May 25, 2018 – by Jeffrey Tomich, E&E News. Editors note: Valley Watch, along with the Citizens Action Coalition, Save the Valley and the Hoosier Environmental Council, collaborating as the Indiana Clean Energy campaign worked tirelessly in the early years of this century to shut down the Clifty Creek facility that sits on the western edge of Madison, IN. We knew they were going to have to place controls for both Nitrogen Oxides and Sulfur Dioxide which would cost billions and it was our position then that this was money being wasted. But because all the owners, Including Vectren and Duke had their hands in ratepayer pockets, both Democrat and Republican Administrations in Indiana allowed them to go forth. This story shows how our predictions were, once again, correct.
When FirstEnergy Solutions Corp. sought bankruptcy protection this spring, included in the avalanche of legal filings was a motion to exit a partnership that runs a pair of 1950s-era coal plants on the Ohio River.
Clifty Creek power plant sits adjacent to Clifty Falls State Park, just outside Madison, IN. It serves no current useful purpose except to keep rates its owners charge higher than they need to be. File Photo © 2009 BlairPhotoEVV
The reason was clear: The 1,304-megawatt Clifty Creek plant in Indiana and the 1,086-MW Kyger Creek plant in Ohio are bleeding red ink and are a barrier to the financial turnaround of FES. Backing the plea was analysis from an expert, ICF International Inc. Managing Director Judah Rose, who forecast the company’s tiny stake in the venture would produce a $268 million loss over the life of an agreement to keep the plants running.A year earlier, Duke Energy Ohio submitted very different testimony concerning the same coal plants in another proceeding, this one before the Public Utilities Commission of Ohio.
In that case, Duke asked regulators to require the utility’s 700,000 electric customers in southwest Ohio to subsidize the plants on the basis that they provided a hedge against volatile, rising natural gas prices.
Backing up Duke’s request was testimony from an industry expert: ICF’s Judah Rose.
How can two companies tell a federal judge that the 60-year-old coal plants are a financial albatross and simultaneously argue to utility regulators that the plants are a good investment for consumers? And rely on the work of the same consultant? The answer depends on who’s paying the bill.
Unlike industries vulnerable to disruptors such as Amazon.com Inc. and Uber Technologies Inc., electric utilities — even those in deregulated markets like Ohio — continue to press lawmakers and regulators to shield them from competition. And they’re doing so by playing on fears that letting plants shut down will lead to a shortage that will result in a price shock — or, worse yet, the lights going out.
Ezra Hausman, an electric industry consultant who has analyzed the plants’ economics, has a simpler explanation.
“They made a bad bet and they don’t want to live with the consequences,” said Hausman, a former vice president at Synapse Energy Economics Inc., who prepared a report on the plants for the Sierra Club last year.
So far, two Ohio utilities, American Electric Power Co.’s Ohio utility and Dayton Power and Light Co., have gotten approval from Ohio regulators to subsidize the plants in the name of stabilizing consumer rates until at least 2024.
Those decisions are being appealed. The Office of the Ohio Consumers’ Counsel is challenging the AEP order at the Ohio Supreme Court, and environmental groups have asked PUCO to reopen the Dayton Power and Light case. The Duke request is still pending.
Other disputes involving the same troubled plants are playing out before the Ohio Legislature and state Supreme Court, the Federal Energy Regulatory Commission, and the U.S. bankruptcy court.
Meanwhile, the group of seven Midwest utilities and electric cooperatives say they are contractually bound to run the money-losing plants for another two decades, until 2040, when each will be 85 years old.
The two plants weren’t always controversial. In fact, they were built to support the federal government during the Cold War — a bit of history that utilities continue to play up a half-century later.
The plants are operated by a utility consortium known as OVEC, or the Ohio Valley Electric Corp. The group includes a handful of investor-owned utilities as well as two generating and transmission cooperatives.
The companies run the plants according to terms of an intercompany power agreement, under which each “sponsor” company shares in the plants’ output and costs according to their ownership interest. The largest owner is Columbus-based AEP, which has about 40 percent interest through three utilities.
OVEC was founded in the early 1950s to supply power to the Atomic Energy Commission’s uranium enrichment plant in Piketon, Ohio. For 50 years, they quietly served that purpose until the plant closed and the contract with the AEC’s successor agency, the Department of Energy, ended in 2003.
The end of the relationship included a $97.5 million “termination payment” by DOE to OVEC to cover uncollected post-retirement and plant closure costs. Continue reading