EXC Exelon Corp

By Cassandra Sweet 

Two of the nation's largest electricity producers, American Electric Power Co., Inc. and FirstEnergy Corp., on Thursday won regulatory approval in their home state of Ohio to shift the financial burden of unprofitable power plants to consumers.

The Public Utilities Commission of Ohio voted unanimously to approve plans to have consumers pay extra to keep the plants running, over objections from rival power-plant owners and consumer groups, who said the moves would raise utility bills and hurt competition.

"The electricity industry as a whole is in a period of transition," commission chairman Andre Porter said. "Ohioans should not be alarmed by the transition."

Under the plans, FirstEnergy, based in Akron, and AEP, based in Columbus, would have their regulated Ohio utilities buy power from seven old coal-fired plants and one nuclear plant owned by their unregulated businesses. The utilities will then sell that electricity on the wholesale market.

Because there is a surplus of electricity in the region and prices are at historically low levels, the companies argued that they won't generate enough money from ordinary electricity sales to keep the plants running.

So to keep the facilities operating, Ohio regulators agreed to allow the companies to charge utility customers for the shortfall between what the companies say it costs to produce the power and what they can fetch on the wholesale market. The arrangements run from this coming June to May 2024.

"We're pleased that the commission has made a decision on our proposal, following a thorough analysis of our plan," FirstEnergy spokesman Doug Colafella said.

AEP's plan will benefit consumers, support the state's economy and preserve jobs, the company's chief executive Nicholas Akins said.

FirstEnergy and AEP have argued that while the utilities may lose money on the deals now, customers will get money back on their bills if wholesale prices rise in the future and the power sales make money.

Under the plans, if utilities can later fetch certain higher prices on the wholesale market, they would pass some of the profit on to customers in the form of rebates.

Rival power plant owners such as Dynegy Inc. and Exelon Corp., however, opposed the plans. "This is a clear example of state intervention that hurts competition, hurts prices and hurts citizens," Dynegy Chief Executive Bob Flexon said.

Mr. Flexon said Dynegy, which owns several Ohio power plants, including some it co-owns with AEP, could provide Ohioans the same power for much less money. He said Dynegy would continue fighting the plans through state and federal regulators and in court, if necessary.

A coalition of power companies, including Dynegy, has filed complaints with federal regulators to block AEP's and FirstEnergy's plans. The matter is pending before the Federal Energy Regulatory Commission.

PJM Interconnection, the organization overseeing the PJM wholesale power market that includes Ohio and 12 other Midwestern, mid-Atlantic and East Coast states, has joined in opposition to AEP's and FirstEnergy's plans, arguing they violate competitive wholesale market rules.

Average wholesale power prices in Ohio and elsewhere in the PJM market have fallen by one-half since 2014 to $31.27 a megawatt-hour this year to date, according to a Wall Street Journal analysis of market data compiled by the Energy Department.

Consumer and environmental groups also oppose the plans, saying they are a bad deal for consumers and the environment. "These bailouts subsidize old power plants that are dirtying our air. It's a terrible deal for Ohioans' health and wallets," said Jim Marston, a vice president at the Environmental Defense Fund. The organization has said it plans to continue fighting the companies' plans and would be prepared to sue in court.

Write to Cassandra Sweet at cassandra.sweet@wsj.com

(END) Dow Jones Newswires

March 31, 2016 17:27 ET (21:27 GMT)

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