Generators, RESA Ask FERC To Rescind Prior Waivers Granted to FirstEnergy, AEP Units Regarding Affiliate Sales, Seek FERC Review of Proposed Ohio PPAs

In separately filed complaints, the Electric Power Supply Association, Dynegy, Eastern Generation, LLC, several NRG Companies, and the Retail Energy Supply Association petitioned FERC to withdraw waivers previously granted to market-based rate subsidiaries of AEP and FirstEnergy concerning affiliate sales, and asked FERC to review proposed PPAs between the companies' regulated Ohio utilities and competitive arms under the Edgar/Allegheny standards

The PPAs have not been approved or executed yet, but generators asserted that their complaints are not premature

The Commission’s market-based rate regulations expressly provide that, "no wholesale sale electric energy or capacity may be made between a franchised public utility with captive customers and a market-regulated power sales affiliate without first receiving Commission authorization for the transaction under section 205 of the [Federal Power Act]."

The generators noted that for purposes of these restrictions, "captive customers" are "wholesale or retail electric energy customers served by a franchised public utility under cost-based regulation."

FERC has generally granted waivers of such requirement in states with retail choice, on the basis that such customers are no longer captive.

The generators noted, however, the charges under the affiliate PPAs would be assessed on a nonbypassable basis, making all customers captive to the charge.

"As a result, where costs of the Affiliate PPA are concerned, retail customers will be 'served by a franchised public utility under cost-based regulation' just as surely as they were before retail choice," the generators said

The generators also contrasted the current affiliate PPAs with prior affiliate sales by arguing that the new PPAs are not being procured through any PUCO-approved competitive solicitation process (a factor previously cited by FERC in granting the waivers)

"Moreover, to the extent that this holding is construed as applying even to noncompetitive procurement, it falsely assumes that the PUCO has the power to review the justness and reasonableness of the Affiliate PPA and thereby allows FirstEnergy to create, and then exploit, a regulatory gap. As the FE Ohio Utilities have insisted in the PUCO proceedings, the PUCO lacks the authority to review the Affiliate PPA," the generators said

Generators' complaints only sought revocation of the prior affiliate sale waivers, and assurance that FERC will review the PPAs under the Edgar/Allegheny standards. The instant complaints do not challenge the PPAs themselves, though complainants noted their belief that such PPAs are separately preempted by the FPA and will be subject to injunction, stating that such a matter is appropriately addressed by the federal courts