FirstEnergy: The Grinch Who Stole from Ratepayers

firstenergy grinch

Image courtesy of @darth, who is a freaking national treasure.

In this season of giving, FirstEnergy seems intent to give its customers the finger.

Based on Ohio law – SB221, which was passed nearly unanimously in 2008, to be exact – the state’s investor-owned utilities must provide a portion of their electricity from advanced energy sources. By 2025, when the state’s renewable portfolio standard is set to expire, the utilities are required to source at least one-quarter of their electricity from such sources; of this amount, at least half of this total must come from renewable energy sources, like solar and wind.

But recognizing the constraints of quickly ramping up green energy production in a state where it was largely nonexistent before 2009 – along with a wise desire to take advantage of economies of scale – SB221 allowed utilities to buy renewable energy from other providers or to purchase renewable energy credits (RECs) from those providers when sufficient energy is not available. These RECs are an essential component of any renewable energy program.

Unfortunately, FirstEnergy, which rejects the value of energy efficiency/renewable energy and continues to fight aggressively against the mandates, has consistently failed to meet its obligations under the law. Environment Ohio, which grades each of the state’s four major utilities based on how well they abide by the mandates, gave FirstEnergy an F in year 1 and a D- in year 2. FE has come into compliance with the mandates since this point.

But as FE continued to fight the law with one hand and tread water with the other, it decided to purchase a number of RECs to meet its renewable energy mandates. In doing so, however, it drastically manipulated the REC market, allowing it to extract millions of dollars in excessive charges from ratepayers. As Plain Dealer energy reporter John Funk writes:

In a kind of reverse Robin Hood maneuver, FirstEnergy managed to pay the highest known rates for the credits when it bought them in those early years, including some from its affiliate, FirstEnergy Solutions…

[A] management audit by Exeter Associates of Columbia, Md.,found that FES paid up to 15 times more for credits than the Illuminating Co., Ohio Edison and Toledo Edison would have spent had they just paid the fines for not buying the credits.

In fact, the cost of those renewable energy credits was higher than RECs bought anywhere in the country, before or since, the audit noted.

A consultant to the Public Utilities Commission of Ohio (PUCO) calculated that FE’s actions allowed it overcharge customers by at least $100 million. NRDC looked at the numbers and came up with $130 million in overcharges. In August, the PUCO called out FE’s malfeasance and required it to return $43.4 million to ratepayers for its manipulation of the REC market.

But rather than acknowledge its wrong doing, FE has decided it won’t go down without a fight. Instead of returning the money back to its customers, the company has filed an appeal of the PUCO’s ruling to the Ohio Supreme Court. It apparently thinks that, as long as you have the money, two wrongs make a right.

So as we approach Christmas, let’s hear it for FirstEnergy, Ohio’s largest private utility and The Grinch Who Stole $100 Million from Ratepayers.

Please pardon my awful parody of Dr. Seuss:

While all Ohioans seemed to like renewable energy a lot, FirstEnergy, who lives above downtown Akron, does not.

The company hated green energy, everything in the sector. It had no good reasons, just some straw men and specters. It could be that it was concerned about costs. It could be, perhaps, that it feared about jobs being lost. But I think that the most like reason for its tantrums and fits may have been that the policy didn’t fit its ideological interests.

Happy holidays.

PD editorial on Obama’s climate plan is lazy, wrong & shortsighted

President Obama wipes his brow while delivering his climate speech at Georgetown University on June 25 (courtesy of The Atlantic Wire).

President Obama wipes his brow while delivering his climate speech at Georgetown University on June 25 (courtesy of The Atlantic Wire).

Last Sunday (June 30), the editorial board of The Plain Dealer published an editorial titled “Don’t bypass Congress on climate-change policy,” which criticized President Obama’s climate policy speech at Georgetown on June 25. In the piece, the board argued that the President is acting inappropriately by taking executive action to tackle the US’s greenhouse gas emissions through the Environmental Protection Agency. They note that the proposed regulations on GHG emissions from existing coal-fired power plants would “drive many of them out of business.” They continued:

Such plant closures would disproportionately hurt coal-dependent states such as Ohio. It is unfair to expect one region or small group of states to shoulder the chief economic impacts of a radical policy shift without subsidies or offsets.

