Ohio Power argues for passthrough of battery storage pilot project costs

Ohio Power told the Public Utilities Commission of Ohio in a Jan. 20 brief that, despite the opposition of the Ohio Consumers’ Counsel (OCC), it should be able to pass along costs to ratepayers for a troubled battery storage pilot project.

On Feb. 3, 2014, Ohio Power, a unit of American Electric Power (NYSE: AEP) that is also known as AEP Ohio, filed its 2014 application to update its gridSMART Rider. The application reflects actual gridSMART project spending and revenue recovery during 2013 and projected costs for 2014.

“AEP Ohio disagrees with OCC’s recommendation that the Company reduce O&M expenses associated with the Community Energy Storage (CES) batteries,” said the Jan. 20 brief about prior testimony in this case. “The OCC, like the [PUCO] Staff, argues that the costs associated with CES batteries should be eliminated from the rider. OCC’s primary argument is based on a faulty premise (similar to the Staff’s) that the units were never returned from the vendor, tested, operational and ready to be installed.

“The Company’s October 22, 2014 response to the comments filed by Staff provides support for the Commission to reject this position on CES. In its October 22 comments, the Company discussed the revised scope of the CES project that was negotiated with the Department of Energy (‘DOE’) and the battery vendor after the Company determined that the batteries were not performing as expected. The scope of the project was reduced from 80 battery units to 6. The 6 battery units the Company ultimately purchased from the vendor were installed and tested in a laboratory during which the Company was able to observe how the batteries operated under different load scenarios like those the batteries would experience if deployed in a neighborhood setting. The Company gained valuable information about the technology through this laboratory deployment and testing.

“The Staff performed a field audit and verified that the 6 units were installed and was provided the results of the laboratory tests. The CES project was approved by the Commission as a pilot program to test new and evolving technology, and the Company has satisfied its performance obligation for the pilot project. After determining that the batteries initially received were not performing as expected, the Company acted prudently in its decision to return the batteries, renegotiate its contract with the battery vendor, and significantly reduce the scope of the pilot – all to the benefit of the Company’s customers. The Company should be permitted to recover the costs incurred associated with the CES pilot program.

“OCC also argues that the CES equipment was not ‘used and useful.’ However, this argument too is based on a misunderstanding of the nature of the CES pilot program. In its August 24, 2011 Opinion and Order in Case No. 11-1353-EL-RDR, the Commission stated, ‘In the ESP, the Commission approved a gridSMART rider, as opposed to distribution rate increases over the term of the ESP, to better facilitate the audit of expenditures. In this case, as approved by the Commission, in order to encourage the expedient installation and operation of gridSMART technologies, prudent gridSMART investments are recoverable as costs are incurred.'”

 A total of $155,409 is the cost of the six batteries purchased by the company.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.