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DP&L to move away from coal, embrace renewables as part of settlement

Louisville, Kentucky — Dayton Power & Light would move away from coal-fired generation, add more renewables and modernize its grid under an electric security plan settlement sent to the Ohio Public Utilities Commission this week.

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Ohio's smallest investor-owned electric utility, a subsidiary of AES Corp., plans to close the 2,400-MW J.M. Stuart and Killen baseload coal plants in Ohio by mid-2018 if it can receive consents from the plants' co-owners, Dynegy and American Electric Power.

Dynegy owns a share in both plants while AEP is a co-owner of only Stuart, the second-largest generating station in Ohio behind the 2,600-MW Gavin coal plant.

"While this settlement is still subject to approval by the PUCO, we believe it meets our goals of providing the company an opportunity to achieve the credit metrics necessary to establish financial security," Tom Raga, DP&L president and CEO, said in a Monday statement. "We have a history of serving our customers, and if approved, this settlement will do that for many more years to come."



DP&L serves about 515,000 customers in west-central Ohio. It owns 2,093 MW of coal-fired generation, comprising two-thirds of its overall generation portfolio.

Given the timing of the settlement filing, it is unclear if the PUC will proceed with a scheduled Wednesday hearing in the ESP case in Columbus. DP&L requested the hearing be extended until February 8.

"Since they're already scheduled to meet tomorrow, the parties will discuss the motion at the hearing and the attorney examiner will issue a ruling, presumably establishing testimony deadlines and a new hearing date," PUC spokesman Matt Schilling said in a Tuesday email.

The six-year settlement was the product of lengthy discussions among numerous parties, including the Sierra Club and Retail Energy Supply Association.

"Our energy landscape is changing," DP&L spokeswoman Mary Ann Kabel said in a Tuesday interview about her company's decision to end its decades-long involvement with coal. Assuming the commission endorses the proposal, "we would begin the sales process for the other coal generation," including the utility's interest in the Conesville, Zimmer and Miami Fort coal plants, also in Ohio.

DP&L operates both Stuart and Killen, but does not own either of the plants outright. The utility owns a 67% stake in Killen and 35% of Stuart. In addition to DP&L, Dynegy is a co-owner in Conesville, Zimmer and Miami Fort, while AEP is a co-owner in Conesville and Zimmer, but not Miami Fort.

Dynegy, a Houston-based merchant generator, has indicated in the past it wants to become the sole owner of Zimmer and Miami Fort.

The settlement requires DP&L to invest in 300 MW of wind and/or solar energy projects in Ohio over the next three years.

DP&L would be a buyer of long-term power purchase agreements -- 15 years or more -- for each renewable project. Capacity, energy and ancillary services for all projects would be liquidated into the PJM markets with resulting revenues credited to DP&L's retail customers.

AEP spokeswoman Melissa McHenry said in a Tuesday email that while her Columbus, Ohio-based company has not formally given its consent for Stuart's shutdown, "we are in conceptual agreement with their recommendation to retire the plant."

Dynegy officials could not be reached for comment.

The Sierra Club will not formally join the settlement "until we see something that affirmatively enforces the announcement" by DP&L, Dan Sawmiller, senior campaign representative for the Sierra Club's Beyond, said in a Tuesday interview.

"DP&L, as co-owner" of Stuart and Killen, "does not have the ability on its own to retire those facilities," he added. "Until we see that, there is a little uncertainty."

DP&L's decision to exit coal "appears to be part of an ongoing trend, as we have seen with other utilities that are seeking to mitigate or exit their merchant exposure while increasing their investments in the more regulated and less volatile parts of their business," said Glenrock Associates analyst Paul Patterson in a Tuesday email.

In Ohio alone, AEP and FirstEnergy have retired more than 7,000 MW of coal generation in recent years.

RESA spokesman Bryan Lee said in an email that while the stipulation represents a "significant compromise" from the trade group's litigation position, "it is important to note that the stipulation represents a package deal that will enhance the competitive retail market."

Specifically, the settlement would facilitate the delivery of "innovative products and services to customers by increasing billing functionality," he said. Moreover, "it starts the process by which Ohio can appropriately allocate costs between customers who are with retail choice providers and customers on utility service. Finally, the stipulation will enable DP&L to modernize its grid."

DP&L would be allowed to implement a non-bypassable "distribution modernization rider," or special customer charge, designed to collect $90 million annually.

Stuart has been idle since a January 10 explosion rocked one of the plant's four generating units. Kabel said it remains unclear when the plant, in commercial operation since 1970, will be back in service.

A "very thorough investigation" is under way to determine the cause of the explosion, she said, and the plant will remain off line until it is completed.

--Bob Matyi, newsdesk@spglobal.com

--Edited by Derek Sands, derek.sands@spglobal.com