AEP’s Ohio Power wants the option to build its own generation in Ohio

The AEP Ohio/Ohio Power unit of American Electric Power (NYSE: AEP) is building into its Electric Security Plan approved by the Public Utilities Commission of Ohio the flexibility to build its own new power generation in the future in this deregulated state.

Earlier this decade, under a PUCO-approved program, AEP Ohio, a regulated transmission owner, sold its power plants to an unregulated AEP subsidiary, AEP Generation Resources. Earlier this year, on March 31, the PUCO approved a controversial deal where Ohio Power would buy back some of that power under a power purchase agreement (PPA) from now-unregulated power plants on behalf of its ratepayers as an energy security measure for a period of eight years, out to 2024. That PPA approval mandated the filing of this new application.

In a May 13 application filed at the PUCO, AEP Ohio is seeking an amendment to its current Electric Security Plan (ESP). One piece of supporting testimony came from Andrea E. Moore, who is employed by Ohio Power as Director–Regulatory Services.

The company filed its ESP III application in December 2013, and it was approved by the commission in February 2015, and several entries on rehearing at later dates. These orders modified and approved aspects of the company’s application. “Consistent with the Purchase Power Agreement (PPA) Stipulation, the Company is proposing to modify and extend the provisions already approved by the Commission in the ESP III decision,” Moore wrote.

“The proposed ESP Extension incorporates numerous commitments and programs that balance the interests of both customers and investors over the term of the current ESP through May 31, 2024 and into the future by stabilizing customers’ rates and promoting economic development in the state of Ohio. Reasonably-priced electricity is a critical component to the economic vitality of our nation, particularly in Ohio. National, regional, and state energy policies continue to evolve, and AEP Ohio has already embraced some of these changes through investments in transmission and distribution infrastructure, reliability enhancements, comprehensive energy efficiency programs, and by taking an active role in educating and communicating impacts of electricity proposals within various policy arenas.

“Building on the current ESP (ESP III) and the commitments made, modified, and approved in the PPA Stipulation, AEP Ohio’s proposed plan establishes a competitive auction schedule to supply internal load, while also supporting continued infrastructure investment in the Company’s transmission and distribution systems to enhance reliability. The Company is committed to support Ohio’s economic growth as demonstrated through newly proposed innovative tariffs.

“The proposed ESP extension also supports the continued development of a marketplace in which CRES providers can offer innovative and competitive generation supply options. Further, the proposed ESP continues to support compliance with existing benchmarks concerning advanced and renewable energy and energy efficiency and demand response programs.

“The proposed ESP aligns with the state of Ohio’s long-term vision for a competitive generation marketplace, promotes Senate Bill 221 (SB 221) state policies, and supports economic development within the state of Ohio. The proposed ESP also provides the regulatory flexibility to enable innovative mechanisms that will help sustain critical investment in Ohio’s electricity infrastructure which will support jobs for Ohioans and an essential tax base to fund Ohio’s ongoing needs.”

One of the amendments is something called the Generation Resource Rider (GRR), which Moore describes as: “The GRR helps AEP Ohio to address long-term capacity needs by providing the opportunity to build additional generation if needed in the future. For instance, if the Company were to build utility scale solar projects, the Company would expect recovery of the investment through the GRR. Because the term of the ESP is being extended through 2024, it is important that this mechanism is approved to provide generation investment opportunities to AEP Ohio if the need should develop, consistent with the options in the ESP statute. An added benefit is this option would provide a hedge against potentially volatile market prices. This rider will be designed to recover renewable and alternative capacity additions as well as more traditional capacity constructed or financed by the Company and approved by the Commission.

“The GRR also provides the potential for substantial economic impact in the state. These benefits to the state would include payroll taxes associated with jobs in both construction and thereafter, purchase of Ohio goods and services, taxes that provide critical funding for Ohio schools, infrastructure and public services, and substantial philanthropic support from AEP Ohio.”

AEP Ohio has proposed a procedural schedule on this application that includes:

  • A May 30 technical conference to allow interested persons the opportunity to better understand the application.
  • Motions to intervene filed by June 6.
  • The company to file supplemental testimony to implement the commission’s pending rehearing decision in this case within 30 days after issuance of the rehearing decision.
  • Testimony on behalf of intervenors filed by June 30.
  • Discovery requests, except for notices of deposition, served by July 15;
  • Testimony on behalf of commission staff filed by July 15;
  • A procedural conference to be held on July 18.
  • The evidentiary hearing to commence on July 25.
  • The commission to issue an order approving, or modifying and approving, the application by Sept. 21.
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.