The Sierra Club wants to grab the attention of state lawmakers and utility regulators with a new billboard in downtown Columbus. An electronic ticker at Broad and High streets adds up the hundreds of millions of dollars Ohio electric customers are forced to funnel to energy companies that own a pair of failing coal plants.
The total cost could reach $1 billion by the time the subsidies are scheduled to end in 2030, a leftover of the 2019 House Bill 6 corruption scandal.
All of Ohio's electric customers are paying the costs — it doesn't matter which electric company is providing the service. If you pay for electricity in Ohio, you're helping prop up two unprofitable coal-burning plants in Ohio and Indiana.
The plants are owned by 12 energy companies, including AEP Ohio. They have a share in a conglomerate of energy companies called the Ohio Valley Electric Corporation, or OVEC.
OVEC sells the electricity it generates into the regional market.
When the Cold-War era plants lose money, and they've lost hundreds of millions of dollars, Ohio's 2019 bailout law insulates the owners from the losses.
Lawmakers repealed the nuclear bailout portion of House Bill 6 after a federal investigation revealed a bribery scheme. But, the coal subsidies remain.
"This is just part of the ridiculousness of the bailout," said Neil Waggoner, a spokesperson for the Sierra Club.
Waggoner manages the environmental advocate group's Beyond Coal Campaign in the Midwest.
Waggoner said lawmakers and utility regulators responsible for the coal plant bailout are throwing customers to the lions. "Even with the few opportunities that we have in the state to rein it in, our regulators are refusing to do that," he said.
While the bailout bill made it legal to require consumers to make up for OVEC's losses, it also requires the Public Utilities Commission of Ohio to approve whether or not the subsidy payments are appropriate through an audit.
In August, the Public Utilities Commission of Ohio, or PUCO, reviewed the third-party audit of OVEC's $105 million in charges to consumers in 2020, and accepted the results.
Waggoner said even if the bailout law made the coal plant subsidies legal, the commissioners on the Ohio Public Utilities Commission are charged with only passing along costs if they are prudently incurred.
"The HB 6 legislation says that all prudently-incurred costs should be passed on to customers. What does prudently incurred mean?" he said.
Waggoner said the PUCO didn't define exactly what that means.
But, PUCO spokesman Matt Schilling states in an email that the state does "explicitly" define it.
"'Prudently incurred costs related to a legacy generation resource' means costs, including deferred costs, allocated pursuant to a power agreement approved by the federal energy regulatory commission that relates to a legacy generation resource, less any revenues realized from offering the contractual commitment for the power agreement into the wholesale markets, provided that where the net revenues exceed net costs, those excess revenues shall be credited to customers. Such costs shall exclude any return on investment in common equity and, in the event of a premature retirement of a legacy generation resource, shall exclude any recovery of remaining debt. Such costs shall include any incremental costs resulting from the bankruptcy of a current or former sponsor under such power agreement or co-owner of the legacy generation resource if not otherwise recovered through a utility rate cost recovery mechanism."
And, he says the Ohio Supreme offered more clarification on the definition, that "prudently incurred means the cost "reflects what a reasonable person would have done in light of conditions and circumstances which were known or reasonably should have been known at the time the decision was made.”
Schilling said the PUCO agrees with the auditor's findings, that "OVEC’s commitment strategy was prudent at the time. Consistent with the Supreme Court of Ohio, we analyze prudency at the time the decision was made.
The dictionary says "prudently incurred" means to go about something carefully, with forethought, often with wisdom.
Operators ran the plants without interruption, instead of letting market forces dictate when the plants could be run at a profit.
"They could have just not run the plants, and they would have lost less money, which means fewer costs on customers. This seems like a cost that has thus not been prudently incurred," Waggoner said.
AEP Ohio argues the way OVEC runs the plants, all the time, instead of when it was economic to do so, shouldn’t interfere with the collection of the subsidies. The company argued it costs money and ages equipment when OVEC has to start and stop operations. And, that the advocates might not like the charge, but it’s legal.
The company quotes an audit that found OVEC’s “processes, procedures, and oversight were mostly adequate and consistent with good utility practice." The audit did not recommend any clawbacks.
That audit also states the OVEC plants cost more than what they earn, and that OVEC could save costs to electric costumers by being more responsive to market conditions.
Waggoner said the PUCO should have used the audit process to hold OVEC at least partially responsible for its operating choices, but PUCO opted not to.
"This billboard is drawing attention to the commission and their lack of engagement and the fact that every single day we're paying more for this stupid bailout that we don't get any benefit from," Waggoner said.
Waggoner said the PUCO has failed to use the guardrails it has.
"We have a long history of questionable leadership of the commission. Issues of utility capture on the commission and the commission failing to protect customers even when they do have the authority to do it," he said.
Utility capture is when an industry that's being regulated, like utility companies, capture positions as their own regulators.
PUCO commissioners declined to comment on the billboard. A PUCO spokesperson said the commission followed state law, and stayed within the bounds of their authority by accepting the audit. He states the audit found that OVEC acted, "appropriate and reasonable and, accordingly, prudent.”
Waggoners said the Sierra Club would also like to press lawmakers to repeal the rest of House Bill 6 and get rid of the subsidies.
He's supportive of a few bills sponsored by Democrats that would reform the PUCO, by requiring consumer representatives on the commission and barring people from the commission with recent ties to utility companies. The bills are unlikely to move forward in the Republican-controlled Statehouse.
Waggoner said he thinks lawmakers haven't overturned the subsidies either, because they've "bought the lies about the plant" or "they just want it to go away, because they know that this not a winning thing."
"The utilities desperately want this because nobody wants it. Let's be clear. Nobody wants these plants. They are economic losers. And they are going to continue to cost people. They're going to continue to cost Ohio customers a lot every single month," he said.
Waggoner says consumers should let the PUCO know how they feel, after they take a look at the Sierra Club's billboard. The ticker stood at more than $375 million this week.
