AEP Generation Resources clears capacity in PJM auctions

American Electric Power (NYSE: AEP) announced Sept. 10 that 7,209 MW of the company’s unregulated generation fleet in the PJM Interconnection market cleared the capacity auction for the 2018-2019 delivery year, representing all of the capacity that AEP Generation Resources bid into the auction.

Auction results were announced Aug. 21 at a clearing price of $164.77/megawatt-day. This auction was the first held under PJM’s new capacity performance system, designed to encourage investment in power plants and strengthen the reliability of the electric grid, AEP noted.

PJM also held two transitional auctions to incorporate capacity performance into its previous auctions for the 2016-2017 and 2017-2018 delivery years.

  • In the 2016-2017 transitional auction completed Aug. 31, AEP Generation Resources cleared 7,169 MW at $134/megawatt-day. This replaces the original capacity auction clearing price of $59/megawatt-day for 2016-2017.
  • AEP Generation Resources cleared 6,495 MW at $151.50/megawatt-day in the 2017-2018 transitional auction results announced Sept. 9, replacing the original auction clearing price of $120/megawatt-day.

“The improvements PJM has made to the capacity market design are a step in the right direction to help support the investments needed for reliable generator performance. These higher auction prices for the next three years better reflect the value of reliable generation to meet peak electricity demand. The auction results also illustrate the benefits of our proposed purchase power agreement in Ohio to help provide more stable electricity rates for customers in the future,” said Nicholas K. Akins, AEP chairman, president and chief executive officer.

That power purchase agreement case, now before the Public Utilities Commission of Ohio, has to do with AEP Ohio buying 3,111 MW from six plants including AEP’s shares of the Kyger Creek and Clifty Creek coal facilities over the long term, providing a more stable source of power than PJM capacity auctions. The PUCO has decided the idea is legal, but is still reviewing the specifics of the AEP plan and also a similar plan from FirstEnergy (NYSE: FE). The six power plants, all coal-fired, that would provide that capacity under the AEP plan are AEP’s shares of Cardinal, Conesville, Stuart, Zimmer, Kyger Creek and Clifty Creek.

Notable is that much of the AEP Generation Resources capacity is made of coal-fired units that AEP Ohio had to divest at the end of 2013 under Ohio’s utility deregulation program. Capacity for the proposed power purchase deal would come from AEP Generation Resources.

Incidentally, as a sample of what’s going on in the PUCO docket for that power purchase deal, where multiple depositions are being taken from various parties, is this Sept. 10 complaint from AEP Ohio: “On August 7, 2015, the Commission issued its scheduling Entry in this case which provided, among other things, that intervenor testimony would be due September 11, 2015 – five weeks after the Entry and approximately four months after the Amended Application filed by Ohio Power Company (AEP Ohio). On August 12, the Environmental Law & Policy Center (ELPC) –along with several other intervenors – filed a joint motion to delay the procedural schedule established by the Commission. After the Company filed a memo contra, the group of intervenors filed a reply in support of their request for delay on August 21, which appended an un-executed affidavit inserting a new claim not raised in the original motion for delay. More than 10 days later, ELPC submitted an executed affidavit as additional support for the motion to delay, explaining simply that the affiant was ‘on vacation in Florida.’ On September 3, 2015, AEP Ohio filed a letter registering some concerns and questions about the late-filed affidavit.

“Specifically, AEP Ohio letter’s questioned the propriety of the executed affidavit being submitted more than 10 days after the reply memo was filed – and well after the deadline for submitting arguments in support of the motion for delay. The Company also raised some questions that have not been addressed. Presuming the affiant agreed to the original language of the affidavit at the time it was submitted, why did he not just take a few extra minutes to execute and transmit the completed affidavit? Why did it take 10 days to execute the affidavit? Of course, the substantive content of the affidavit raises additional procedural questions. Can a conversation between counsel and a prospective witness that occurred after the request to delay was filed and presented for the first time on reply (after the Company responded to the original motion) be properly submitted as a valid basis for the prior motion? Is a claim that a prospective witness is on vacation and too busy to prepare testimony by the established deadline probative or relevant, given that the question was not asked of the potential witness until 10 days after the deadline was established? After the Company’s letter was filed, EPLC filed a motion to strike the correspondence.”

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.