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Ohio Staff: "Properly Conceived" AEP Ohio PPAs May Be In Public Interest, Oppose As-Filed Versions

October 12, 2015

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

Similar to its recommendation at the FirstEnergy Ohio utilities, Staff of the Public Utilities Commission of Ohio opposed the as-filed proposed AEP Ohio ratepayer backed contracts to support 2,700 MW of generation owned by AEP's merchant generating arm (plus the utility's share in OVEC), but offered modifications to the proposed program to the extent PUCO finds the program to be in the public interest

While Staff recommended denial of the PPA program as proposed by AEP Ohio, "it is possible that the expanded PPA Rider, if properly conceived, may be in the public interest," Staff said

Among other things, Staff opposed the proposal based on what it called an "excessive" ROE proposed by AEP Ohio, and also said that AEP Ohio has not demonstrated a financial need for the PPAs to support the plants.

Furthermore, Staff said that the AEP companies, "did not, in Staff’s opinion, commit to sharing the financial risk associated with the PPA Rider with its distribution customers."

"The Company stated that its commitment for Commission review of the expanded PPA Rider is itself a commitment to a sharing mechanism of the financial risk. The Company claimed that should the Commission disallow an expense or break the PPA contract between the Company and AEPGR [AEP Generation Resources], the Company would continue to be tied to the financial commitment in the contract. This, in Staff’s opinion, is an erroneous interpretation of the Commission’s condition on a sharing mechanism," Staff said

AEP Ohio has proposed the contracts as addressing price volatility, but Staff reiterated that it prefers the current staggering and laddering approach to SSO contracts for mitigating price volatility.

To the extent the Commission elects to adopt the PPA program, Staff proposed several conditions as part of any adoption.

Among other conditions, Staff said that the PPAs' terms should not extend beyond the term of the current electric security plan, which expires May 31, 2018

Additionally, Staff said that AEP Ohio and AEPGR should be required to develop a sharing mechanism whereby AEPGR commits to be responsible for a portion of the costs associated with the expanded PPA Rider in exchange for a portion of the revenues associated with the expanded PPA Rider. Alternatively, the Commission may wish to include an appropriate charge and credit caps on the expanded PPA Rider, Staff said

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