2017 Ohio Electric Outlook

Screen Shot 2018-02-19 at 10.31.05 AM.png

Many of the 2017 developments expected in the energy world for Ohio are carryovers from 2016 with a few twists. Here are the top issues that could impact your future electricity budgets.

 

Re-regulation Initiative in the Statehouse

Re-regulation by far will be the highest profile story of 2017. Two major utilities in the state with their armies of lobbyists are hitting the Statehouse hard in efforts to turn back the clock on electric deregulation. AEP and FirstEnery Solutions (FES) own many old power plants that simply cannot compete in today’s low priced energy markets. Instead of selling the plants for a loss or shuttering them, the utilities are asking our lawmakers to change the energy pricing model back to the good old monopoly days. Using fear based arguments of reduced reliability and potential bankruptcy of FES, they are asking lawmakers to force ratepayers to foot the bill for the losses incurred by these plants in order to keep them online. There is no doubt that such a move at the Statehouse will increase costs to their customers. In fact, a recent study by Cleveland State University and The Ohio State University pegs potential lost consumer savings at $15 billion for the next five years if the current market-based pricing model is impeded. And, even though the utilities are claiming that customers may continue to shop for energy supply under re-regulation, customer choice could evaporate with new rules that  weaken competitive supply acquisition. What would this mean to customers? Higher costs with no way to reduce them through competitive suppliers.

 

Ohio Renewable Standards – Back for Now

Governor Kasich put a big fat veto stamp on proposed legislation that would have extended a freeze on renewable energy standards for the next two years. This veto will restore renewable standards passed in 2008 which mandate the utilities to obtain 25% of their energy from advanced energy sources by 2025. In 2014, the governor approved a two-year freeze on the standards to allow lawmakers to study them. Even though the governor repeatedly stated that a continuation of a freeze would be vetoed, Ohio legislators delivered him a bill that made the standards voluntary. Now that the bill has been vetoed it would not be surprising to see the renewable standards issue make its way into the larger re-regulation debate.

 

The Trump Effect on the Federal Clean Power Plan

The U.S. EPA Clean Power Plan was an initiative under President Obama to reduce carbon dioxide emissions in Ohio by 27.7% from 2005 levels by 2030, putting already financially pressured coal-fired power plants further in the cross hairs. This controversial plan has been put on hold by the U.S. Supreme Court as it works its way through the appeals court in Washington D.C. With the new Trump administration ready to take charge this proposed plan may never see the light of day as he has vowed to kill it. There are several ways this can be achieved either through executive order or by some legal maneuvers but the ultimate outlook for the Clean Power Plan looks bleak.

 

FirstEnergy Solutions Financial Stability

Chuck Jones, CEO of FirstEnergy Corp., stated in a recent earnings call that its competitive generation is weighing down the rest of the company. Jones attributes the financial stress of FirstEnergy to its competitive generation business, FirstEnergy Solutions (FES), which just a few years ago, was one of the largest electricity suppliers in the Ohio market. Now Jones wants to sell all its Ohio generation and exit the competitive market. If he can’t find a buyer for the 13 Ohio power plants or get the re-regulation relief from state lawmakers, he will likely be closing some of the plants. In addition, FES has $515 million of debt maturing in 2018 and without the ability to extend or refinance the debt, Jones said FES could be forced to seek bankruptcy protection. Whether this is imminent or used to pressure lawmakers is yet to be seen, but for certain it will be on Wall Street’s radar in 2017.

 

Happy New Energy Year!