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State senate mulls repeal of coal bailout

An Ohio Senate committee is considering the repeal of an estimated $700 million ratepayer-funded bailout extended to two coal-fired power plants in legislation now at the center of a criminal prosecution.

Senate Bill 117, which received its second hearing Wednesday, would not only end the subsidies of Ohio Valley Electric Corporation power plants, but refund all monies collected and return them to ratepayers.

Utility companies and other industry entities own OVEC, which formed in 1952 to operate coal-fired plants in Ohio and Indiana. The plants powered a now-shuttered uranium enrichment facility for the federal government in Piketon.

American Electric Power is OVEC’s largest shareholder with about 43% equity, followed by Buckeye Power (18%), Duke Energy (9%), Dayton Power and Light Company (4.9%), and others.

In 2010, the companies agreed to renew their joint agreement through 2040 and upgrade the plants to meet federal regulations instead of retiring them, which critics now point to as a poor business decision that ratepayers are now on the hook for.

The Public Utilities Commission of Ohio in 2014 allowed AEP, Duke, and Dayton Power & Light to charge customers “riders” for losses incurred by OVEC plants through 2024. House Bill 6 extended those subsidies through 2030 and passed the costs on to all rate payers, not just the OVEC shareholders’ customers.

The riders were originally sold as a “hedge” against market volatility — if prices drop, customers pay, but if prices rise, they get a credit. However, a PUCO spokesman said in an email Wednesday that the riders have always functioned as a charge to ratepayers.

HB 6 is now the center of a public corruption prosecution aimed at former House Speaker Larry Householder, R-Glenford, who championed the bill. He pleaded not guilty and awaits trial. FirstEnergy, the largest beneficiary of HB 6 and focus of the indictment against Householder, indicated to shareholders it is in talks with the U.S. Department of Justice on a deferred prosecution agreement, though nothing has been finalized.

If SB 117 passes, it would also block a reinstatement of the riders as PUCO approved them.

The repeal bill’s sponsors, Sens. Mark Romanchuk, R-Ontario, and Hearcel Craig, D-Columbus, said bad business decisions of OVEC led its plants to sell electricity at a loss. This loss, they said, should be OVEC’s problem — not ratepayers.

“Simply put, customers are currently being charged to cover the losses of uneconomic and environmentally-expensive coal plants,” they said in written testimony. “Ohio ratepayers should not be bailing out the poor business decisions of investor-owned utilities, particularly for generation resources that do not even reside in Ohio.”

OVEC representatives did not respond to a call or email. AEP spokesman Scott Blake said OVEC costs have been recovered in customer rates for more than a decade.

“We are monitoring the progression of this bill and will work to ensure that policymakers understand the value of the reliable service that OVEC provides,” he said.

Blake said it’s “difficult to speculate” whether repealing the subsidies would cause any job loss at the plants.

At the hearing Wednesday, several parties (who also opposed HB 6) spoke in favor of repealing the coal plant subsidies. Jeff Dillon, legislative director for the libertarian Americans for Prosperity, called the OVEC payouts “cronyist subsidies.” Jeff Jacobson, speaking for the Ohio Consumers’ Counsel, which represents ratepayers before state energy regulators, called on the state to “stop propping up these old inefficient power plants at taxpayer expense.”

The Ohio Manufacturers Association testified in support of the repeal Wednesday as well. Last year, OMA released an analysis of HB 6. OMA estimated the legislation amounts to $700 million in subsidies to the plants, which have been selling power at a loss since 2012.

The committee didn’t vote on the matter Wednesday. However, some Senators signaled distaste for the idea.

“If the government is going to apply regulations that the coal companies or the power generators have to conform to, who’s going to pay for it?” asked Sen. Frank Hoagland, R-Adena.

Perhaps worse for the bill’s chances, Senate Energy Chairman Bob Peterson, R-Washington Court House, sponsored legislation to codify the OVEC subsidies into law in 2017. However, he said after the hearing he’s keeping an open mind.

“A lot has changed since 2017,” he said.

Speaking to reporters Wednesday afternoon, Senate President Matt Huffman, R-Lima, said he has some “concerns” with the OVEC subsidies remaining in place. He said he’s looking forward to more hearings, though the budget is likely to occupy most lawmakers’ attention for the next few weeks.

“I don’t think the problem for me, so much, is the substance of the actual subsidy, but it has more to do with the process in that, the Public Utilities Commission is there to handle these somewhat complex requests about utilities,” he said.

Also on Wednesday, the committee voted to recommend the full Senate confirm Jenifer French to lead PUCO. She was nominated to replace Sam Randazzo, who resigned after FBI agents seized materials from his personal home, and FirstEnergy disclosed to shareholders a $4 million payment from 2019 made to an unidentified energy regulator matching his description within the HB 6 scandal. He has not been charged with a crime.

Jake Zuckerman is a reporter for the Ohio Capital Journal – ohiocapitaljournal.com.

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