An extreme U.S. policy aimed at divesting the nation from coal-fired energy should not be decided by the White House alone.

Unfortunately for the PD editorial board (and the public in Northeast Ohio it’s supposed to inform), this argument is a house of cards that one can easily dissect. So allow me to do so.

First, the board refers to the proposal as one of the “mandates that need no congressional approval” of which Americans must be “wary.” Nowhere in the piece does the board mention the fact that in Massachusetts et al. v. EPA (2007, PDF) the US Supreme Court ordered the EPA to determine if carbon dioxide constitutes a danger to public health in the country, the so-called “endangerment finding”. Justice Stevens, writing for the majority, noted that:

Because greenhouse gases fit well within the [Clean Air] Act’s capacious definition of “air pollutant,” EPA has statutory authority to regulate emission of such gases…

On December 7, 2009, the EPA issued the results of its endangerment finding, noting that

the current and projected concentrations of the six key well-mixed greenhouse gases…in the atmosphere threaten the public health and welfare of current and future generations.

Yet, despite this judicial ruling that EPA regulate GHGs, the editorial board makes no reference to the jurisprudence or the endangerment finding. It treats the President’s actions as if they were capricious and unexpected, rather than mandated by the highest court of the land.

Bipartisanship & consensus are to the PD editorial board as the ring was to Gollum (courtesy of Wikicommons).

Bipartisanship & consensus are to the PD editorial board as the ring was to Gollum (courtesy of Wikimedia Commons).

Secondly, the editorial board criticized the President for not working towards the consensus it reveres so highly. “Consensus” and “bipartisanship” are the buzzwords of the day for the Very Serious Persons who sit on editorial boards around the country. Yes, if only President Obama could reach out to Congressional Republicans and bring them to the table on climate action.

Of course, this belief completely belies reality. The modern Republican Party is the only opposition party in the world that steadfastly denies climate science. Moreover, the party remains completely obsequious to the fossil fuel industry. According to a recent study from the Investigative Reporting Workshop at American University, 411 elected officials around the country have signed a pledge to the Koch brothers-funded Americans for Prosperity promising to avoid taking action on climate change.

Furthermore, while VSPs at the PD and The Washington Post continue to write ballads about their fantasy carbon tax, recent evidence suggests that the EPA route may be the better alternative. A report from Resources for the Future suggests that, depending on the details, EPA regulation would likely be more effective at reducing GHG emissions than a carbon tax. This is particularly true, given the carbon tax that would likely come out of the current Congress – none.

Thirdly, the PD editorial board asserts, without providing any evidence, that the President’s climate plan will necessitate “sweeping economic sacrifice” and will change the “lifestyles and energy sources” of Ohioans.  Once again, the board refused to let fact get in the way of a [not so] good argument.

For decades, industry shills and their supporters have cried out against EPA regulations, claiming they would destroy the American economy. Yet, in case after case, the benefits of these regulations have far exceeded estimates, while the costs have been vastly lower than projected. The Edison Electric Institute claimed (PDF) that the 1990 Clean Air Act (CAA) amendments would carry $4-5 billion in annual compliance costs. The actual annual cost? $836 million. They were only off by 81.4%. According to a 2010 study, the benefits of the CAA and the 1990 amendments outweighed the costs by a ratio of 32.1 to 1 ($23.42 trillion in benefits to $730 billion in costs).

The monetized costs and benefits of the Clean Air Act and its 1990 amendments. As the table shows, the benefits of the CAA have vastly outweighed its costs (courtesy of Small Business Majority).

The monetized costs and benefits of the Clean Air Act and its 1990 amendments. As the table shows, the benefits of the CAA have vastly outweighed its costs (courtesy of Small Business Majority).

