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PUCO focuses on customers, 'out of the generation business,' chairman says

? PUCO chairman sees Ohio as "leader" in grid modernization.

? Moving on from generation subsidies.

? Staying on the sidelines of electricity market restructuring efforts.

Asim Haque was appointed to the Public Utilities Commission of Ohio in June 2013 and took over as chairman in May 2016. Not long after Haque's term began, American Electric Power Co. Inc. and FirstEnergy Corp. subsidiaries, later followed by AES Corp. utility Dayton Power and Light Co., submitted controversial subsidy plans designed to provide financial support for unregulated baseload generation impacted by low prices in the PJM Interconnection wholesale energy and capacity markets.

The plans called for power purchase agreements between distribution utilities and their unregulated affiliates. The utilities would buy the generation and sell it into the PJM markets with customers receiving rate credits or charges to offset the costs. PUCO approved the AEP and FirstEnergy proposals, but the Federal Energy Regulatory Commission stepped in. The utilities and PUCO have now shifted their focus to the grid.

S&P Global Market Intelligence recently interviewed Haque on the commission's newly launched PowerForward grid modernization initiative. This is an edited transcript of the discussion.

S&P Global Market Intelligence: What inspired the launch of PowerForward? Are you satisfied with the progress?

Asim Haque: December of 2013 is when our first power purchase agreement was filed by [AEP Ohio]. Those cases were very challenging cases, very controversial cases, and that dialogue about the future of coal plants and nuclear plants has now shifted to [Washington]. When those cases were complete, when those cases came back to us from the FERC and we made our decisions ... it just sort of dawned on me that throughout the discussion of the future of these plants and the impact of these plants on our utilities, that the customer in the state of Ohio just had been lost in the dialogue. I have said that we are out of the generation business. I'm turning my attention and the commission's attention to the distribution system and specifically, the betterment of customers in the state of Ohio. That's really how PowerForward began.

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Asim Haque is chairman of the Public Utilities Commission of Ohio.
Source: Public Utilities Commission of Ohio

PowerForward rests on two pillars: the concept of innovation and that innovation needing to enhance the customer electricity experience. I think so far we have had a wonderful proceeding. Phase one, which took place in April of this year, was entitled "A Glimpse of the Future." And what that did is really build the business case for why we need to start exploring grid modernization. Phase two was an extremely deep dive for a state commission into grid architecture. You know, the actual grid engineering and architecture of the [distribution] grid is something that your typical economic regulator doesn't spend a lot of time on.

Phase three is really the bread and butter of what state commissions do. We are going to, of course, explore the rate making and rate design components of potential investments, but also we're going to explore the roles and responsibilities within the distribution system going forward. We anticipate another very deep, deep dive.

We expect to put out a product next year that will be what I'll call a road map with some bumpers associated with how we want our stakeholders to proceed in the grid modernization space. I really think Ohio is a leader in this space.

Why is it important for the commission to be involved in grid modernization education?

What we've realized as a collective here is that this is a very transformative time in the industry. Because, first of all, I do believe the utilities want to expand and push down the grid modernization path. We have received applications, for instance, associated with smart city endeavors and the desire to push out microgrids and electric vehicle charging stations.

Utilities want to advance in this space and we know the technology is out there that can really benefit customers. I think one thing we learned in phase one is that customer demographics are changing every day and they expect more from their service providers. Customers are, generally speaking, very well connected these days and so, they expect more. The technology exists to give them more. And I think we're the third piece of the puzzle here. We are a governmental agency that is expressing a will to explore this even though it's sort of uncomfortable because some of it is outside of our typical rate making comfort zone.

You've made public comments on possibly "ring-fencing" FirstEnergy's utilities to protect them from the company's unregulated business, which could file for bankruptcy. What is PUCO's role in ensuring that its investor-owned utilities continue to be viable businesses?

Our role is to continue to ensure that customers — residents and businesses in the state of Ohio — are receiving safe, reliable services at fair prices from all of our distribution utilities. We've got to be also very conscious of and very thoughtful about what's going on from a regional and national level associated with the marketplace and generating units because all of that can have a net impact on the potential delivery of safe, reliable power at fair prices to customers.

Our focus is the distribution system. Our focus is distribution utility advancement and health. But we are, of course, not going to completely turn a blind eye to everything happening on the generation front because what happens on the generation front could impact that core mission, which will then impact Ohioans.

Do you have any concern about efforts in the Ohio General Assembly to restructure the electricity market?

My role with the state legislature is to be really a neutral arbiter of information. So, I don't view my role as an advocate over there. I view my role as assisting in providing information, facts, data, when the legislature calls upon me. We will implement whatever the legislature decides at the end of the day and that's the role of the PUCO.