On April 27, 2016 FERC ruled in favor of groups challenging FirstEnergy’s and AEP’s long term electricity supply agreements. The ruling rescinded the previously granted section 205 waivers, which had allowed the utilities to purchase electricity from their affiliate generators, effectively invalidating the PPAs. Additionally it questioned the non-bypassable RRS rider proposed to fund the Purchase Power Agreements (PPAs). The utilities have cautioned that the only way to maintain grid reliability is by continuing the operation of these “unprofitable” nuclear and coal plants. There is a possibility that without the PPAs, plant owners will go through with their threats to shut down the plants, causing a potential increase in electricity prices in the region in the long term.

Consumer advocate groups and competing generator companies filed a complaint with FERC concerning the validity of AEP’s and FirstEnergy’s section 205 waivers. They requested that FERC rescind the section 205 waivers granted to the utilities as it relates to the PPA. Thus ensure that the PPA is reviewed under section 205, which does not allow wholesale transactions of electricity energy between a utility and its power sales affiliate without receiving Commission authorization. The complaint argued that the waiver was granted to the utilities relating to a particular power contract and that there have been “fundamental” changes in circumstances since the Commission had granted that waiver.

As Tradition had expected, FERC granted the complaint (EL 16-33-000), rescinding the section 205 waiver, and effectively annulling the PPAs until the agreements have been reviewed. Additionally, FERC questioned the non-bypassable rider used to collect revenue for the PPA as it may not be relevant for all ratepayers.

The PPAs had been approved by the Public Utilities Commission of Ohio (PUCO) in March 2016. PUCO’s order allowed the utilities to maintain their affiliated nuclear and coal plants by guaranteeing a profit from the operation of the plants from June 1, 2016 through May 31, 2024. In addition, the order approved rider RRS, which would be implemented to reduce customer exposure to market volatility. The rider was non-bypassable, meaning it would have been applicable to all ratepayers, shopping and non-shopping.