Dive Brief:
- PJM Interconnection has joined a widespread call for federal regulators to review proposed power contracts in Ohio that would guarantee profits for a pair of generators. Unchecked, the deals "could harm the overall competitiveness of the PJM markets," the grid operator told FERC in a filing last week.
- The grid operator, along with the Electric Power Supply Association, a generator trade group, want FERC to withdraw waivers allowing FirstEnergy and American Electric Power to engage in affiliate transactions. Generators like Dynegy and NRG Energy have jumped into the fray as well, saying they can provide the state's consumers with cheaper power.
- American Electric Power, whose case is acting as the standard bearer for a similar set of proposals from FirstEnergy, has said generators, federal regulators and out-of-state commissions have no place in the proceeding, which they believe will result in millions of savings for the state's residents.
Dive Insight:
The calls for federal oversight of Ohio's proposed subsidies are sharpening, with EPSA, Retail Energy Supply Association, Dynegy, Eastern Generation, NRG Energy and now PJM entreating for FERC to protect regional markets.
The power purchase agreements, if approved, "create incentives that will likely lead to these generation units being offered, unless checked, in a manner that could harm the overall competitiveness of the PJM markets," the grid operator said last week. "This outcome could impact significantly PJM’s administration of the wholesale markets in its region and affect the mission entrusted to these markets – assuring efficient, long-term resource adequacy."
Those comments echoed the wider group's filing last week. Led by EPSA, the generators told FERC that the Ohio contract proposal "strikes at the heart of the Commission’s longstanding restrictions on affiliate transactions. Indeed, this contract threatens exactly the harm to both captive consumers and markets that prompted the adoption of those restrictions in the first place."
Rescinding a waiver granted for affiliate transactions, the groups say, would ensure federal oversight of the deals.
AEP reached a settlement in 2015, calling for eight-year power purchase agreements covering 2,671 MW from nine AEP generating units, as well as the utility's 423 MW contractual share of Ohio Valley Electric Corp. generation. FirstEnergy's similar deal would keep two power plants operating – the Davis-Besse Nuclear Power Station in Oak Harbor and the W.H. Sammis coal-fired plant in Stratton.
Nuclear generator Exelon said in January that it believes it could sell 3,000 MW of carbon-free generation into the state – $2 billion cheaper than FirstEnergy's proposal — despite not owning any instate generation resources. Dynegy has indicated it could provide the power at a similar savings.
As RTO Insider points out, the groups petitioning FERC have asked for an expedited review because Ohio regulators could rule on the proposals in the next few weeks, while PJM's planning auction for 2019 and 2020 is slated to be held in two months.
