• U.S. regulators say utilities' customers would be `captive'
  • Power contracts now subject to federal review and approval

American Electric Power Co. and FirstEnergy Corp. face a federal review of controversial contracts they secured from state regulators for power from money-losing plants they run in Ohio.

AEP and FirstEnergy won guaranteed rates for uneconomic coal-fired and nuclear plants last month, over the objections of competing generators who argued they amounted to a consumer-funded bailout. The contracts warrant a U.S. review as the utilities’ customers will be “captive in that they have no choice as to payment” of the charges, the Federal Energy Regulatory Commission said Wednesday, ordering the companies to submit their so-called power purchase agreements for approval.

The federal review throws into question yet again the fate of the companies’ Ohio power plants, totaling about six gigawatts of capacity. The generators, like other U.S. power suppliers, are seeking other sources of revenue as they face low power prices in wholesale markets and weakening demand growth that’s threatening to force plants into early retirement.

Just, Reasonable

In deciding to review AEP’s contracts, the commission said it “has an independent role to ensure that wholesale sales of electric energy and capacity are just and reasonable and to protect against affiliate abuse.”

The agency “stood up for customers and defended fair markets and competition” in ordering a review of the contracts, John Finnigan, lead counsel for climate and energy at the Environmental Defense Fund, said in an e-mailed statement.

The commission is “sending a clear signal to any utility trying to bail out their uneconomic power plants through political prowess,” Finnigan said.

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