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The wait is over: PUCO to rule March 31 on proposed subsidies for Ohio generation

Ohioregulators appear ready to rule on proposals by American Electric Power Co. Inc. and FirstEnergy Corp. subsidiaries that guarantee income forolder, less economic power plants. The Public Utilities Commission of Ohio has addedthe cases to its March 31 agenda.

The decisionson the controversial subsidy plans will come more than a year after PUCO AEP Ohio's rate rider andpower purchase agreement for its roughly 20% share of the Ohio Valley Electric Corp.'s Kyger Creek and Clifty Creek coal plants.

AlthoughPUCO has found proposed PPAs by AEP Ohio, the trade name of Ohio Power Co., and DukeEnergy Corp. subsidiary DukeEnergy Ohio Inc. to be permitted under Ohio law, regulators said theywere not persuaded thatthe proposals would benefit ratepayers. The commission, however, kept open the possibilityfor PPA provisions in future orders by authorizing the companies to establish placeholdernonbypassable PPA riders "at an initial rate of zero" for the term oftheir electric security plans.

In aneffort to appease opponents and secure regulators' stamp of approval, AEP Ohio andFirstEnergy's Ohio utilities agreed to reduce the terms of their proposed subsidies.

FirstEnergyon Dec. 1, 2015, agreed to reducethe PPA to eight years from 15 years for the 2,210-MW W.H. Sammis coal plant and 908-MW nuclear plant and cutits ROE to 10.38%. It also promised at least $100 million in customer credits. Theretail rate stability rider, if approved, would run from June 1, 2016, through May31, 2024. (Case No. 14-1297-EL-SSO)

FirstEnergy'sOhio utilities will buy the power from the plants, owned by competitive subsidiaryFirstEnergy Solutions Corp.,as well as the company's stake in the OVEC plants, and then sell the output intoPJM Interconnection LLCwholesale energy and capacity markets, with customers receiving rate credits orcharges to offset power purchase costs.

FirstEnergyhas said "customers are projected to save more than $560 million over the plan'seight-year term as retail power prices increase over time."

AEP Ohiofiled its own settlement agreement Dec. 14, 2015, with PUCO that its "life of the assets"income guarantee for its share of the OVEC coal plants and four assets owned inpart by AEP Generation Resourcesin favor of an eight-year power purchase agreement. (Case Nos. 14-1693-EL-RDR, 14-1694-EL-AAM)

The AEPsubsidiary also agreed that over the last four years of the PPA rider, it will ensurethat customers receive total credits up to $100 million.

AEP haseven gained the backing of the Sierra Club through its commitments to develop atleast 900 MW of wind and solar projects in the state and retire, refuel or repowerthe company-owned coal plants in its PPA.

The plans,however, continue to face fierce oppositionfrom competitive power providers and consumer advocates worried that customers willbe on the hook for billionsto "bailout" the companies' power plants. In addition, a group headedby the Electric Power Supply Association in January asked FERC to certain waivers it previously grantedto AEP and FirstEnergy tied to affiliate power sales agreements.

EPSA,the Retail Energy Supply Association and a group of merchant generators argue thatAEP Ohio, as well as FirstEnergy Corp.'s Ohio utilities, have entered into affiliatepower sales agreements that will force captive customers in Ohio "to " of unregulatedgeneration subsidiaries AEP Generation Resources and FirstEnergy Solutions. (EL16-33and EL16-34)

If PUCOrejects the subsidies, AEP is likely to sellthe approximately 2,700 MW of PPA generation along with other Midwest assets.

The PUCO meetingis scheduled for 1:30 p.m. ET on March 31.