A proposal by Akron-based FirstEnergy Corp. to keep four aging electricity generation plants alive will cost ratepayers in Ohio almost $4B through 2024, a new study by the Institute for Energy Economics and Financial Analysis concludes.
The report, “A $4 Billion Bailout in the Buckeye State,” is an independent analysis of FirstEnergy’s proposal, which is being considered by the Public Utilities Commission of Ohio (PUCO).
The study details energy market trends that put coal-fired and nuclear-powered electricity generation plants at a growing disadvantage to other energy sources. It also shows how FirstEnergy is pursuing approval of the plan as part of a larger corporate strategy to shift risk to ratepayers and how the proposal before the PUCO would guarantee shareholders a 10.38% return on the plants regardless of their performance.
“The goal of FirstEnergy in putting forth this ratepayer-subsidized plan is to prolong the life of outdated plants in Ohio, put customers on the hook for the escalating costs of these plants and ensure future profits for FirstEnergy shareholders,” said Sandy Buchanan, IEEFA’s executive director. “The PUCO should reject it.”
The report, by David Schlissel, IEEFA’s director of resource planning analysis, and Cathy Kunkel, an IEEFA energy analyst, details financial and market risks attached to the coal-fired W.H. Sammis, Clifty Creek, Kyger Creek plants and the nuclear-powered Davis-Besse plant.
Among well-established market trends that present obstacles to the competitiveness of the plants, according to the report:
- the precipitous recent decline in natural gas prices and the decline in the cost of generating power at natural gas-fired power plants.
- the rise of wind- and solar-powered generation as renewable-energy installation costs drop as and as federal and state incentives for renewable power continue.
Flat growth in electricity demand in PJM, the regional electricity-transmission organization, driven by the deployment of energy-efficiency programs, demand response and distributed, on-site renewable resources.
The report notes that all four of the plants in question are currently unprofitable and describes how they will likely remain so for years to come. It includes market analysis that undermines FirstEnergy’s forecasts for future natural gas prices and PJM electricity market prices.
“Our findings conflict sharply with what FirstEnergy asserts,” Buchanan said. “Rather than drag Ohio’s economy down with an additional $4B in unnecessary expenses, the state should recognize that markets are changing, support the development of cleaner, modern and more efficient resources, and develop an economic transition plan for the workers and communities affected by the closures of the aging plants.”
The full report can be read here.
The Institute for Energy Economics and Financial Analysis
Filed Under: Financing