Michigan Public Service Commission Warns AEP That It Will Limit Costs to Customers for Uneconomic Coal Plants

Columbus, OH - In a final order issued today, the Michigan Public Service Commission (PSC) ruled the Ohio Valley Electric Corporation (OVEC) contract costs Indiana and Michigan Power (I&M, an AEP subsidiary) sought to charge Michigan customers are likely to be disallowed in all future proceedings. Michigan customers will no longer have to pay I&M’s OVEC costs that exceed the market value of OVEC power. The effect of the ruling will save Michigan customers tens of millions of dollars each year, which costs will be borne by AEP shareholders instead. 

In response, Neil Waggoner, Senior Campaign Representative for Sierra Club’s Beyond Coal Campaign in Ohio, released the following statement:

“Michigan is the first state to take action to protect electricity customers from the uneconomic OVEC coal plants. The OVEC plants have been losing money for years and those losses will only continue. These losses are driven by the irresponsible decisions made by the OVEC sponsor utilities and those costs should never have been covered by customer dollars. The Michigan PSC took appropriate action today to limit costs and protect customers.

“It’s astounding the Michigan PSC can look at just the basic OVEC costs versus market costs and know it was a bad deal for customers while Ohio legislators and regulators have not only those same bad financials but also know the OVEC bailout is tied up in the largest bribery scheme in Ohio history and continue to do nothing. Michigan delivered a victory while Ohio continues to fall shamefully behind.”

Background: 

The Ohio Valley Electric Corporation (OVEC) was formed in October 1952 by investor-owned utilities providing electric services in the Ohio River Valley. Originally, the Clifty Creek Generating Station (1.3 GW coal-fired plant located in Madison, IN) and the Kyger Creek Generating Station (1.1 GW coal-fired plant located in Cheshire, OH) were formed to meet the substantial power requirements for uranium enrichment facilities than under construction by the Atomic Energy Commission in the area. 

After the end of the Cold War and the closure of atomic weapons programs to which these plants had provided power, the companies made a decision, in 2003, to operate as a merchant generator, selling power into the market. Although both plants date back to 1955, they agreed in 2011 to renew their contract and continue under the OVEC umbrella through 2040. Now, the companies say they are locked into a contract, forcing them into a scenario where they are losing money.

HB6, Ohio’s notoriously corrupt coal and nuclear bailout legislation, extended, expanded, and fundamentally altered the previously approved OVEC bailout for AEP, Duke, and AES Ohio while also now forcing FirstEnergy customers to pay as well, with all revenue remitted to the previous three. The utilities are currently guaranteed cost recovery through 2030 but costs over a monthly cost cap for customers are to be deferred meaning Ohioans could pay for the legislation for even longer. The Ohio Manufacturers Council estimates the OVEC bailout costs Ohio customers $150 million a year and a 2020 PUCO audit found not only has the bailout never produced a benefit for customers but is likely to always be a cost to customers.