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PUCO Staff: "Properly Conceived" FirstEnergy PPAs May Be In Public Interest, Oppose As-Filed Versions

September 21, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

Staff of the Public Utilities Commission of Ohio opposed proposed 15-year ratepayer backed contracts to support two power plants owned by FirstEnergy Solutions (as well as its share in a jointly owned plant), but offered modifications to the proposed program to the extent PUCO finds the program to be in the public interest

"[I]t is possible that Rider RRS, if properly conceived, may be in the public interest," Staff said

Staff said that the FirstEnergy utilities have not justified their proposed PPAs for, among other reasons:

• "With respect to a demonstration of the financial need for the Davis-Besse and Sammis plants, the Companies and FES assumed in the PPA a 50%/50% capital structure and a Return on Equity (ROE) of 11.15%. Staff believes the proposed ROE is excessive and, therefore, Staff does not believe a demonstration of financial need has been presented."

• "The Companies and FES did not provide an independent assessment of the impact of the closures of Davis-Besse and Sammis on grid reliability. Rather, they simply provided an assessment, conducted by two of their transmission engineers, of the impact of such closures on the grid should FES retire the plants."

• "The Companies and FES did not commit to a rigorous Commission oversight of Rider RRS. Rather, the Companies offered a statement that all legacy cost components of the Davis-Besse and Sammis plants were 'reviewed by the EDU Team' and were 'found to be reasonable'"

• "The Companies and FES did not commit to full information sharing in its proposed Rider RRS"

• "The Companies and FES did not, in Staff’s opinion, commit to sharing the financial risk associated with Rider RRS with its distribution customers"

While Staff agreed that PJM prices have been volatile, Staff said that it prefers staggered and laddered default service procurements to mitigate volatility, instead of the PPAs.

Staff said that should PUCO find the PPAs to be in the public interest, it should condition approval on several modifications, including shortening the PPAs from 15 years to the term of the electric security plan (proposed to be three years)

Staff also proposed a sharing mechanism for the risk associated with Rider RRS. "The Companies and FES would have to develop a sharing mechanism whereby FES commits to be responsible for a portion of the costs associated with Rider RRS in exchange for a portion of the revenues associated with Rider RRS. Alternatively, the Commission may wish to include an appropriate charge and credit caps on Rider RRS," Staff said

Additionally, Staff would condition approval on the companies committing a severability provision should a court of competent jurisdiction invalidate Rider RRS in whole or in part.

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