Office of the Ohio Consumers' Counsel
February 5,2016
The PJM Board of Managers
c/o Howard Schneider, Chairman
PJM lnterconnection, L.L.C.
2750 Monroe Boulevard
Audubon,PA 19403
RE:
Protection of Ohio Electric Consumers/Competitive Wholesale Markets
Dear Chairman Schneider, President and CEO Ott, and PJM Board of Managers:
On behalf of Ohio Consumers' Counsel Bruce Weston, this letter respectfully requests your support
for the integrity of PJM's markets--and the protection of Ohio consumers that are served through
those markets--by directing PJM to urge the Federal Energy Regulatory Commission ("FERC") to
review the FirstEnergy and AEP Ohio power purchase agreements ("PPAs"). Those agreements are
pending before FERC in two separate complaint cases. The PPAs also are pending before the Public
Utilities Commission of Ohio ("PUCO"). Those cases involve requests by FirstEnergy and AEP
utilities for approval of non-bypassable, retail charges to subsidize the power plants at issue in the
PPAs. The Ohio Consumers' Counsel has recommended that the PUCO deny these requests, to
protect consumers and the electricity markets that serve consumers. PUCO rulings on these requests
are imminent.
We ask that PJM recommend to FERC that its review of these wholesale affiliate contracts is
required to protect consumers from unjust and unreasonable charges and protect wholesale markets
from anti-competitive abuse and manipulation. FERC's core responsibility, as stated on its website,
is to, "guard the consumer from exploitation by non-competitive electric power companies." PJM's
mission, posted on its website, seeks to, oocteate and operate robust, competitive and nondiscriminatory electric power markets." The PPAs are not arms-length contracts, stem from noncompetitive transactions, would require retail consumer subsidies for uneconomic power plants
divested to the utilities' marketing or generation affiliates, and are contrary to FERC's expressed
policy that the cost of uneconomic generation is a risk that should be borne by market participants
and not by consumers.l
I Wholesale Competition Regions
in
with Organized Electric Markets, Order No. 719 atP
1,
FERC Stats. & Regs. fl
31,281 (2008) (""Effective wholesale competition protects consumers by providing more supply options, encouraging
new entry and innovation, spurring deployment of new technologies, promoting demand response and energy eff,rciency,
improving operating performance, exerting downward pressure on costs, and shifting risk away from consumers.")
(emphasis added), order on reh'g, Order No. 719-A, FERC Stats. & Regs. 131,292; order on reh'g, OrderNo. Tl9-8,
129 FERC n61,252 (2009).
The PJM Úrdependent Market Monitor is an intervenor in the PUCO proceedings, and provided
testimony as to the adverse consequences of allowing subsidized, uneconomic power plants to
participate in PJM's markets. The Market Monitor explained that allowing these power plants to
participate in PJM's markets may well discourage participation by economic, competitive power
plants in PJM's markets. These transactions would adversely affect consumers in Ohio by requiring
that consumers pay both the affiliate subsidies and the costs of any distortion in PJM's markets.
We respectfully note that certain PJM statements appear to reflect an approach limited to requiring
the PPA plants to be offered into the market at full cost. Such a limited approach will not adequately
protect all consumers in the PJM region. That proposal might resolve structural market concerns. But
it does nothing to protect captive Ohio consumers from paying unwarranted subsidies for deregulated
generating plants. Indeed, it could significantly increase the subsidies that Ohioans will pay, if the
power plants do not clear the PJM markets. Under such a scenario, the total affiliate subsidies could
be up to $3.1 billion for AEP Ohio consumers and up to $5.15 billion for FirstEnergy consumers. In
this regard, the Office of the Ohio Consumers' Counsel estimates that the PPAs could result in
charges of more than $1,000 (on average) to each of three million Ohio electric consumers over the
eight-year terms of the PPAs.
PJM already has moved to intervene in FERC Docket Nos. EL16-33-000 (AEP Ohio) andBLl6-34000 (FirstEnergy). W'e respectfully ask that PJM urge FERC to review these wholesale contracts for
compliance with its affiliate restriction requirements, set forth in the Edgar and Allegheny cases.
Thank you for considering our recommendations.
Consumers' Counsel
(61
T312
cc: Bruce Weston, Ohio Consumers' Counsel
10 West Broad Street, 18th
Floor Columbus, Ohio 43215-3485 . (614) 466-1312 . www.occ.ohio.gov
Your Residential Utility Consumer Advocate