The Wheeling Power Co. (WPCo) and Appalachian Power Co. (APCo) units of American Electric Power (NYSE: AEP) need to file a report by Dec. 3 with the West Virginia Public Service Commission advising the commission about how an Oct. 17 Public Utilities Commission of Ohio (PUCO) order will impact the power generation assets the two utilities might have in the future.
The Dec. 3 filing needs to report on the status of the capacity and energy supply options under consideration by the two utilities, and needs to indicate whether the companies are ready to go forward to address their capacity and energy needs, either through merger or as separate corporate entities, said an Oct. 29 order from the West Virginia commission.
In December 2011, APCo and WPCo filed a petition with the West Virginia commission for a possible merger. In an April 2 order, the commission concluded that considerable uncertainty existed with respect to a future merger and future power supply options to meet the needs of APCo and WPCo customers either with or without a merger. The commission, therefore, held the proceeding in abeyance for 90 days as requested by the companies.
The commission required the companies in future filings to address how they planned to remedy the capacity deficiency issue raised by the West Virginia Consumer Advocate Division (CAD) and various power supply options and costs either with or without a merger. The commission stated that future filings should provide relevant information including cost implications regarding updates and modifications to the AEP Pool Agreement, acquisition of generation capacity, and other options that may be available to APCo and WPCo to address the generation capacity deficiency and energy requirements with or without a merger.
The April 2 order also granted the petitions to intervene filed by CAD, the West Virginia Energy Users Group and Steel of West Virginia Inc. The order allowed CAD to begin immediate discovery notwithstanding the abeyance period.
AEP told W.Va. commission that PUCO action needed first
The commission ordered the companies to file a status report on June 26 that would include the status of the capacity and energy supply options under consideration and indicate whether the companies are ready to go forward to address capacity and energy needs, either through merger or as separate corporate entities. The companies filed that status report as ordered, and discussed developments since the April 2 order.
In the update, the companies said that:
- AEP’s Ohio Power Co. (OPCo) filed with the PUCO a Modified Electric Security Plan on March 30. OPCo provided testimony in the filing regarding the potential transfer of generating units to APCo. On the same date, OPCo made a Corporate Separation Filing to legally separate OPCo’s generation assets from its distribution and transmission assets, and to transfer generation assets to a new subsidiary.
- None of the multiple 2012 FERC filings related to this, which were terminated without prejudice by an AEP Notice of Withdrawal filed on Feb. 28, has been re-filed. It remained AEP’s intention to re-file them once underlying matters were resolved in certain state jurisdictions. In the FERC cases, AEP proposed that APCo acquire the Amos Unit 3 capacity currently owned by OPCo (864 MW) and 80% of the capacity of Mitchell (1,248 MW) or a total of 2,112 MW – which would entirely eliminate the looming APCo capacity deficit.
- The companies discussed the May 31 action of the Public Service Commission of Kentucky to allow AEP’s Kentucky Power Co. (KPCo) to withdraw, without prejudice, its application to, among other things, install a scrubber at the 800-MW Unit 2 of its Big Sandy coal plant. In its motion filed on May 30, KPCo told the Kentucky commission that it wished to reevaluate alternatives to meet its environmental obligations at Big Sandy and that it would file a new application when that evaluation has been completed. “Given that APCo and KPCo are contemplated to acquire capacity currently owned by OPCo to meet their own capacity needs, the Companies stated that this development could have implications for KPCo’ s capacity position,” the West Virginia commission noted.
- On June 4, APCo filed an update to its integrated resource plan with the Virginia State Corporation Commission (SCC). It detailed the companies’ latest position regarding changes to the AEP Interconnection Agreement and generation asset transfers to APCo. The companies stated that these matters will be affected, and to a large extent determined by, the outcome of pending and future proceedings before the PUCO, the FERC, and other regulatory authorities, including the West Virginia commission.
