Synapse in the News: Ohio Commission Rejects Duke Rider Synapse Testified Could Cost Consumers Millions

The Public Utilities Commission of Ohio denied on Thursday the price stabilization rider attached to Duke Energy Ohio’s proposed electric security plan, holding with Synapse and with numerous other intervenors concerned that the rider could be detrimental to ratepayers.

Synapse associate Sarah Jackson testified in October 2014 that the rider—which would pass on the net costs or benefits associated with the sale of generation from Duke’s Ohio Valley Electric Corporation (OVEC) assets into the PJM market to its customers—could cost consumers millions through 2024.

Duke claimed that, over the life of the rider (which would run until at least 2040), a net benefit would accrue to customers, though it offered no evidence for this claim. Ms. Jackson reviewed Duke’s proposed rider on behalf of Sierra Club and found that, based on the company’s own analysis, it would result in cumulative net costs to consumers through at least 2024. (The company did not provide any data beyond 2024.)

If the company’s predictions about future energy and capacity prices are wrong, or if costs of power from OVEC’s two aging coal-fired plants increase significantly in the coming years as a result of environmental regulations, it is possible that Duke’s customers would never see any financial benefits from the rider.

SNL Energy reporter Darren Sweeney cited Ms. Jackson in an article on the Commission’s decision. He writes:

A consultant hired by the Sierra Club told SNL Energy in December 2014 that Duke Energy Ohio's plan would result in net costs, not the benefits claimed by the company.

Sarah Jackson, an analyst with Synapse Energy Economics Inc. in Cambridge, Mass., said the company's cash flow numbers show that consumers will lose "a great deal of money" in the next few years through the proposed PSR and will not "make that money back up" for at least the next 10 years.

Jackson, who has consulted for nonprofit organizations, government entities and small utilities, also said the plan is not a good fit for Ohio's competitive market.

"I think it's hard to say that subsidizing large generators with ratepayer money won't affect the competitive market," she said.

Ultimately, the Commission agreed with Ms. Jackson’s testimony and with other intervenors who shared her concern, and rejected the rider on the grounds that, as proposed, it would not benefit ratepayers. However, the Commission ruled that Duke can establish a placeholder rider at a rate of zero for the term of the electric security plan (2015-2018). Duke will be required to petition for any cost recovery through the rider in a future filing.