Ohio commission okays less coal, more renewables for AEP Ohio

The Public Utilities Commission of Ohio issued a Nov. 3 decision in a long-running electric security plan case for the AEP Ohio subsidiary of American Electric Power (NYSE: AEP) that in part calls for the retirement of some coal-fired capacity and the development of 900 MW of new renewable energy resources.

Under the order, AEP Ohio will file with the PUCO by Dec. 31, 2016, a carbon reduction plan for promoting both fuel diversification and carbon emission reductions. AEP Ohio will work to retire, refuel, or repower to 100% natural gas several coal units at its Conesville and Cardinal generating facilities by 2029 and 2030, respectively. Any associated costs will not be eligible for inclusion in a Power Purchase Agreement (PPA) rate rider, or any other cost recovery mechanism.

Over the next four years, AEP Ohio will propose to develop a total of at least 900 MW of renewable generation facilities.

Also, AEP Ohio will maintain its corporate headquarters in Columbus, Ohio, and will maintain a nexus of operations in the state relating to operation and support of the PPA units.

In February 2015, the PUCO approved AEP Ohio’s electric security plan (ESP) for the term of June 1, 2015, through May 31, 2018. The commission approved the establishment of a PPA rider, set at an initial rate of zero. However, the commission was not persuaded that the plan as proposed would be in the public interest. AEP Ohio subsequently filed an amended application and testimony in regards to its PPA rider.

Sierra Club applauds this move toward clean energy

Said the Sierra Club about this order in a Nov. 3 statement: “Today, the Public Utility Commission of Ohio approved a multi-party stipulation involving American Electric Power and the Sierra Club. In this stipulation, AEP committed to developing the largest clean energy project in Ohio history and responsibly phasing out 1,500 MWs of coal plants in the state. Today’s decision kickstarts the progress toward one of the largest economic development projects in Ohio’s Appalachian region and begins a path forward for communities affected by retiring coal plants.”

The club added: “AEP’s clean energy commitment aims to bring at least 900 megawatts of clean energy projects online in Ohio over the next four years and will help make Ohio a leader in clean energy development. The projects include 400 megawatts of solar and 500 megawatts of wind, all to be sited in Ohio. The proposed settlement gives preference for the solar to be developed in Ohio’s Appalachian region, the area of the state most in need of well-paying energy jobs. One of the stated goals of AEP, Sierra Club, and other signatories to the approved stipulation, is to make Appalachian Ohio a solar manufacturing hub with the potential to employ hundreds of Ohioans in one of America’s fastest growing industries. The project will be competitively bid, and will require partnership with private industry to develop a large-scale solar facility  with an emphasis on employing Ohio military veterans, and creating sustainable employment in Appalachian Ohio.

“The stipulation requires retirement for three coal-burning units at AEP’s Cardinal and Conesville plants. These coal units emitted approximately 8,000 tons of sulfur dioxide and 11,000 tons of nitrogen oxide pollution annually in recent years. Ceasing coal burning at these units will avoid such harmful air pollution, and represents a significant portion of the carbon pollution reductions that Ohio needs to meet the modest EPA Clean Power Plan goals.”

PUCO clarified certain aspects of prior decisions in this matter

The commission said in one of the Nov. 3 orders about the 900 MW of renewables, in relation to a prior decision on this question: “In response to the issues raised by AEP Ohio in its application for rehearing, we note that, although the Commission intended to encourage AEP Ohio to make the development of solar projects a priority, the PPA Order does not preclude the Company from pursuing wind projects simultaneously with solar projects. We further note that nothing in the PPA Order would preclude AEP Ohio or its affiliates from owning up to 50 percent of solar projects and 50 percent of wind projects on an aggregate net basis based on installed capacity. As to bilateral contracting, the Commission clarifies that AEP Ohio should adhere to the stipulation and competitively bid the projects for both the remaining ownership share and for construction. Consistent with the stipulation, we expect that AEP Ohio will work with Staff to develop each renewable energy project, file the EL-RDR application for each project in a separate docket, and request and obtain the Commission’s approval for any associated cost recovery in advance of the commencement of construction of each project.”

The PUCO also ruled on complaints by Dynegy (NYSE: DYN), which co-owns some coal-fired capacity, including at Conesville, with AEP: “The Commission finds that Dynegy’s ninth and tenth grounds for rehearing are moot to the extent they pertain to the affiliate PPA units, otherwise lack merit, and should be denied. In the PPA Order, we specifically acknowledged that many of the generating units proposed to be included in the PPA rider, including the OVEC units, are co-owned. At no point, however, did the Commission suggest that any co-owned unit may be unilaterally retired by one of its owners. The Commission merely found, based on the evidence in the record, that the PPA rider proposal in the stipulation would benefit customers by avoiding the potential for increased ttansmission costs that may result from premature retirements, as well as maintaining a diverse fuel source mix in the state. In making these findings, the Commission did not, by any means, ignore the co-ownership status of the generating units. In any event, we are not persuaded that co-ownership will necessarily protect the generating units from their current economic circumstances, including the potential for premature retirement.”

“OVEC” refers to Ohio Valley Electric Corp., which AEP co-owns and operates the coal-fired Clifty Creek and Kyger Creek plants.

PUCO Chairman Asim Z. Haque wrote in an addendum to the Nov. 3 decision: “The Commission decided two related AEP Ohio cases on rehearing today. As these decisions collectively comprise a significant amount of technical reading, this concurrence is meant to explain, from my vantage point, the Commission’s decisions today.

“The Commission today provided financial certainty to AEP Ohio for its ownership interest in the Ohio Valley Electtic Corporation (OVEC), and more specifically, its interest in power plants owned and operated by OVEC. OVEC was created in 1952 by investor-owned utilities furnishing electric service in the Ohio River Valley area. OVEC’s creation arose from a national security need — to provide power to a uranium enrichment facility consttucted by the Atomic Energy Commission (AEC) in Portsmouth. To advance this national security need, OVEC corrsttucted two coal-fired generating units, Kyger Creek and Clifty Creek, and entered into a long-term power purchase conttact with the federal government that ensured the availability of power for the facility’s substantial electricity demand. In 2003, the U.S. Department of Energy officially terminated this power purchase relationship with OVEC, and the megawatts produced by Kyger Creek and Clifty Creek were available to be offered on the open market.

“We have historically, and will continue to ask through an annual filing, that AEP Ohio try and shed their interest in these plants. AEP Ohio has been unable to do so because divestment requires the agreement of all of OVEC’s many and diverse owners. The Commission today, however, has affirmed its willingness to provide certainty to AEP Ohio during the duration of their ESP or until their interests in OVEC are divested, whichever comes first.”

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.