A recent study from the Natural Resources Defense Council suggest that EPA regulations on GHG emissions will once again provide a significant net benefit. In December, NRDC put together a proposed set of regulations for EPA to implement. This plan would set state-by-state emissions reductions standards, allowing coal-dependent states like Ohio to make a more gradual shift to more renewable energy sources. According to their assessment, the plan would reduce GHG emissions by 26% by 2020; its benefits would be roughly 6 to 15 times greater (PDF) than its associated costs.

NRDC recently had a respected firm run an economic assessment of this plan (PDF). The firm, Synapse Energy Economics, found that, contrary to the warnings of the naysayers at the PD, this plan would create 210,000 jobs and reduce electric bills by $0.90 per month through 2020.

Graph from Synapse Energy Economic's report on the NRDC policy proposal. As the graph shows, Ohio is projected to gain the second most jobs from EPA action (courtesy of Synapse Energy Economics).

Graph from Synapse Energy Economic’s report on the NRDC policy proposal. As the graph shows, Ohio is projected to gain the second most jobs from EPA action (courtesy of Synapse Energy Economics).

Ohio, one of the 14 states included in the analysis, would particularly benefit. The state would gain an additional 12,000 jobs – second only to Florida – and households would pay $1.03 less per month for electricity. Moreover, these regulations would simply speed up the transition away from coal that the state is already making. Under SB 221, Ohio is already obligated (PDF) to improve its energy efficiency by 22.2% and get 12.5% of its energy from renewable energy sources. Rather than increasing prices or killing jobs, a study from Ohio State has concluded that the policy saved ratepayers $170 million on their electric bills from 2008-2012 and created 3,200 jobs in the state.

Lastly – and unsurprisingly, given Ohio’s fealty to the coal industry – the editorial fails to mention any of the serious consequences of the state’s dependence on coal. A myriad of studies shows that coal carries significant costs for public health and well-being. According to a 2011 research article (PDF),

the life cycle effects of coal and the waste stream generated are
costing the U.S. public a third to over one-half of a trillion dollars annually.

If we were to internalize these externalities, the authors estimate that the price of coal-fired electricity would double or triple, making it noncompetitive with renewables. The Clean Air Task Force has concluded (PDF) that coal plants are responsible for 13,200 premature deaths, 20,400 heart attacks, and 217,600 asthma attacks annually in the US. Given Ohio’s dependence on this filthy fuel, the state ranked 2nd in 2010 for in coal-related mortality risk, hospital admissions, and heart attacks. The Cleveland metro area ranked 8th for mortality. All in all, evidence suggests that, for every $1 in economic benefits from coal, it carries $2 in costs to the public.

Mortality per 100,000 people from coal-fired power plants. As the map illustrates, coal-dependent states and their neighbors, including Ohio, suffer substantially from its effects (courtesy of the Clean Air Task Force).

Mortality per 100,000 people from coal-fired power plants. As the map illustrates, coal-dependent states and their neighbors, including Ohio, suffer substantially from its effects (courtesy of the Clean Air Task Force).

The Plain Dealer‘s editorial is just the latest in a series of inaccurate claims that EPA regulations will doom the American economy. They have proven wrong, time and again, and the PD will almost certainly be wrong here. The editorial is inaccurate, shortsighted, and – to be frank – an extremely lazy argument. As President Obama said in his climate speech,

[T]he problem with all these tired excuses for inaction is that it suggests a fundamental lack of faith in American business and American ingenuity. These critics seem to think that when we ask our businesses to innovate and reduce pollution and lead, they can’t or they won’t do it. They’ll just kind of give up and quit. But in America, we know that’s not true.

The next time the PD wants to write about climate policy, I suggest the editorial board actually does its homework, rather than relying on a tired set of easily disproved talking points.

