Ohio Commission's Concern with RPM Continues, Orders FirstEnergy EDCs to Take Action to Mitigate Prices

The Public Utilities Commission of Ohio has ordered Cleveland Electric Illuminating, Ohio Edison, and Toledo Edison to take actions to mitigate expected capacity price increases in the Reliability Pricing Model due to the retirement of certain units owned by FirstEnergy's generation subsidiaries.

Specifically, PUCO directed the FirstEnergy electric distribution companies to expand their energy efficiency programs to reduce the zone's capacity obligations, noting the measures that were not previously cost effective may now be, given the expected increase in capacity prices.

PUCO noted that in January, FirstEnergy Corporation announced that its generation subsidiaries would be retiring the following power plants located in northern Ohio by September 1, 2012: Units 2-4 at the Bay Shore Plant, the Eastlake Plant, the Ashtabula Plant, and the Lake Shore Plant. These generation facilities are in the American Transmission System Inc. (ATSI) zone for the PJM Interconnection, LLC (PJM).

The retirement of this generation in one area of the transmission system could impact the ability to maintain voltage support and result in transmission constraints during peak periods, PUCO noted.

Moreover, PJM's initial planning parameters for the 2015/2016 base residual auction (BRA) indicate that as a result of the removal of approximately 2,200 MW of generation located in the ATSI zone, the ATSI zone for the first time would be modeled separately by PJM for purposes of setting prices in the 2015/2016 RPM BRA.

"Limited import capabilities and reduced generation located within the ATSI zone could produce a significant increase in capacity prices in the 2015/2016 RPM BRA if appropriate steps are not taken to reduce generation requirements, improve energy efficiency, and expand demand response resources," PUCO said.

"Given their obligation to provide adequate service and reasonable and adequate facilities and instrumentalities, and consistent with state policy, the FirstEnergy electric distribution utilities in the ATSI zone, The Cleveland Electric Illuminating Company, the Ohio Edison Company, and The Toledo Edison Company (collectively, the Companies), have an obligation to take all reasonable and cost-effective steps to avoid unnecessary RPM price increases for their customers. Sections 4905.22, 4905.70, and 4928,02, Revised Code. Moreover, the retirements of First Energy's generation plants could make some measures cost-effective which might not have been considered cost-effective assuming the continued operation of this generation," PUCO said.

PUCO directed the FirstEnergy EDCs to consult with Staff and file within 30 days a report detailing potential energy efficiency and peak demand reduction offers into the May 2012 PJM RPM auction for the 2015/2016 year. "This report should include all cost-effective energy efficiency and peak demand reductions achievable by 2015 and a forecast of the demand and voltage reductions achievable by 2015 as a result of implementing all cost-effective distribution system Volt-VAR controls. Additionally, the Companies should provide PJM with a forecast of the demand and voltage reductions achievable by 2015 so that PJM may consider it in developing its forecast demand and voltage parameters for the May 2012 RPM auction, or report to the Commission reasons why the data will not be provided," PUCO said.

"In order to encourage that all cost-effective steps are implemented promptly to offset generation retirements, the Companies are hereby directed under Rule 4901:l-39-04(A), Ohio Administrative Code, to file no later than July 31, 2012, interim energy efficiency and peak demand reduction program portfolio plans, specifically those programs that in the aggregate would have a mitigating impact on the generation retirements," PUCO ordered.