Debunking Silly Arguments for Utility Protectionism

2008_Weak_&_Strong_Arguments_BRYANS.jpegOhio utilities FirstEnergy and AEP, as readers of this blog know too well, want the Buckeye State to bail out their uneconomic power plants. Combined, their proposals before the Public Utilities Commission of Ohio (PUCO) would run Ohioans nearly $6 billion in increased costs. We understand where the companies’ greedy desire for subsidies comes from, but the arguments for them have become downright silly.

Let’s review why FirstEnergy and AEP’s bailout justifications don’t hold up:

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  • The power giants say their subsidies will be good for customers by providing certainty about future electricity rates. The only certainty is those same customers will need to pay an extra $130 per year so the companies can enjoy bonuses and dividends.
  • They also argue the bailouts will be good for Ohio’s businesses. Yet industrialists, which are major electricity consumers, say the utilities’ income-guarantee plans “will make it more difficult for […] Ohio manufacturers to remain competitive in the global markets.”
  • They claim the bailouts will save Ohioans money in the long run. According to a state agency, they will actually cost Ohio almost $6 billion.
  • FirstEnergy and AEP also say the lights will go out if they have to close their power plants. Reliability, no doubt, is an important issue. That’s why the responsibility is in the hands of the regional grid operator, which can manage electricity across a wide area, not the regulators of an individual state. The regional regulator, in fact, says Ohio has lots of excess capacity and reliability is not an issue. Even the Public Utilities Commission chairman warned the utilities to stop scaring Ohioans. Viewing reliability from another perspective, the regional power market ensures power plants that are needed are paid for their electric capacity. In other words, unnecessary units don’t make the cut. The only reason FirstEnergy and AEP are seeking subsidies is their generators are expensive and not needed.
  • FirstEnergy and AEP say regulators need to protect their financial health. Last time we checked, the regulators’ job is to protect the public interest – and to care more about fair customer bills than utility credit ratings.
  • FirstEnergy complains Ohioans should not rely upon out-of-state power, forgetting electrons don’t really care about state boundaries. Once they’re on the regional grid, there’s no telling where they’ll end up. Plus, there are other Ohio-based generators willing to meet energy demand (like Dynegy, which has offered alternative plans).

AEP does say it’s willing to support a few hundred megawatts of solar and wind power, but its requested subsidies would ensure dirty power plants continue operating and spewing more than a few thousand megawatts worth of pollution.

Their strongest – although unspoken – argument seems to be political influence. The powerful utilities have made generous campaign contributions and hired trusted advisors to key elected officials, but the proposed “deals” are bad for business, reliability, customers, and the environment.

The PUCO should see right through these silly arguments and reject FirstEnergy and AEP’s requests for subsidies.

Photo source: Wikimedia/Joan Bryans

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One Comment

  1. Bob Meinetz
    Posted February 14, 2016 at 10:51 pm | Permalink

    Dick, your article reveals a fundamental misunderstanding of electricity, and thus doesn’t make much sense. You write:

    Once [electrons] are on the regional grid, there’s no telling where they’ll end up…

    Electrons on an A/C grid go go back and forth – the “alternating” in “alternating current”. If you were to cut the electric energy which pushes and pulls them, they would end up very close to where they started. That electrical energy is very carefully accounted for (that’s how generators get paid). Questions:

    1) What gives you the right to tell utilities who will generate the electricity on wires they own?

    2) If AEG builds thousands of megawatts of solar and wind capacity, who/what generates Ohio’s electricity at night and when the wind is not blowing – coal plants in other states?

    3) “A few thousand megawatts worth of pollution” makes no sense at all – emissions are a function of energy, not power, and are completely dependent upon the method of generation. Since Ohioans can be counted on wanting electricity any time they need it, is this a plug for nuclear?

    EDF would benefit by having someone who’s knowledgeable on the subject they want to debunk. Even though it would likely upset EDF’s policy-cart of apples, that’s the place to start.