This ESP has been controversial. The reason is because FirstEnergy, as part of its plan, has asked the PUCO to pass a fee through to its ratepayers to support its subsidiary’s struggling coal and nuclear generation. The subsidy would be supported by all of FirstEnergy’s Ohio distribution customers, regardless of whether they acquire their generation from FirstEnergy’s subsidiary. The subsidy would be assessed through a rider that is based upon a power purchase agreement (PPA), pursuant to which the ratepayers would guarantee for 15 years a price for the electricity generated, regardless of market conditions.
What I want to focus on now is the tactic FirstEnergy has used to assimilate support for its ESP. In my January blog, I noted that FirstEnergy had assembled what Edward “Ned” Hill, the then-dean of Cleveland State University’s Maxine Goodman Levin College of Urban Affairs, called a “redistributive coalition.”
A redistributive coalition, according to Professor Hill, exists when a small group of stakeholders band together to seek mutually favorable policy treatment at the expense of the public at large. Typically, the coalition incurs little cost in coordinating its efforts. However the public, being heterogeneous and widely dispersed, incurs great cost and difficulty in organizing a response.
FirstEnergy was able to induce companies to support its ESP by including special rates or programs for the coalition members — with the costs therefore borne by the ratepayers. In his original testimony, Hill pointed that the redistributive coalition was assembled to present to the commission (and the public) the appearance of not only broad support for the ESP, but also a broad range of benefits that would flow to varying classes of customers, including those with low income. However, Hill demonstrated that the benefits would only flow to the members of the coalition — a very small group.
But what really caught my attention in Hill’s testimony was his discussion of another concept that FirstEnergy cynically exploits: “rational ignorance.” Rational ignorance is the term used to describe reasonable disengagement by a public unable to digest complex technical arguments set forth by more knowledgeable industry experts.
In this context, Hill noted that FirstEnergy looks to exploit the general public’s inability to understand the nuance of the coalition support. On its face, the coalition seems to be asking for policy that the public should support — things such as price breaks for the poor, energy efficiency programs for small businesses, and so forth.
But under close examination, it turns out that the programs are narrowly crafted to help only those in the coalition. Why, for instance, would we only support the city of Akron and no other urban areas in northern Ohio? And why only support the members of the Council of Small Enterprise and not other small businesses?
Utilities AEP and Duke also sought PPAs. Yet neither sought to assemble redistributive coalitions for PPAs to try to fool or confuse the public. But then again, they were unsuccessful in their applications.