AEP Ohio Settlement Castigated As Another ‘Utility Bailout’

Another so-called “utility bailout” case has been resolved – but not to the satisfaction of ratepayers, retail energy suppliers, or environmentalists – among them, the nationwide Retail Energy Supply Association, which commented, “Once again the Public Utilities Commission of Ohio (PUCO) staff has agreed to a proposed settlement that protects the utility at the expense of Ohio’s electricity consumers and the state’s economy.”

In the latest case, AEP Ohio, which serves about 1.5 million customers in The Buckeye State, filed a stipulated agreement in support of the company’s expanded purchase power agreement (PPA) with the Public Utilities Commission of Ohio (PUCO) on December 14.

According to AEP, “the agreement will be signed or unopposed by 11 parties,” including the PUCO staff, Sierra Club, Mid-Atlantic Renewable Energy Coalition, Ohio Energy Group, Ohio Hospital Association, Ohio Partners for Affordable Energy, and three competitive retail energy suppliers.”

Under the terms of the stipulated agreement, expected to be ruled on by the PUCO early in 2016, AEP Ohio would enter into an eight-year power purchase agreement (through May 31, 2024) for the capacity, energy, and ancillary service output of its 2,671 megawatt (MW) ownership share of nine generating units and its 423 MW contractual share of Ohio Valley Electric Corporation (OVEC) coal-fired generation.

The nine generating units involved in the order– eight of them currently coal-fired, and one of them a nuclear plant – 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 agreement includes what the utility characterizes as “significant environmental improvements” to five of the nine AEP-owned generating units – including:

  • Converting Conesville Units 5 and 6 to co-fire natural gas by 31, 2017, subject to regulatory approval; and
  • Retiring, refueling or repowering Conesville Units 5 and 6 and Cardinal Unit 1 to only use a significant acceleration in ceasing coal operations at these units.

AEP Ohio also committed to develop at least 900 MW of wind and solar energy projects statewide over the next five years; continue its strong support of energy efficiency programs; move forward with grid modernization efforts, including the installation of smart meters, distribution automation and Volt-VAR optimization; and provide up to $100 million in customer credits during the term of the agreement.

Although the agreement, alone, would involve a monthly increase of 62 cents in the first year for a residential customer using 1,000 kilowatt hours (kWh) per month on AEP Ohio’s Standard Service Offering, when combined with AEP Ohio’s recently implemented Electric Security Plan, that customer would actually see a decrease, on average, of $9 per month from the same period a year ago, according to the utility.

In aggregate, AEP Ohio said, “The plan is expected to save consumers $721 million over the life of the agreement,” optimistically noting, “This agreement addresses many of the concerns raised by a diverse group of parties including advocates for low-income customers, environmental organizations, industrial and commercial customers and  Ohio’s electricity generation resources and protect Ohio customers from electricity price volatility.”

However, the leadership of the regional PJM [Interconnection] Power Providers Group (P3) and the nationwide Electric Power Supply Association (EPSA) jointly commented, “In the wake of the massive public outcry opposing the proposed FirstEnergy bailout, it strains all logic and reason to think that the PUCO staff would double down on the idea of tax increases on the homes and businesses of Ohio for the exclusive benefit of AEP.

The people of Ohio will pay and the shareholders of AEP will get paid. It is as simple as that. It just doesn’t make sense that in the face of overwhelming testimony that competitive markets are working to push electricity rates to historically low levels in Ohio that the PUCO staff would yet again agree to a misguided proposal that will not improve reliability, will not reduce volatility, will force consumer to pay more for power and will drive innovation out of the state.”

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