{"id":10097,"date":"2015-05-07T10:19:09","date_gmt":"2015-05-07T15:19:09","guid":{"rendered":"http:\/\/blogs.edf.org\/energyexchange\/?p=10097"},"modified":"2015-05-07T10:26:05","modified_gmt":"2015-05-07T15:26:05","slug":"creative-utility-accounting-estimating-the-true-cost-of-a-subsidy","status":"publish","type":"post","link":"https:\/\/blogs.edf.org\/energyexchange\/2015\/05\/07\/creative-utility-accounting-estimating-the-true-cost-of-a-subsidy\/","title":{"rendered":"Creative Utility Accounting: Estimating the True Cost of a Subsidy"},"content":{"rendered":"

\"rp_coal-88064_640-300x199.jpg\"<\/a>$5 billion is a lot of money, yet that\u2019s the difference in cost estimates between an Ohio-based, consumer advocacy group and FirstEnergy for the utility\u2019s proposed bailout plan.<\/p>\n

FirstEnergy, the giant Akron-based company that owns power plants and transmission lines in several midwestern and northeastern states, calculates its proposed plan to raise electricity rates will eventually save<\/em> Ohio customers $2 billion. The Ohio Consumers\u2019 Counsel, in contrast, estimates the subsidies will cost<\/em> Ohioans $3 billion.<\/p>\n

To appreciate the differences, consider a little history.<\/p>\n

Several years ago, FirstEnergy thought it could profit in emerging regional electricity markets, so it convinced regulators to allow it to set up a separate subsidiary that would generate and sell electricity. That unit was to be independent from another subsidiary company, which managed the power wires and delivered power to customers. This partial step toward free markets, however, didn\u2019t work out too well for FirstEnergy. Now, it\u2019s asking regulators to abandon competition.<\/p>\n

In an effort to shift risk from its shareholders to its customers, FirstEnergy wants regulators to approve a non-competitive purchase agreement whereby its sister company will buy the output of another subsidiary\u2019s three, old coal-fired power plants and a nuclear reactor that are not able to compete in regional power markets.<\/p>\n

The Ohio Consumers\u2019 Counsel thinks<\/a> the arguments for such a deal are \u201cunpersuasive, highly speculative, [and] \u2026 onerous.\u201d<\/p>\n

Even FirstEnergy admits its proposal will cost customers a lot of money \u2013 a bit more than $400 million<\/a> \u2013 during the three-year period of the proposed rate increase. Yet the utility decided to base its proposal on a 15-year period. Over the same period, OCC found FirstEnergy\u2019s proposal would cost about $3 billion instead of the utility\u2019s calculation of a $2.021-billion benefit.<\/p>\n

The FirstEnergy bailout also raises fundamental questions about the future of the power industry. Because the utility is proposing a return to the days when its distribution or \u201cwires\u201d subsidiary (which is a regulated monopoly with virtually guaranteed profits) could give preferential treatment to its power-generation subsidiary (which is supposed to compete with other power plants), the plan would be a blow to corporate separation, competition, and innovation.<\/p>\n

The Public Utility Commission of Ohio (PUCO), the state agency that regulates Ohio\u2019s power grid, is charged with reviewing the cost-estimate differences and deciding on FirstEnergy\u2019s request. PUCO\u2019s hearings are scheduled to begin on June 15, 2015. In the past few months, the Commission has decided against similar proposals<\/a> by AEP and Duke, but the FirstEnergy case involves more money.<\/p>\n

This is one\u00a0in a series of posts that examine FirstEnergy\u2019s proposed bailout for its aging coal fleet and other market manipulations. Stay up to date on FirstEnergy by visiting EDF\u2019s<\/em>\u00a0<\/em>website<\/em><\/a>, where we\u2019ve published helpful resources and will host a series of newsletters. If you would like to receive our FirstEnergy newsletter directly, please click<\/em>\u00a0<\/em>here<\/em><\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

$5 billion is a lot of money, yet that\u2019s the difference in cost estimates between an Ohio-based, consumer advocacy group and FirstEnergy for the utility\u2019s proposed bailout plan. FirstEnergy, the giant Akron-based company that owns power plants and transmission lines in several midwestern and northeastern states, calculates its proposed plan to raise electricity rates will …<\/p>\n","protected":false},"author":39893,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[42996,46898,28800],"tags":[],"coauthors":[],"class_list":["post-10097","post","type-post","status-publish","format-standard","hentry","category-smart-power","category-firstenergy","category-ohio"],"acf":[],"yoast_head":"\nCreative Utility Accounting: Estimating the True Cost of a Subsidy - Energy Exchange<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/blogs.edf.org\/energyexchange\/2015\/05\/07\/creative-utility-accounting-estimating-the-true-cost-of-a-subsidy\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Creative Utility Accounting: Estimating the True Cost of a Subsidy - Energy Exchange\" \/>\n<meta property=\"og:description\" content=\"$5 billion is a lot of money, yet that\u2019s the difference in cost estimates between an Ohio-based, consumer advocacy group and FirstEnergy for the utility\u2019s proposed bailout plan. 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