Stop Davis-Besse stranded costs, order $80 million refund
Transmitted by facsimile
December 19, 2002
Alan R. Schriber, Chairman
Public Utilities Commission of Ohio
180 E. Broad Street
Columbus, Ohio 43215
Dear Chairman Schriber:
I am writing on behalf of tens of thousands of Ohio Citizen Action members who pay stranded costs to Toledo Edison and Cleveland Electric Illuminating, to urge the Public Utilities Commission to immediately order Toledo Edison and Cleveland Electric Illuminating to --
- Refund all generation-related stranded costs collected for the Davis-Besse nuclear power plant since February 16, 2001, and
- Stop including these charges on future bills.
For the first ten months alone, a refund would return more than $80 million to ratepayers.
As you know, Davis-Besse is currently undergoing massive repairs because of the extensive cracking and corrosion of the reactor head. Although the plant has been closed for ten months, it is unclear if or when it will reopen. Thus far, plant repairs have far exceeded both cost estimates and anticipated schedule. Last month, FirstEnergy’s CEO Peter Burg said that Davis-Besse isn’t a "black hole", indicating that FirstEnergy may not continue to pay indefinitely for the crippled reactor’s repairs.
As Ohio deregulated the electric utility industry, the Public Utilities Commission approved stranded costs for FirstEnergy that could total nearly $9 billion. The purpose of stranded or transition costs was to provide a means for utility companies to recover costs that they claimed they would not be able to recover in a competitive market.
In the direct testimony of Harvey L. Wagner, FirstEnergy’s Controller and Chief Accounting Officer, filed in the FirstEnergy transition case, Mr. Wagner confirmed that all generation assets were used and useful for jurisdictional customers (pg. 25, attached):
"Q. Were the generation assets included in this analysis used and useful for providing service to jurisdictional customers?
A. Yes they were."
Now, however, things have changed substantially. Davis-Besse hasn’t produced electricity for ten months, and its future is questionable. It clearly is not "used and useful". It is not a plant that could function in a competitive market, and customers should not be held financially liable for the idled plant.
It is impossible to get an exact number for what the refund and future canceled stranded costs should be, but here’s a good starting point. Stranded costs are broken into two categories: generation and regulatory assets. The following numbers represent only the above-market generation costs attributable to Davis-Besse.
Using figures from the initial direct testimony of Mr. Wagner and Richard A. Kaiser in the transition case, the generation stranded costs for Davis-Besse totaled $506,192,879, which FirstEnergy would collect from ratepayers from January 1, 2001 through December 31, 2005. This figure is reached by subtracting Davis-Besse’s actual value of $156,000,000 from Davis-Besse’s book value of $662,192,879. Also, according to the filed testimony and FirstEnergy’s 2001 10-K report, CEI owns 51.38% of Davis-Besse, Toledo Edison owns 48.62%.
Because regulatory stranded costs were not broken down on a plant basis, it is impossible to know what regulatory costs should be refunded and stopped. We ask that the Commission make that determination.
We further ask that you act quickly on this so that customers can receive a refund and be relieved of the burden of paying for a plant that produces no electricity.
Sincerely,
Amy K. Ryder
Cleveland Area Director
cc:
Commissioner Judy A. Jones
Commissioner Donald L. Mason
Commissioner Ronda Hartman Fergus
Commissioner Clarence D. Rogers
