Ohio Utility Says PUCO's "Dual Auctions" For Default Service Capacity, Energy Impermissibly Preclude Utility From Its Statutory Options To Consider Generation, Bilateral Contracts

Various parties filed for rehearing of the Public Utilities Commission of Ohio's recent order requiring the utilities to submit plans to conduct simultaneous dual auctions for Standard Service Offer (SSO) supplies.

As first reported by EnergyChoiceMatters.com, PUCO directed the utilities to file plans to conduct the following simultaneous auctions for SSO service, covering a period of four years commencing with the June 2022 delivery year, with PUCO then evaluating the results of each separate auction:

i. A full requirements product with a proxy price, using the June 2021 capacity price as the proxy, subject to true-up and reconciliation;

ii. An energy-only auction and a capacity-only hedge product. Suppliers will offer capacity hedge at a fixed price for all years included in the auction product, thereby guaranteeing the capacity price to be paid by consumers over the long-term.

PUCO ordered the dual auctions due to the lack of a PJM capacity price beyond the 2021-22 delivery year. See more details on PUCO's order here

Of note among the rehearing requests is an argument raised by Duke Energy Ohio concerning utilities' statutory rights under the SSO regulations (such as under an electric security plan, or ESP)

Among other things, Duke said that PUCO's order, "is unreasonable and unlawful in that it precludes the Company’s ability to evaluate alternative procurement processes permitted in an ESP under R.C. 4928.143, including bilateral contracts and building of new generation."

"Nowhere in that statute is the utility required to procure its SSO supply through a competitive auction. In fact, the statute actually contemplates other potential methods. The statute gives Duke Energy Ohio and other EDUs the flexibility to consider other SSO procurement processes to meet their SSO obligations, including entering into bilateral contracts, or even constructing new generation resources. The Order restricts the EDUs’ ability to consider those other procurement options contemplated under R.C. 4928.143," Duke said

A diverse group of stakeholders including the utilities, Ohio Consumers' Counsel, and retail suppliers, all filing comments separately, all raised additional arguments on rehearing that were similar to each other. Generally, parties said PUCO's order exceeded the Commission's authority because it: (1) altered the utilities' existing ESPs, setting forth SSO procurement, without consent of the utilities (which are allowed to withdraw an ESP upon modification by PUCO), and (2) would include SSO procurement beyond the term of the current ESPs, intruding on utilities' authority to establish ESPs for such periods.

The FirstEnergy Ohio utility companies made the following arguments, which were similar to those made by other stakeholders:

• The Commission’s Finding and Order is unlawful because, under R.C. Chapters 4903 and 4928, the Commission lacks legal authority to unilaterally, and without the Companies’ consent, reopen a prior order approving an electric security plan.

• The Commission’s direction for the Companies to submit a plan for dual auctions for a period of four years is unlawful because the Commission lacks legal authority to impose SSO auction terms for the Companies’ next ESP without the Companies’ consent.

• The Finding and Order violates R.C. 4903.09 by failing to explain significant components of the dual auction concept.

Case No. 16-776-EL-UNC