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AEP Ohio Seeking to Subject Default Service Auction Prices to Existing 12% Rate Cap AEP Ohio has again proposed that prices resulting from its energy auctions for a portion of, and eventually 100% of, its Standard Service Offer (SSO) default supply requirements be included within the existing 12% rate cap applicable to certain costs under AEP Ohio's electric security plan.
AEP Ohio's comments came in a PUCO proceeding reviewing potential customer rate impacts from AEP Ohio's transition to auction-sourced default service. As previously reported, PUCO incorporated three energy-only auctions to procure a portion of (and eventually all) SSO energy during the ESP term, via: (1) a 10% energy-only auction initially; (2) a 60% energy-only auction starting in June 2014; and (3) a 100% energy-only auction from January to May 2015.
In the ESP order, PUCO adopted a 12% limit on rate impacts from certain costs -- namely riders RSR, DIR, PTR and GRR.
Not included in the 12% rate impact cap were the prices arising out of the energy auction (or the existing Fuel Adjustment Clause)
AEP Ohio, which had presented this proposal in the initial ESP case, again proposed to "incorporate" the impacts of setting rates by SSO auction into the existing 12% rate cap.
Any amounts over the cap would be deferred, "and collected from all customers," inclusive of carrying charges, AEP Ohio said.
"While other parties may propose more elaborate solutions based on certain assumptions about expected auction clearing prices (all of which are speculative), the simple elegance of the rate cap solution is that it utilizes an existing rate impact threshold determined by the Commission to strike a reasonable balance between moving toward market rates and the long-term benefits to be enjoyed by customers while recognizing the short-term potential need to mitigate rate impacts during the transition period," AEP Ohio said.
"AEP Ohio recognizes that the clearing prices for the energy auctions may come in higher than the Company's internal variable energy costs, but that contingency should only be mitigated if it creates a significant rate impact. The rate cap solution is only triggered if the rate impact concerns actually materialize and will not operate if the significant rate impacts do not occur. Stated differently, incorporating the impacts of setting rate by auction into the 12% rate cap would rely on the market in the first instance and trigger a regulatory solution only as needed," AEP Ohio said.
Interstate Gas Supply again proposed a retail auction of SSO customers as a means of mitigating any shock associated with the transition to market-based rates. IGS Energy had proposed a retail auction in the ESP case as well.
IGS Energy noted, in particular, a retail auction could mitigate deferred costs for AEP Ohio customers, through revenues raised by the auction.
"The retail auction will raise significant funds from CRES suppliers, as they bid a per dollar amount to serve SSO customers. Money raised by the auction could be used to pay down the deferral AEP customers will face after the ESP period. As such, the structure and timing of the AEP ESP, presents an excellent opportunity to conduct a retail auction in order to pay down the looming AEP deferral," IGS Energy said.
Case No. 13-1530-EL-UNC
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August 13, 2013
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Reporting by Paul Ring • ring@energychoicematters.com
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