Commission of Ohio, Lael Campbell, Exelon’s director regulatory and government affairs, said the company is taking an unprecedented step of offering up to 3,000 megawatts of emissions-free generation to consumers in Ohio, a state where the retail electricity market is deregulated.


Exelon said it is making the offer "so that no one can misunderstand the gravity of the harm that would occur to Ohio customers" if the FirstEnergy agreement is accepted without a "competitive process."

The filing comes two weeks before a scheduled hearing in the case before the commission and figures to further fuel an already contentious debate. Already, the chief executive of another rival generator, Houston-based Dynegy Inc., has threatened to file a lawsuit if the FirstEnergy proposal is approved.

Dynegy has also threatened to sue to stop a similar income-guarantee proposal by American Electric Power Co. Hearings in the AEP case began yesterday in Columbus.

FirstEnergy filed an updated plan on Dec. 1 that was supported by the commission staff and more than a dozen other parties. The plan would guarantee income for the 908-MW Davis-Besse nuclear plant and 2,200-MW W.H. Sammis coal plant and a share of output from plants in Ohio and Indiana through mid-2024 (EnergyWire, Dec. 2, 2015).

The term of last month’s agreement is about half the original 15-year proposal and included pledges to slash emissions, fund low-income programs, and support energy efficiency and renewable energy development.

FirstEnergy, which operates three electric utilities in northern and central Ohio, insists the revised agreement would ensure more predictable, stable pricing and preserve thousands of jobs and millions of dollars in local taxes. But environmental groups and consumer advocates have called it a bailout that would merely pad company profits. They also criticized the private meetings that led to the agreement as "backroom dealing."

The Office of the Ohio Consumers’ Counsel filed testimony on Dec. 30 predicting that FirstEnergy’s 1.9 million consumers will pay an average of $800 more in electricity costs over the next eight years to fund the utility "bailout."

Under the income-guarantee proposals offered by FirstEnergy and AEP, the utilities would enter agreements to buy all of the output from the plants and sell it through the wholesale market run by regional grid manager PJM Interconnection LLC. The difference between costs and revenues would be a charge or credit to customers.

FirstEnergy said its plan would initially cost consumers. But, contrary to the consumer advocate’s estimate, the company said it customers would save an estimated $560 million over the life of the agreement based on projected power price increases.


Exelon, meanwhile, makes clear in its filing that it wants the PUC to reject the idea. But, if regulators disagree, the process of choosing an energy provider should be competitive, Campbell said in the Dec. 30 testimony.

A competitive process, Campbell said, would "wash away the stain of this affiliate backroom deal where FirstEnergy has positioned its regulated utility to benefit its affiliate … exclusively by coupling the proposed power purchase agreement with settlement ‘goodies.’"

Among the "goodies" referenced is carbon reduction goals that, according to Exelon, are not enforceable for more than 25 years. "In short, these concessions are nothing more than window dressing designed to hide from the public an out-of-market contract between FirstEnergy and its affiliated merchant generation company," Campbell said.

FirstEnergy spokesman Doug Colafella disagreed with Exelon’s statements. He said the Exelon counter proposal would only make the state more reliant on out-of-state energy sources and would do nothing to preserve the jobs and tax base at the affected plants — part of the core of what FirstEnergy is offering.

"We believe our plan offers the most benefits for Ohioans," he said.

Colafella also noted Exelon unsuccessfully proposed legislation in its home state of Illinois that would have subsidized money-losing nuclear plants by creating a low-carbon portfolio standard. It is a proposal that, like FirstEnergy’s, was offered in the name of preserving jobs and benefiting local economies.

Just like it has pushed in Illinois, Exelon said in last week’s testimony that a requirement for low-carbon energy in Ohio is the best way to preserve nuclear plants like Davis-Besse.

Meanwhile, the company said it doesn’t matter whether the power used by Ohioans comes from inside or outside state borders, only that consumers get the lowest price possible.

Exelon doesn’t say specifically where it would source the generation for Ohio. But the company said its offer is good for six months and it would agree to deliver energy from renewable energy sources and nuclear plants in PJM.

The company also pledged in its testimony to assume all capacity-performance risk under new rules established by PJM while the FirstEnergy proposal wouldn’t similarly shield consumers.