Rubber-Stamp Regulators: Ohio Gives FirstEnergy Another Go-Ahead

approved-pixabayAt least in theory, government officials are supposed to monitor electric utilities and ensure they do not abuse their monopoly power. For more than a century, these independent regulators have protected customers from unfair, above-market prices and provided a check on giant corporations.

That social contract is being tested in Ohio.

In an unprecedented move, the Public Utilities Commission of Ohio (PUCO) today allowed FirstEnergy to seek a new power plant bailout – a full day before opponents were to offer their objections. So, without listening to the arguments against the deal, the PUCO rubberstamped the utility’s request for a rehearing.

Unfortunately, this is not the PUCO’s first rubber-stamping. FirstEnergy’s original proposal would have forced customers to pay $4 billion to subsidize the utility’s old and dirty power plants, which could no longer compete in the market. That proposal was almost laughable since the power plants were not needed, and certainly not at such a high price – other companies proposed to offer the same amount of electricity at significantly lower prices.

Many organizations and advocates spoke out against the deal. But even though groups like the Ohio Consumers’ Counsel and Ohio Manufacturers’ Association complained the subsidies would hurt the state’s customers and industries, the PUCO granted the politically-powerful utility’s bailout – in less than six minutes of formal consideration.

To the agency’s great embarrassment, the Federal Energy Regulatory Commission (FERC) quickly overturned the original PUCO decision, declaring Ohio’s subsidies illegally distorted competitive markets. (FERC has jurisdiction over wholesale power markets, of which Ohio is a part.)

FirstEnergy responded with a sleight of hand, asking the PUCO to send the subsidy to its distribution-monopoly affiliate rather than its generation-company affiliate – a creative move to avoid further FERC oversight. Most likely FERC will see through this sham, but that doesn’t seem to be stopping the PUCO from pushing through FirstEnergy’s radically “new” proposal.

Although regulators and the regulated should be separated, the relationship in Ohio appears to be quite cozy. For example, the announcement of the recent PUCO chairman’s departure came not from the PUCO but, amazingly enough, from FirstEnergy’s own chairman, who praised the regulator for doing a great job.

The PUCO’s action today suggests commissioners care more about appeasing a politically-connected company than protecting customers or considering both sides of an argument. That decision should make the Ohio Supreme Court realize these regulators are not independent, nor are they fulfilling their primary purpose: regulating fairly. Since FirstEnergy’s new proposal still reflects illegal exchanges among the utility’s affiliates, it will further embarrass the PUCO when federal regulators or the Ohio Supreme Court rule against the new bailout proposal.

Perhaps more importantly, today’s PUCO ruling forces a reconsideration of the regulatory contract. We need independent oversight of monopolies. We need regulating rather than rubber-stamping.

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3 Comments

  1. Posted May 11, 2016 at 5:57 pm | Permalink

    Hello Mr. Munson,

    Quite the saga unfolding here, like a soap opera.

    It's worth noting, there are both coal and nuclear plants at stake, both increasingly non-economic as you point out. Sure, I'm all the happier to see the coal units phased out, as the Ohio & Tennessee Valleys out to the Mississippi remain strong holdouts for coal. But the justification for the nuclear units is not as clear-cut given we know wind entry into Ohio is not a certainty (transmission constraints & new-build opposition and 140m hub height logistics not reached yet). Solar won't get the job done come the winter months. So that leaves us….. natural gas generation to make up the lion's share of new capacity or shortfalls.

    It's a tricky wicket to say the least, and rubberstamping is not unknown in the US nuclear industry, but we can't exactly take if off the table either. And what if we did, that would not remove the 13,000 MW of capacity across the Great Lakes in Ontario… which seems to have the ability to have "adult" conversations about its need & lives in very close proximity to it.

    I don't know how to sort the FirstEnergy (Coal & Nuclear) rubberstamping, while double-standards are present in NY state were I am with their nuclear fleet, but I think where applicable, coal and nuclear need to be separated or made known as distinct entities within the discussions when they arise.

    Cheers,

    • Dick Munson
      Posted May 17, 2016 at 1:44 pm | Permalink

      Hello Hans – Thank you for your interest and stay tuned for more updates.

  2. Bob Meinetz
    Posted May 12, 2016 at 9:45 am | Permalink

    Dick, fortunately government doesn't function on the basis of theories but law. Your particular theory tends to coincide nicely with that of Franklin Delano Roosevelt, who signed into law the Public Utility Holding Company Act of 1935. It granted broad oversight of electric utilities, including annual antitrust review by the SEC. It functioned well for sixty years.

    In 2005, at the prodding by George W. Bush, both Ohio senators Mike DeWine and George Voinovich voted enthusiastically to remove those protections. So it's not unduly curious Ohio utilities are now adherents of fossil fuel free-market theories more than those which might protect consumers.

    My senators (Boxer/Feinstein) were hardly less culpable – seduced by funding for "renewables", they also voted Yea. But your perspective is in dire need of historical basis – Ohioans have made the bed in which they lie.