State regulators on Wednesday rejected a proposal by Akron-based FirstEnergy and instead approved an alternative plan that would give the company less money to add improvements to the power grid.
The decision, which comes more than two years after FirstEnergy Corp.’s first proposal, appears to tie money for improvements to the company’s continued operation out of its Akron headquarters.
Neither FirstEnergy nor opponents seemed pleased with Wednesday’s decision.
Opponents of the plan still called it a “cash grab” for FirstEnergy with no meaningful strings attached requiring the company to use the money to modernize the grid. The Ohio Manufacturers Association said the plan could cost the state’s businesses and residential consumers $1 billion in “unwarranted new costs.”
Ohio Consumers’ Counsel Bruce Weston said it was time for the state legislature “to repeal the law used by utilities to charge Ohioans more than the market price of electricity.”
“Ohioans should have lower electric bills reflecting lower prices in the energy markets,” Weston said in a news release. “Unfortunately, consumers will pay higher electric bills to subsidize their utility. It’s time to restore the Ohio legislature’s vision for consumers to benefit from competitive pricing for electricity.”
The Public Utilities Commission of Ohio was acting on what was FirstEnergy’s fourth version of its Electric Security Plan, outlining how the parent company of Ohio Edison and its other operating companies would provide electric service to customers for an eight-year term, which started June 1.
Among other things, the company had asked for $558 million over eight years to support grid modernization. The PUCO staff in June recommended a plan proposing $131 million a year for three years with the option to extend for an additional two years.
In a 4-0 vote, the commission approved a new staff plan to give $132.5 million plus taxes, which amounts to about $204 million per year, to FirstEnergy for three years. The utility may get an additional two years, but only with commission approval.
PUCO officials said the new rider, which would be recouped from customers according to state law, would cost no more than $3 a month for the average residential consumer.
In a news release, the commission said the $132.5 million would provide FirstEnergy “with an infusion of capital so that it will be financially healthy enough to make future investments in grid modernization.”
The PUCO said “during the term of rider... FirstEnergy will maintain its headquarters in Akron, Ohio, and make sufficient progress in grid modernization initiatives ordered by the Commission, including its deployment of smart grid technology in the companies’ service territories.”
PUCO Chairman Asim Z. Haque said in the release that the primary purpose of the rider “is to ensure that FirstEnergy retains a certain level of financial health and creditworthiness so that it can invest in future distribution modernization endeavors. We expect that these future endeavors will advance the electric industry in FirstEnergy’s service territory and benefit Ohio’s consumers and businesses.”
In a news release, FirstEnergy President and Chief Executive Officer Charles “Chuck” Jones said the decision “is disappointing for our customers. While we clearly demonstrated to the PUCO what is essential to ensure reliability for customers in the future, the amount granted is insufficient to cover the necessary and costly investments. The decision also fails to recognize the significant challenges that threaten Ohio utilities’ ability to effectively operate.”
FirstEnergy spokesman Todd Schneider confirmed the company plans on staying in Akron.
The company had said the PUCO approval was necessary to protect jobs, the company and electric rates.
The proposed plans has had a lot of starts and stops.
Earlier this year, the PUCO unanimously approved the plan, based on a settlement FirstEnergy officials and others reached with plan.
In April, however, federal regulators blocked Ohio’s approval of profit guarantees for FirstEnergy and American Electric Power, saying the electric utilities must secure federal approval for the plans.
The complaints to FERC were submitted by competitors and opponents.
In May, FirstEnergy filed for rehearing and modified its plan.
Immediate reactions to the PUCO’s decision were not available as interested parties were waiting for the PUCO to upload the order so they could review it.
Critics Wednesday reiterated their opposition to the plan.
“The Alliance for Energy Choice continues to be disappointed that the PUCO once again granted the utility’s request for more money with no corresponding benefit to customers,” said alliance spokesman Todd Snitchler, a former Public Utilities Commission of Ohio chairman from Stark County’s Lake Township. “Businesses and families will again be required to pay more for the same service they already receive with only a hope that customers will gain an upgraded grid if and when the utility elects to do so.”
Snitchler also said if FirstEnergy wants to upgrade its grid, it should have asked in a distribution rate case and follow the proper procedures.
Competitors say they are in favor of modernization of the power grid, which would mean shorter outage times and more localized outages and better reliability.
The mechanisms in place when a utility makes investments to its infrastructure and gets reimbursed from customers through increases on their bills, called riders, are fair, said Teresa Ringenbach, Direct Energy’s senior manager of government and regulator affairs for the Midwest division.
But Ringenbach and Snitchler said they were not in favor of a plan that would not have strings attached to require FirstEnergy to actually make the grid-modernization improvements instead of just holding on to the money.
Trey Addison, AARP’s associate state director for advocacy, called the plan a “cash grab.
“It’s grid modernization in quotes, but it’s simply a cash grab and income transfer,” he said.
Opponents said they expect appeals of the PUCO decision to the Ohio Supreme Court.
FirstEnergy officials said since the plan started on June 1, residential customers’ total monthly bills have dropped an average of $6.64 per month, a 6.2 percent decrease over previous bills.
The company also said even with the new charge, the total monthly bills are expected to be lower than they were a year ago and among the lowest in the state.
Snitchler said if wholesale electricity prices continue to go lower and “overall prices are going higher, then utilities are adding other charges and consumers are not getting the benefit.”
Snitchler also dismissed threats that FirstEnergy has made that rejection of their full proposal might mean they would leave Ohio or Akron or be the subject of a takeover.
“I know those threats have been made, that the headquarters will move. To which, I say ‘to where?’.. Wall Street analysts will say they are not a takeover. The utilities are perfectly healthy and earning a very fair rate of return,” Snitchler said.
Betty Lin-Fisher can be reached at 330-996-3724 or blinfisher@thebeaconjournal.com. Follow her @blinfisherABJ on Twitter or www.facebook.com/BettyLinFisherABJ and see all her stories at www.ohio.com/betty