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AEP: Upcoming Capacity Auction Prices To Drive Decision on Merchant Generation (& Retail Supplier) Strategic Review, In Light of Ohio PPA Uncertainty

July 24, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

Given delays in the adjudication of sought PPAs between AEP's Ohio utilities and its merchant power plants, AEP executives said during an earnings call yesterday that the "main determinant" in AEP's strategic review of its merchant generation business (including its retail supplier) will be PJM capacity prices under the upcoming capacity performance auctions.

"[T]he upcoming auctions ... would be a large part of presenting to us our options relative to the strategic valuation of generation. That's the key component," Nicholas Akins, AEP CEO, said

"As far as the PPA is concerned, that's going to continue on. But it's really hard to tell when the PUCO is going to focus on that. I would say that we continue to push for the PPA obviously, but the main determinant right now with the board [of directors] is that capacity auction. Once we get that, we'll have a major data point for the board, and we can continue our process of that strategic evaluation," Akins said

"I think, certainly, the capacity performance and the base residual auctions are a significant piece of that [merchant strategic review] discussion. We're going to have to see what the lay of the land is after that's concluded, to visit with our board and determine what the next steps are. But that doesn't stop us from pushing ahead with the PPA proposals regardless of the outcome. But certainly I think Ohio could send a great message by approving those PPAs. But it remains to be seen whether we're going to actually wait," Akins said

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