PUCO sought to strike a ‘balance’ between customers, other stakeholders in AEP contract case

The Public Utilities Commission of Ohio (PUCO) on March 31 modified and adopted an agreement where American Electric Power (NYSE:AEP) affiliate AEP Ohio and several signatory parties can implement a power purchase agreement (PPA) rider.

The PUCO modifications limit the impact of the PPA rider, enhance consumer protections, promote grid modernization and stabilize retail rates through May 31, 2024, the commission said in a news release.

“The Commission’s order strikes an appropriate balance between consumers’ interests in cost-effective electric service and diverse stakeholder interests,” stated Chairman Andre T. Porter. “Today’s opinion and order affirms Ohio’s commitment to encourage a modernized grid and retail competition.”

The much-watched case involves a long-term contract agreement with various coal-fired units within the AEP system. The revised rider approved by PUCO calls upon AEP to make additional credits available to customers if AEP fails to ensure that the PPA units are managed efficiently and cost-effectively.

The AEP decision document issued March 31 is more than 100 pages. The AEP decision came on the same day that PUCO announced a ruling in another highly-contested case involving FirstEnergy (NYSE:FE).

Decision touches upon gas conversion, renewables, customer credits

By July 1, 2016, AEP Ohio will make a cost recovery filing supporting the conversion of the Conesville Units 5 and 6 to natural gas co-firing.  “These units will be converted by Dec. 31, 2017” subject to certain approvals.

The agreement also calls upon AEP Ohio and its affiliates to limit the coal heat input for certain units.

The commission’s opinion and order includes AEP Ohio’s incorporation of multiple affiliate generation facilities in the PPA rider, previously established in AEP Ohio’s electric security plan (ESP) III case.

The rider is intended to act as a mechanism to stabilize retail rates in AEP Ohio’s service territory.

PUCO said it has incorporated additional safeguards for consumers through enhanced PUCO oversight including regular audits. The commission placed limits on the PPA rider to ensure further rate stability for consumers.

As directed by the PUCO opinion and order, AEP Ohio will file an application to extend its current ESP through the term of the PPA rider, and to update it to include an extension of the competitive bidding process through May 31, 2024 for its standard service offer.

This extension allows for heightened regulatory certainty and retail rate stability. In addition, AEP Ohio commits to expand interruptible credits and add an automaker credit for the eight-year term.

AEP Ohio must submit a grid modernization plan to the PUCO.

In order to promote a modern electric grid, including cleaner energy in Ohio, AEP Ohio commits to submit a plan for the development of 900 MW of renewable energy and the retirement, refueling or repowering of the power plants associated with the PPA rider.

The AEP PPA has been much debated in filings before the PUCO. Less than two weeks earlier, the Electric Power Supply Association (EPSA), which represents competitive power producers, asked PUCO to put the AEP case on hold until the Federal Energy Regulatory Commission (FERC) has acted on the pending complaints filed by EPSA and other opponents of the contract.

AEP has said that FERC should stay out of the case in Ohio.

AEP says agreement allows it to move forward

“Although the Public Utilities Commission of Ohio modified the settlement agreement, they did recognize the significant benefits of this plan for Ohio consumers,” AEP Chairman, President and CEO Nicholas Akins said in a news release.

“This plan will ensure more stable electricity prices in Ohio and promote the development of new, renewable generation to support the state’s economy,” Akins said.

The plan includes AEP Ohio entering into an eight-year power purchase agreement (ending May 31, 2024) for the capacity, energy and ancillary service output of AEP’s 2,671-MW ownership share of nine generating units and AEP Ohio’s 423 MW contractual share of Ohio Valley Electric Corporation (OVEC) generation. The nine generating units include Cardinal Unit 1 in Brilliant (Jefferson County); Conesville Units 4, 5 & 6 in Conesville (Coshocton County); Stuart Units 1-4 in Aberdeen (Brown County); and Zimmer Unit 1 in Moscow (Clermont County).

The company also will retire, refuel or repower to 100 percent natural gas Conesville Units 5 and 6 and Cardinal Unit 1 by the end of 2029 and 2030, respectively.

Subject to PUCO approval and cost recovery, AEP Ohio will develop at least 900 MW of wind and solar generation in Ohio over the next five years.

14-1693-EL-RDR.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.