FirstEnergy Ohio EDCs Won't Offer Energy Reduction Resources into Capacity Market Absent Hold Harmless Provision

Ohio Edison Company, The Cleveland Electric Illuminating Company, and The Toledo Edison Company have informed the Public Utilities Commission of Ohio that, absent an order from PUCO insulating them from economic harm, the electric distribution companies do not plan to offer any potential energy efficiency and peak demand reduction (EE&PDR) into the 2015/2016 PJM Base Residual Auction.

PUCO had directed the utilities to report on incremental energy efficiency and peak demand reduction opportunities due to generator retirements and expected price increases in the capacity market. In light of such higher capacity prices, EDC-administered load reduction programs which were previously uneconomic may now pass a cost/benefits test.

The FirstEnergy EDCs said that because of the performance obligations of the capacity market, the companies have only offered resources into the BRA when risks were at a minimum. For example the companies offered demand response that existed under their Emergency Load Relief (ELR) Rider and that was approved in the companies' 2010 ESP into a PJM capacity auction for the 2011-12 Delivery Year.

Due to the performances obligations, there is significant risk for the companies to offer potential EE&PDR resources into the 2015/2016 BRA, the EDCs said.

"The current ELR Rider approved in the Companies' Case No. 10-388-EL-SSO expires on May 31, 2014, and there is no certainty whether such Rider will be in place beyond that date. Consequently, the Companies did not offer any reduction resources into the May 2011 BRA for the 2014-2015 Delivery Year simply because they did not have any demand response resources under contract to offer into the auction for that time period. Without such a mechanism through the ESP or other Commission-approved plan, the Companies do not have a mechanism to allow them to enter into contractual relationships with customers to provide emergency demand response resources that the companies could offer into the May 2012 BRA for the 2015-2016 Delivery Year," the EDCs said.

"There are also significant risks if the Companies were to offer energy efficiency or demand response into the May 2012 BRA for the 2015-2016 Delivery Year. By necessity these resources would come from the Companies' EE&PDR Portfolio Plans mandated by Senate Bill 221. However, the Companies' current EE&PDR Program Portfolio Plan is only approved through 2012. The scope of the Companies' next three-year EE&PDR Program Portfolio Plan is for calendar years 2013 through 2015 – a plan that has yet to be filed or approved by the Commission. And there is no guarantee that any (all) resources that are brought into this future plan will qualify as Capacity Resources under applicable PJM tariffs. Moreover, even if these requirements could be cleared (and at this time the Companies do not see how this is possible), because the EE&PDR plan would run only through December 31, 2015, there would not be any assurance that the Companies would have the necessary PJM Capacity Resources to satisfy any supply obligations for the last five months of the 2015-16 Delivery Year," the EDCs said.

"As discussed above, because the Companies do not have an approved EE&PDR Portfolio Plan that covers the 2015/2016 BRA, combined with the PJM penalties associated with failure to deliver on reduction commitments, the Companies cannot offer any EE&PDR Portfolio Plan reductions into the 2015/2016 BRA, absent Commission assurances that any such penalties would be recoverable through rates. For all of those reasons, the Companies do not believe it is prudent to offer any energy reduction resources into the 2015/2016 BRA to be conducted in May 2012," the EDCs said

The EDCs said that they will continue to explore opportunities for energy efficiency, peak demand reduction and VoltVAr controls that can be implemented and possibly help to mitigate the impact on generation requirements.