Updated April 9, 2024 at 6:00 p.m.
An earlier version of this story said Ohioans have already paid nearly $500 billion, including $100 million so far in 2024, for the subsidies that originated in House Bill 6. A correction has been made stating that Ohioans have already paid nearly $500 million.
Ohio’s electric customers were charged more than $100 million to subsidize two unprofitable coal plants in 2020.
Consumer advocates and environmental groups want state regulators at the Public Utilities Commission of Ohio to force the companies to give the money back.
The subsidies were paid to three Ohio companies that own a share in the Ohio Valley Electric Corporation: AEP Ohio, also known as Ohio Power Company; and Ohio-based affiliates of Duke Energy from Charlotte, North Carolina and AES Energy of Arlington, Virginia.
An expert who testified for the Citizens Utility Board of Ohio found the plants were running at a loss, because OVEC operated them all the time. Energy researcher Devi Glick, with Synapse Energy Economics in Cambridge, Mass., said the operators should have been watching the market to determine when they could run the plants at a profit.
Glick found Ohio's electric customers shouldn't be on the hook for the money and recommended the companies return the $100 million.
“OVEC uneconomically operated its two power plants, Kyger Creek and Clifty Creek, during the audit period, which led to lower market revenues and therefore higher net costs to operate the plants than it would have incurred if it had limited operations to periods when the plant’s production costs equaled or were below energy market prices,” she said. “These additional costs, which it seeks to pass on to consumers, could have been mitigated with more prudent unit commitment practices.”
AEP Ohio argued the way officials ran the plants: all the time instead of when it was economically better to do so, shouldn’t interfere with the collection of the subsidies. The advocates that want the PUCO to reverse the subsidies might not like the charge, but it’s legal. They quote an audit that found OVEC’s “processes, procedures, and oversight were mostly adequate and consistent with good utility practice,” and didn’t recommend any claw backs.
That audit also states there were things OVEC could have done to be more profitable.
The governor-appointed commissioners at the PUCO haven’t made a decision on the case, and it’s not yet slated on upcoming agendas, according to Matt Schilling, spokesperson for the PUCO.
The PUCO has been considering this case since 2021. The Ohio Attorney General’s Office told the PUCO it is up to the commission to determine if the OVEC operated the plants economically and reasonably.
Prudence
The PUCO is tasked with deciding whether or not the Ohio OVEC companies operated the plants “prudently,” or economically, to determine if the subsidy payout was appropriate.
“The utility should only be allowed to recover from customers costs that are necessary to serve customers and run their distribution business in order to serve customers in a just and reasonable way,” Bojko said.
Bojko and other consumer advocates argue the money should be returned because it doesn't help Ohio's utility customers in any way.
"It doesn't help with reliability. All it does is require customers to pay for the cost to run the two plants, one that's in Indiana and one that's in Ohio,” she said.
The energy produced at the OVEC plants isn't even sold to the customers who are paying to subsidize the plants. It’s sold into the regional market. And all electric customers in the state have to pay it, no matter who their distributor is.
HB 6 allows the OVEC companies to charge their Ohio distribution customers with the costs of their energy generation business. That’s even though other Ohio law requires energy companies that generate electricity to operate separately from companies that distribute it, something known as corporate separation between a parent company and an affiliate.
History
Back in the Cold-War-fueled 1950s, the United States couldn’t enrich uranium fast enough. To power the process in Portsmouth, two coal-fired power plants were built along the Ohio River – one in Ohio, the other in Indiana.
A group of energy companies operated the plants. Eventually, the hunger for uranium fell, but the Ohio Valley Electric Corporation, known as OVEC, kept generating electricity to sell.
They share in the expenses and profits produced by the two plants, but profits have been down.
At the turn of the millennium, energy markets saw the start of a major shift when new tech opened the door to expanded natural gas extraction. Paired with rising maintenance costs and higher environmental standards, the coal plants were more expensive to operate and less profitable.
The 12 companies with a share in OVEC were losing money generating electricity and then selling it into the wholesale market. But they convinced the Public Utilities Commission of Ohio to help them recoup the losses in 2015.
“Ohio customers have been subsidizing these plants for a very long time,” said Kim Bojko, chief counsel for the Ohio Manufacturing Association.
A study paid for by the OMA found Ohioans gave Ohio OVEC companies about $160 million between 2012 and 2019. That covered nearly a third of the half-billion those companies lost during that time.
The OVEC companies would secure even stronger protections from Ohioans once the scandal-ridden House Bill 6 was passed in 2019, when they brought in $117 million in 2020 alone.
The Future
Ohioans could pay $1 billion dollars to OVEC through 2030, when the subsidies created under the scandal-ridden House Bill 6 expire, according to a report commissioned by the Ohio Manufacturers' Association by professional engineers John Seryak and Charles Schreier at Worthington-based Runnerstone.
That report states Ohioans have already paid nearly $500 million, including $100 million so far in 2024, for the subsidies that originated in House Bill 6.
The PUCO is planning on hiring auditors to examine if the subsidies paid out to the companies in 2021, 2022 and 2023 were justified, according Schilling. A request for proposals from firms is out now.
While much of House Bill 6 was overturned when the former speaker of the House was indicted, the subsidies for OVEC were left in place. According to information revealed in the House Bill 6 investigation, the OVEC subsidies were added to the bill as other energy companies got jealous of the $1 billion bailout the bill authorized for First Energy’s former nuclear power plants.
Two Democratic lawmakers have a bill that would end the OVEC subsidies. But the Republican-controlled House hasn’t advanced the bill since it was put before the Rules and Reference Committee in June 2023.
Rep. Sean Brennan, D-Parma, told the Statehouse News Bureau last year, “If the utilities companies can make a case that these subsidies are absolutely needed, then we can look at it after we undo this piece of HB 6.”
He said he was “not convinced that (the subsidies) were needed. I know that our utilities are making record profits.”
The plants’ shareholders have an agreement to operate the plants until 2040.
