The fate of a pair of 1950s-era coal plants and the largest solar project ever proposed in Ohio are entangled in a single case before the state’s Supreme Court.
American Electric Power agreed to build the 400-megawatt solar project in Appalachian Ohio as part of a controversial settlement over subsidies for two Ohio Valley Electric Corporation coal plants. AEP is an OVEC shareholder.
That settlement was challenged by customer advocates and in June was heard by the Ohio Supreme Court. Although oral argument focused on the coal plants, the decision in the case could perhaps unravel the entire arrangement.
At issue is whether a utility in Ohio’s deregulated electricity market should get generation costs and profits guaranteed while investors in other projects have to put their own money on the line when building and operating generation sources.
“Power plants should be built and charged to customers in the competitive electric market, and not by monopoly utilities with captive customer funding,” said spokesperson Molly McGuire at the Office of the Ohio Consumers’ Counsel, which brought the appeal along with the Ohio Manufacturers’ Energy Group. “The competitive electric market promotes lower prices and innovation.”
Environmental groups that support the 2015 settlement with AEP see the planned solar project as a way to add clean energy, while jumpstarting economic growth for southeastern Ohio.
“There’s a giant hole that the decline of coal left in Appalachia, and the region cannot afford to be left behind as the rest of the country shifts to cleaner and cheaper energy sources,” said Dan Sawmiller, Ohio energy policy director for the Natural Resources Defense Council.
The project would create jobs and spur development, including a possible hub for the renewable energy supply chain, supporters say. Additionally, the projects would offer renewable energy for companies in other industries who are moving away from fossil fuels.
“Renewable energy options are key to business development, and developing these resources in the state benefits our customers and their communities,” AEP spokesperson Scott Blake said. Without all utility customers helping to cover the costs, “these beneficial results could not be achieved.”
The coal plant question
The connection between the planned solar project and the old coal plants started with a regulatory case filed by AEP in 2014. The case had a tortured procedural history, with regulators first denying, but then allowing the charges for AEP’s share of the OVEC plants.
Among other things, the turnabout involved a settlement agreement with some but not all challengers. The case went through more yet tweaks, with other coal plants dropped from the planned charges after a 2016 ruling by FERC.
The Office of the Ohio Consumers’ Counsel and the Ohio Manufacturers’ Association Energy Group appealed the Public Utilities Commission of Ohio’s decision when it became final last year.
The Ohio Supreme Court heard oral argument on June 26. In defense of the PUCO, lawyer Steven Beeler argued that the “blended rate” that customers pay to cover the coal plants’ costs “is basically a mechanism to provide for stability.”
However, attorney Maureen Willis of the Office of the Ohio Consumers’ Counsel argued that the rate plan goes against both Ohio and federal law. Attorney Kimberly Bojko, representing the Ohio Manufacturers’ Association Energy Group, agreed. “It does not meet the statutory requirement. It is preempted by federal law. And it is bad public policy,” she said.
A decision is likely before the end of this calendar year. Meanwhile, AEP has been collecting the coal plant fees. And a separate settlement with most parties deals with AEP’s charges through 2024.
A decision either way could affect the solar project. If the Ohio court says no to the coal subsidies, it’s unclear whether AEP would still move ahead with the projects. That’s because the settlement agreements in the cases are worded as package deals.
Indeed, AEP cancelled plans for a 2 GB project last month after Texas regulators’ rejected the company’s request to charge the state’s ratepayers for it. The Texas commission found that the need and benefits did not outweigh the costs to ratepayers.
The company could decide to move ahead in Ohio anyway, or the Ohio Supreme Court might rule the other way and allow the coal subsidies.
In either case, charges for the renewable projects would have to clear more hurdles. There would be a separate ratemaking case, with possible appeals, to review the actual amount of any proposed charges in terms of costs and benefits. That’s one reason why Sawmiller views the Ohio Consumer Counsel’s opposition to the solar project as premature.
In any event, charges for a large renewable project and for failing coal plants are “world’s apart” and deal with technologies from different centuries, Sawmiller said. And, when it comes to any cost-benefit analysis, “you also have to factor in the benefits of investing in a growing industry with the potential to attract lots of sustainable manufacturing jobs to Appalachia while providing the region with cleaner electricity at a low fixed price for decades.”
Clearing that hurdle could be a challenge, because the Ohio statute allowing recovery of charges for new generation plants is very narrow, Bojko said.
Yet even if the PUCO gave the go-ahead for the Ohio project’s charges, challenges are still likely. The Ohio Manufacturers’ Association “does not believe in above-market charges,” she said. “OMA does not support anti-competitive effects or any distortion of the market by subsidies from ratepayers to one entity.”