FirstEnergy paid $100 million too much for renewable power 

UPDATE –The Public Utilities Commission of Ohio has ruled FirstEnergy overcharged its Ohio customers by $43.3 million for electricity generated by wind and solar.  A consultant to the commission found overcharges of more than $100 million.

COLUMBUS – State regulators are poised today to rule in a utilities rate case that could force FirstEnergy Corp. to repay Ohio consumers millions of dollars in overcharges it collected to pay for electricity generated by wind and solar.

The issue is whether FirstEnergy’s companies bought renewable energy at prices more than 15 times higher than market rates – and then jacked up customer rates to pay for the power.

The decision comes at a time when FirstEnergy has stepped up its complaints about a state law requiring utilities to help customers use less power with energy efficient equipment, appliances, and lighting.

The company’s position is that the efficiency standards have interfered with normal market development. FirstEnergy has also complained that wind power interferes with the operations of its large coal-fired and nuclear plants because wind is intermittent or blows when demand is low.

The Public Utilities Commission of Ohio opened an investigation into allegations of overcharges nearly two years ago and in February 2012 retained two independent auditing consultants to look into the matter.

A year ago Maryland-based Exeter Associates reported that FirstEnergy Solutions, the unregulated FirstEnergy subsidiary, paid up to 15 times the market price for renewable energy when it bought electricity for the Illuminating Co., Ohio Edison and Toledo Edison – which then adjusted customer rates. In its initial report, the firm recommended against allowing the company to pass on the costs.

A companion financial audit conducted by Goldenberg Schneider LPA of Cincinnati examined the amount of money the companies spent – nearly $126 million between the last quarter of 2009 and Dec. 31, 2011.

Since the two reports were filed, FirstEnergy has waged a year-long battle at the PUCO to get the figures redacted and to fend off attacks from the Ohio Consumers’ Counsel and a coalition of environmental and consumer groups urging the state to order rebates. 

The company at the time said it had no choice at the time but to buy the power at the prices it did. Other utilities paid less, however, by signing longer-term contracts, something FirstEnergy turned to more recently.

American Electric Power, based in Columbus, has also tried to enter the case, arguing that FirstEnergy’s actions have jeopardized the entire renewable energy market. FirstEnergy has opposed AEP’s involvement, another wrinkle the PUCO may iron out today.

The Natural Resources Defense Council, an environmental group, took a second look at the two reports and concluded the overcharges amounted to $130 million.

“Between 2009 and 2011, Ohio’s other electric utilities purchased renewable energy cost-effectively,” said Dylan Sullivan, an NRDC staff scientist  “FirstEnergy alone chose to enrich itself. Anything less than a $130 million refund to customers would be a slap in the face to customers.”