The June 26 status report concluded with the statement that the companies still “do not have all of the necessary information, at this time, to go forward to address their capacity and energy needs either through merger or as separate corporate entities. The regulatory mills are definitely grinding, but resolution of the pending PUCO dockets are needed, and the submission of refilings with the FERC would be helpful, to provide clarity and stability for determining the road ahead for the Companies.”
In an Aug. 27 order, the West Virginia commission granted petitions to intervene filed by the West Virginia Citizens Action Group (WVCAG) and the Sierra Club. The order also required APCo and WPCo to file a further status report on or before Sept. 21. In that Sept. 21 status report, the companies asked that the commission allow them 45 days from the date PUCO entered an order to file an update with the commission.
W.Va. consumer advocate wants gas-fired power considered
Also on Sept. 21, the CAD filed a separate status report. CAD reported that it had engaged an expert consultant to evaluate this proceeding. CAD also stated that for a number of reasons, APCo and WPCo could be without sufficient resources to meet the capacity and energy requirements of their retail customers as of Jan. 1, 2014. CAD stated that the companies are no closer to resolving the “looming crisis” than when this case was filed, the commission noted in the Oct. 29 order.
CAD also stated that the commission must gain a complete and thorough understanding of the options available to APCo and WPCo individually and on a merged basis. The CAD consultant found that APCo’s acquisition of a gas-fired combined-cycle facility would be its most economic supply alternative, but that AEP has not included existing gas-fired generation in the portfolio that APCo will acquire. CAD said it believes that AEP/OPCo will retain the most economic generation and transfer more expensive generation to West Virginia.
CAD also stated that to date APCo has not analyzed the capacity and energy available in the bilateral contract market through a request for proposals (RFP) process. CAD recommended that the commission require it to do so. CAD said the commission should also permit comments on the terms of the RFP to ensure that it is designed to produce the most salient results. CAD urged that time is of the essence and that unless the commission requires the companies to issue an RFP, the commission will lack important evidence necessary to determine the appropriate resolution of this case.
CAD concluded by requesting that the commission order APCo to issue an RFP for capacity and energy to satisfy the capacity deficiencies of APCo and WPCo as of Jan. 1, 2014, and further require that APCo request that AEP offer it existing gas-fired generation in addition to the Amos and Mitchell coal-fired generation.
PUCO approves Ohio Power exit from power gen business
On Oct. 17, the PUCO entered an order authorizing and approving OPCo’s modified application for structural corporate separation. Under the corporate separation, the electric distribution utility will divest its generation assets from its noncompetitive electric distribution utility assets by transfer to its separate competitive retail generation subsidiary, AEP Generation Resources (AEPGenCo), on certain conditions, the West Virginia commission noted. Furthermore, subsequent to the transfer of the generation assets and liabilities from OPCo to AEPGenCo, AEPGenCo would transfer to APCo an interest in Unit 3 of the Amos plant and 80% of the Mitchell plant.
The relevant part of the PUCO’s Oct. 17 order said: “Subsequent to the transfer of the generation assets and liabilities from OP to AEPGenCo, AEPGenCo would fransfer to Appalachian Power Company (APC) the interest in Unit 3 of the Amos generating plant and 80 percent of the Mitchell generating plant and transfer to Kentucky Power Company (KPC) 20 percent of the Mitchell generating plant.”
“APCo and WPCo will be required to file a further status report advising the Commission of the impact of the October 17, 2012 PUCO Order on this proceeding as well as the status of the capacity and energy supply options under consideration and indicating whether the Companies are ready to go forward to address their capacity and energy needs, either through merger or as separate corporate entities,” said the Oct. 29 West Virginia commission order. “The status report is due within forty-five days of the PUCO Order, or by December 3, 2012. The generation asset transfers from AEPGenCo to APCo that are discussed in the PUCO Order will require a formal petition proceeding at this Commission and may require proceedings in other jurisdictions including Virginia and the FERC. As part of the status report, the Companies will describe the filings that will be made, or have been made as of the filing of the status report, and the timing of such filings. This Order does not dictate a power supply portfolio for the Companies, but the Companies are on notice that they must demonstrate they have considered all reasonable power supply options in future filings.”