Fighting Billion-Dollar Bailouts for Outdated Coal Plants in Ohio

Earthjustice attorneys have spent the past six weeks in Columbus, Ohio, litigating against proposals by two major utilities to force customers to prop up eight outdated power plants—seven coal and one nuclear—for the next 15 to 35 years. Proposals by FirstEnergy and American Electric Power (AEP) could cost customers billions of dollars while guaranteeing profits for corporate shareholders who should instead be investing in clean energy resources.

Here’s how energy reporter Dave Roberts described one of the requests on Vox.com:

“A power utility in Ohio is attempting to shaft its own customers in a manner so shameless as to defy description. Yet describe it we must, for it represents everything backward and perverse in the electricity sector and reveals that the interests of the institutions that provide electricity have come fundamentally out of sync with the interests of the citizens who depend on it.”

Under FirstEnergy’s proposal, its utilities would buy power from the W.H. Sammis coal plant in Stratton, Ohio, and the Davis-Besse nuclear power plant on Lake Erie. The utilities would then sell that power and pass the net costs or revenues on to customers.

According to FirstEnergy’s own numbers, customers would lose hundreds of millions of dollars in the first couple years of the deal. While FirstEnergy claims that customers would save money in later years, its claims are built on unrealistic assumptions. If FirstEnergy’s projected benefits never materialize, customers would be on the hook for the costs of these outdated plants—including a return on investment for FirstEnergy’s shareholders.

The financial risks of these plants would be shifted to FirstEnergy’s customers while corporate shareholders would be guaranteed to profit.

Why is FirstEnergy making such an outrageous proposal? The plants “just aren’t making money in the open market,” said the company’s chief spokesman Todd Schneider.

“It's worth pausing a moment let that sink in,” Roberts wrote. “The company can't sell its product on a competitive market, so it's asking the state to force customers to buy it. For 15 years. A Russian oligarch would blush.”

As Roberts noted, FirstEnergy’s business plan is based on 20th-century utility economics, which assume that a utility can profit only if it keeps demand high for its baseload power plants and crowds out any cleaner energy resources.

FirstEnergy has fought a renewable energy standard in Ohio. It suspended most of its energy efficiency programs after helping to convince the state legislature to freeze Ohio’s energy efficiency standard. And FirstEnergy is fighting at the federal level to keep customers from being fairly compensated for reducing their electricity demand during peak hours.

AEP’s proposal is even worse. It would force customers to subsidize the operations of four of the utility’s coal plants (plus AEP’s ownership interest in the Kyger Creek and Clifty Creek coal plants) for the remaining life of those plants, which AEP projects could be 20 to 35 years or potentially even longer.

Both proposals are being considered by the Public Utilities Commission of Ohio. Neither is in the interest of Ohio’s electric consumers. For more than a year, Earthjustice, representing the Sierra Club, has been fighting every step of the way, carrying out the in-the-trenches litigation necessary to protect customers and the environment from these misguided proposals.

The good news is that the Public Utilities Commission previously rejected similar proposals by AEP and a third utility, Duke Energy, though they left the door open to approving a future proposal if it were shown to be in the best interest of customers. The commission’s own staff recently filed testimony urging the commission to reject these latest bailout proposals because, to them, the proposals are not in the best interest of customers. And cross examination of company witnesses by attorneys from Earthjustice and the Sierra Club has shown that FirstEnergy and AEP’s cases are riddled with holes. 

Ohio customers deserve better than what FirstEnergy and AEP are proposing. They deserve energy utilities that are looking to seize the economic, environmental and health benefits presented by clean energy and to transition away from aging and uneconomic coal plants. Instead, these utilities want to keep dirty power plants running indefinitely and let their customers foot the bill.

Earthjustice will continue to fight these corporate bailouts, and we strongly urge Ohio regulators to put an end to this anticompetitive farce.