AEP, FirstEnergy Look to Customers to Cover Aging Plants’ Operating Costs

 AEP, FirstEnergy Look to Customers to Cover Aging Plants’ Operating Costs

Two of the country’s largest power producers are asking Ohio state regulators to approve a plan that would have its consumers foot the bill for operating costs at eight aging power plants.

American Electric Power Co. (NYSE: AEP) and FirstEnergy Corp. (NYSE: FE) say they’re losing money keeping seven coal-fired plants and one nuclear plant in operation, per the Wall Street Journal, but the companies don’t want to close the facilities and lose surplus capacity that could be used in the event of extreme weather.

Critics say the companies’ proposal could add upwards of $600 million a year to customers’ utility bills over a 15-year period.  WSJ reports staff from the state’s Public Utilities Commission have recommended rejecting AEP’s and FirstEnergy’s plans, but Ohio regulators aren’t expected to make a decision until March.

Ohio is among nearly a dozen states with deregulated electricity prices, meaning power plants compete to offer the cheapest electricity and utilities aren’t required to purchase power from one particular producer.

AEP has already shuttered two coal plants in Ohio and has plans for gas-fired generation in the future, but Nick Akins, AEP chief executive, tells WSJ the older coal units will remain necessary for several more years until the transition can be made.

In the meantime, AEP wants customers of its Ohio utility to cover operating costs at six of its co-owned plants, and in exchange the utility would receive and be able to sell AEP’s share of the plants’ capacity in the wholesale market.

According to the Sierra Club, AEP’s plan could cost its customers billions of dollars over the first 10 years.  If regulators deny the proposal, AEP says it may sell its shares to the plants.

Per WSJ's report, FirstEnergy says without financial help from its customers it would have to mothball a large coal plant and a nuclear plant.

“We wouldn’t have proposed something like this if they weren’t at some degree of risk,” Bill Ridmann, FirstEnergy vice president, tells WSJ.

FirstEnergy’s plan would cost its utility customers $3 billion over a 15-year period, per WSJ, which cites Bruce Weston, state Consumer’s Counsel.  The plan finds support in the Ohio Energy Group, including the Ford Motor Co., which says customers will benefit in the long term.  The group, however, does not support AEP’s proposal.

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