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Consumers' Counsel Recommends Change In How Choice Utility Procures RECs To Avoid Higher Costs, Floats Invoking Force Majeure
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The Ohio Consumers' Counsel has recommended that the PUC of Ohio adopt changes in REC procurement at the FirstEnergy Ohio utilities, as recommended by an auditor, as a means of reducing renewable energy compliance costs, with OCC floating the potential to invoke a force majeure to avoid "excessive" costs
In Ohio, compliance RECs are not included in the wholesale SSO product provided by full requirements default service suppliers. Instead, the utilities serving SSO customers retain the renewable energy compliance obligation, and the utilities procure RECs for their non-shopping customers. Renewable energy compliance costs are bypassable, and are included in the price to compare
A recent audit report regarding the FirstEnergy Ohio EDCs' renewable energy compliance had recommended that the EDCs use, in RFPs for RECs, benchmark prices for more than one traded date, and that bid offers
"significantly above" the benchmark prices should be rejected
The FirstEnergy Ohio utilities urged PUCO to reject the latter recommendation to the extent that such policy would mandate that the EDCs reject bids simply because the bids are above the benchmarks
The FirstEnergy Ohio EDCs said that, under their RFP approach, such bid rejections could cause administrative challenges and result in higher REC prices or other costs to customers
The FirstEnergy Ohio EDCs have primarily purchased RECs through a competitive RFP process in November of each compliance
year
The FirstEnergy Ohio EDCs (Companies) said, "When the Companies conduct their November RFP, they notify the market of their
procurement position. If, as [the auditor] recommends, the Companies are required to reject bid offers
significantly above benchmark prices during their November RFP, the Companies must still meet
their procurement obligations for that compliance period. While it is uncertain what the specific
market implications would be, the Companies could face pricing, procurement, and administrative
challenges by attempting to procure outstanding RECs in the final month of the compliance period.
The process for determining which bid offers are 'significantly above benchmark prices' is also
undefined, which could create additional risks and administrative difficulties.
The FirstEnergy Ohio EDCs further said, "Further, if the Companies do not fulfill their REC requirements during the November RFP,
they must procure their remaining requirements in the non-RFP marketplace. This is a significant
undertaking and may ultimately increase procurement costs—like individual transaction and
brokers’ fees—for customers. Requiring the Companies to reject above-benchmark bids does not
guarantee that the Companies will ultimately procure RECs at prices lower than benchmarks, and
the limited time to procure the remaining required RECs may impact the Companies’ ability to
efficiently manage their RFP and procurement processes."
However, OCC said that the auditor's recommendations could lower costs for customers, by avoiding above-market REC costs in the RFP, through the application of the price benchmarks
OCC said, "Paying excessive prices is
imprudent. It causes higher rates for consumers. Instead of paying significantly higher
prices, FirstEnergy [EDCs] should change its compliance approach."
The FirstEnergy utilities, OCC said, should implement a more robust contingency planning process.
"FirstEnergy [the EDCs] should do an in-depth analysis of the renewable energy credit market. This
could help FirstEnergy identify alternative compliance strategies (such as direct
negotiations with renewable generators) if the bids it receives are too high," OCC said
OCC also suggested that the EDCs could procure RECs earlier in the year (rather than November), which would allow additional time for sourcing RECs if an initial RFP results in excessive REC prices
Notably, OCC raised the potential for the FirstEnergy EDCs to seek a force majeure determination from PUCO, under R.C. 4928.64(A)(4). A force majeure may be sought when a utility (or CRES) pursued all reasonable options for obtaining renewable energy credits but could not meet its compliance requirement.
The determination of the EDCs' ultimate obligations under a force majeure are reserved to PUCO (e.g., whether any excusal would cover part of or all of the compliance obligations; the need to make-up any excusals in future years, etc), but OCC said that a force majeure finding could excuse the EDCs from paying excessive prices for the
RECs, which, "would protect consumers from an unreasonable rate
hike."
OCC also dismissed the EDCs' concerns about administrative challenges to adopting the auditor's recommendation, noting that renewable compliance obligations have been in place since 2009
The renewable energy obligations under R.C. 4928.64 end in 2026
Case 22-1037-EL-RDR
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March 11, 2025
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Copyright 2025 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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