Half a Dozen New Nonbypassable Charges Highlight AEP Ohio Electric Security Plan Email
This Story January 31, 2011
AEP Ohio has proposed for Ohio Power an electric security plan for the period January
1, 2012 through May 31, 2014, that would include a half dozen new nonbypassable riders,
plus the continuation of several existing nonbypassable riders (11-0348-EL-SSO et.
al.). The electric security plan presumes that Columbus Southern Power will be merged
into Ohio Power by the plan's start date.
Proposed new nonbypassable riders include:
Environmental Investment Carrying Cost Recovery Rider (EICCR): To recover environmental
compliance costs of existing generation dedicated to default service customers
Generation Resource Rider (GRR): To recover costs of new generation dedicated to
default service customers
Facility Closure Cost Recovery Rider (FCCRR): To recover costs from the retirement
of generation which was used to serve default service customers
Generation NERC Compliance Cost Recovery Rider (NERCR): To recover NERC-related compliance
costs for generation used to serve default service customers
Carbon Capture and Sequestration Rider (CCSR): To recover costs of a front-end engineering and design
study on carbon capture and sequestration
Market Transition Rider (MTR): To mitigate the impact of changes in rate design to
move generation rates to, "better reflect today's competitive market pricing structures."
The rate re-alignment is essentially lowering commercial rates (the class which
has seen the most migration), with corresponding increases in residential and industrial
rates. The MTR includes various charges and credits over three years to transition
to the desired rate re-alignment while limiting the immediate impact.
As part of this rate re-alignment, AEP Ohio would eliminate demand charges from generation
AEP Ohio would also continue the nonbypassable Provider of Last Resort Rider. The
rider would be set at $2.84/MWh. Customers could continue to avoid this rider by
agreeing that any return to AEP Ohio supply would be priced at market rates; however,
AEP Ohio is proposing that any returning customer be required to take market rates
from AEP Ohio beyond the term of the current electric security plan. In other words,
once the customer left AEP Ohio, and bypassed the POLR charges, the customer could
never return to the standard default rate, even when returning before a new default
service plan starts.
AEP Ohio also said that POLR rates do not include capacity charges.
Under the electric security plan, the bypassable generation rate would consist of:
(1) Standard Offer Generation Service Rider (base generation); (2) Fuel Adjustment
Clause Rider; (3) Alternative Energy Rider; and (4) Transmission Cost Recovery Rider.
Amounts for the other bypassable riders have not yet been determined. Note that
renewable compliance costs have been removed from the FAC and placed in a separate
rider, but remain bypassable.
AEP Ohio has also proposed discounted generation rates for commercial and industrial
customers agreeing to take supply from AEP-Ohio for five years, which is beyond the
end date of the proposed electric security plan. These customers would receive a
discount of 15% (later decreasing to 10%, 5% and finally 0% in the final year) off
of the non-fuel generation rate. This option would be available to commercial and
industrial customers having annual peak demands of greater than 200 kW, and the program
is capped at 2,500 GWh of participating load. Discounts would be paid to customers
through the bypassable Rate Security Rider (RSR).
AEP Ohio has also proposed offering an optional Green Power Portfolio Rider (GPPR),
allowing default service customers to purchase 25%, 50%, 75%, or 100% of their energy
usage from renewable resources. The proposal is notable because the RECs voluntarily
purchased by these customers would be used to reduce AEP Ohio's renewable compliance
obligations, and would result in a reduction in the costs recovered from other customers
on a bypassable basis.
AEP Ohio predicated the need for many of the nonbypassable riders cited above due
to the "risks" inherent in the Ohio market, and proffered a need for new generation,
which it said would not otherwise be constructed without nonbypassable charges.
"[T]here is a distinct risk Ohio could become an importer of electric power ... A
[regulatory] framework biased toward current short-term market mechanisms will likely
lead to retirement of critical assets, an irreversible course that will leave the
State exposed to tighter supplies and the associated increases in market prices,"
AEP Ohio said.
However, elsewhere in discussion of a potential modification or termination of the
AEP generation pool, AEP Ohio concedes that Ohio Power is currently a capacity surplus
member of the AEP Pool, and would remain such even with the integration of Columbus
In fact, should the termination of the AEP Pool lead to lost revenues due to fewer
opportunities for excess sales of Ohio generation, "the Company would be in a position
to consider selling some of its generating assets, since it is in excess of what
it needs to meet its non-switching load and other firm capacity obligations," AEP
Finally, AEP Ohio would also institute a nonbypassable charge to recover deferred
fuel expenses from the current electric security plan, which was contemplated under
the original plan.