Bill Seitz has sure changed his tune on Ohio’s Advanced Energy Portfolio Standard

sb 221 energy efficiency benchmarks

On May 1, 2008, then-Governor Ted Strickland signed Substitute Senate Bill 221 (SB 221), making Ohio one of 29 states (plus DC) in the country to establish energy efficiency resource standards (EERS).

The bill mandates that the state’s investor-owned utilities (IOUs) reduce their energy consumption by 22.2% by 2025. This mandate is broken down into yearly increments – each utility is supposed to meet each annual goal on the path to the overall reduction. For 2013, IOUs must reduce the annual electricity consumption of their customers by 0.9%.

Annual energy efficiency benchmarks for Ohio's investor-owned utilities, as specified by SB221 (courtesy of Mark Rabkin).

Annual energy efficiency benchmarks for Ohio’s investor-owned utilities, as specified by SB221 (courtesy of Mark Rabkin).

The bill also required IOUs to generate at least 25% of their electricity from advanced energy sources by 2026. Of these “advanced energy sources,” at least half must come from true renewable energy sources, like wind and geothermal (the bill includes a 0.5% carve out for solar energy). The other half can come from alternative sources, including “clean coal” (carbon capture and sequestration) and, as of Fall 2011, combined heat and power.

To date, the bill has largely delivered on its promises. According to Environment Ohio, the standards have saved enough energy (negawatts) to power 267,000 houses for a year. Additionally, the renewable portfolio standard (RPS) has sparked the installation of enough solar and wind generation capacity to power 95,000 houses for a year. Furthermore, the bill has contributed to the growth the renewable energy industry in Ohio, making good on the promises of job creation from its proponents. In 2011, Ohio ranked 5th in the country for green jobs, with 137,143. This industry – which had the highest growth rate of any sector in the US economy from 2010-2011 – has contributed significantly to Ohio’s economic recovery. Green jobs account for 2.8% of Ohio’s total workforce, higher the national average (2.6%).

Despite the success of this legislation, the bill has come under attack recently by a group of conservative lawmakers and industry interests. As a part of its broader effort to fight renewable energy at the state level, ALEC has placed SB 221 squarely in its sights. Two conservative state senators – Sen. Kris Jordan and Bill Seitz – are leading this charge. This effort is also the latest assault on energy efficiency and renewable energy in Ohio from FirstEnergy, the electric utility whose incompetence brought you the 2003 East Coast blackout.*

FirstEnergy's failure to properly maintain its Davis-Besse nuclear power plant in Northwest Ohio led to the development of a football-sized hole in the reactor lid. According to a review, the reactor could have been 60 days away from a meltdown (courtesy of The Plain Dealer).

FirstEnergy’s failure to properly maintain its Davis-Besse nuclear power plant in Northwest Ohio led to the development of a football-sized hole in the reactor lid. According to a review, the reactor could have been 60 days away from a meltdown (courtesy of The Plain Dealer).

Last week, Sen. Seitz told the Wall Street Journal that that mandates in SB 221 reminded him of “Joseph Stalin’s five-year plan.” Setting aside the absurdity of this statement, it represents a remarkable shift for Seitz on the bill in just 4 years (he initially proposed to scrap the EERS & RPS entirely in 2011; that bill never made it out of committee). Seitz has conveniently failed to mention that he voted for SB 221 in 2008. In fact, the bill sailed through the Ohio State Senate unanimously. And it passed through the Ohio House by a 93-1 vote. During the debate on the bill, Seitz never offered any opposition to it on the record, nor did he try to amend it in any substantial way.

This is an awfully big change from a legislator who tried to paint himself as a reasonable moderate during the contentious debate over SB 5. Yet, I guess it’s not surprising from a man who has served on the Board of Directors for ALEC and has received nearly $63,000  in campaign contributions since 2000 from industries ALEC represents, including oil and gas.

 

*FirstEnergy has been pushing to kill SB 221, even as it promotes its own rebate programs for energy efficiency made possible by the legislation. Hillariously, as I was writing this post, I received an email from the company promoting their new round of rebates for energy efficient appliances.