Ohio-based FirstEnergy is trying an audacious regulatory double play in the state legislature, with two bills aimed at subsidizing the company’s two unprofitable Ohio nuclear power plants – Davis Besse and Perry – while at the same time vastly increasing the profits the parent company can earn while scaling back renewable energy and energy efficiency measures.
The measures, which appear to have the support of the state’s Republican establishment, including Gov. John Kasich, have run into a strong headwind of criticism from consumer advocates, traditional Republican interests, classic conservatives, labor, and environmentalists.
The indefatigable Dick Munson, Midwest analyst for the Environmental Defense Fund, commented, “FirstEnergy lobbyists have been busy. In addition to promoting H.B. 6 [the nuclear bailout bill], they helped slip language into the massive, two-year budget proposal that would relax the company’s profit limits.”
The $150-million H.B. 6 bailout plan got a hearing last week in the Ohio House of Representatives. Two supporters (including FirstEnergy) testified, while 73 opponents made their views known. Here are some of the opponents comments, courtesy of Munson.
* Ohio State University’s Ned Hill: “If it looks like a duck, waddles like a duck, and quacks like a duck, let’s be honest and just call it a duck. And, we should also acknowledge, but not celebrate, the face that we are close to starting our sixth year of duck hunting. August 2019 makes the sixth anniversary of a determined campaign by Ohio’s IOUs to subsidize their (or their affiliates’) loss-making power plants.”
* Micah Derry, state director of Americans for Prosperity—Ohio: H.B. 6 is corporate welfare, it is cronyism on full display; in other words, a bailout.”
* Terri Sexton, Navistar and the Ohio Manufacturers’ Association: “The OMA finds this bill, as written, to be a mandated customer-financed bailout of uneconomical power plants in the form of ‘Clean Air Credits’ and direct subsidies. We note that this bill appears to allow fossil-fuel plants to apply for unspecified amounts of funds to subsidize investment in the plants.”
Then there is the two-year budget bill, H.B. 166, which would alter a 2008 legal provision aimed at preventing the utilities from earning “significantly excess” profits above 17% (an already generous rate of return). It’s called the “Significantly Excessive Earnings Test,” or SEET. It empowers the Public Utilities Commission of Ohio to order refunds of profits in excess of the ceiling.
The 3,524-page bill that passed the Ohio House gives the FirstEnergy parent company the ability to pair its larger earnings from subsidiary Ohio Edison with the smaller returns of its Toledo Edison and Cleveland Electric Illuminating companies.
The state’s Office of Consumers’ Council, which opposes the current SEET, is also pushing against the easing of the rule. Dan Shields of the OCC told the Statehouse News Bureau that SEET “was intended to be a consumer protection where and when the utility, the local distribution company over earned money would be refunded to customers.” His organization says that in 2017, Ohio Edison say a more than 17% return on equity but didn’t surpass the PUCO’s excessing earnings test.
OCC’s Jeff Jacobson, a former legislator, told the Columbus Dispatch that the change in the SEET law could earn FirstEnergy a 26% profit with no need to refund customers. He noted that, according to Regulatory Research Associates [now part of S&P Global Market Intelligence], that the national average profit margin for electric utilities is 9.6%.
[Disclaimer: I am a customer of one of FirstEnergy’s subsidiary utilities, Potomac Edison, serving some 400,000 customers in Maryland and West Virginia. I have no particular complaints about my service or bill.]
— Kennedy Maize