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PUCO Staff: AEP Ohio Has Not Shown Need For 900 MW Of Utility-Developed Resources

Staff Concerned Proposed Renewable PPAs Could Crowd Out Competitive Options

January 9, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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Staff of the Public Utilities Commission of Ohio (PUCO) has filed testimony stating that AEP Ohio has not demonstrated a need for at least 900 megawatts (MWs) of renewable generation resources

AEP Ohio had sought a finding of such a need as part of a long-term forecast. Such forecast proceeding has been consolidated with an application by AEP Ohio for approval of renewable energy purchase agreements totaling 400 MW of nameplate capacity solar energy (see details on the application here)

A witness for PUCO Staff testified that, "In May of 2018, PJM conducted its most recent Base Residual Auction (BRA) to procure the capacity needed to ensure reliability through the 2021/2022 delivery year. This auction resulted in a reserve margin of 21.5%, well in excess of the target reserve margin of 15.8%. PJM’s reliability construct, known as the Reliability Pricing Model (RPM), has consistently procured capacity at levels that exceed the standards that are set to ensure resource adequacy is maintained."

Staff's witness further testified that, "Having determined that supply is sufficient to meet the needs of Ohio Power’s customers and to ensure that resource adequacy is maintained, Staff therefore finds that the Company has not demonstrated a need to construct any additional resources at this time. Given the fact that our finding is of no need, Staff does not believe it is necessary at this time to evaluate the specific merits of the Company’s proposed facilities."

Staff's witness further testified that, "If Staff had found that additional resources are necessary, we would have continued to the next step of evaluating the types of resources that would be best suited to meet the identified need. As previously described, Staff’s evaluation would include all cost effective alternatives, on both the supply and the demand side of the equation. Our evaluation would not be limited to only considering 500 MWs of nameplate wind capacity and 400 MWs of nameplate solar capacity."

Addressing testimony AEP Ohio offered in support of the PPAs, Staff's witness further testified that, "Staff believes that Ohio Power is conflating customer preferences with customer needs. The Company provides insufficient evidence that customer preferences are not being adequately met, even as these preferences increase and change over time."

Staff's witness further testified that, "Staff observes that under Ohio’s current regulatory structure, environmental preferences can be acted upon in a number of ways. Ohio Power currently has over 1,500 customers on net metering tariffs, who have chosen to install distributed generating facilities at their own premises. For customers who do not wish to own their own generating facilities, the Commission’s Apples to Apples website consistently demonstrates the existence of a multitude of CRES provider offerings that are, in whole or in part, renewable products. As of November 8, 2018, residential customers in the Ohio Power service territory had twenty-nine CRES provider offerings to choose from on the Apples to Apples website that were 100% renewable content. Small commercial (GS-1) customers had fourteen offers to choose from that were 100% renewable content."

Staff's witness further testified that, "In addition to these offerings available in the marketplace, Staff also notes that government aggregations are capable of sourcing renewable resources for their participants, such as the one that currently serves Ohio’s third largest city."

"Therefore, Staff concludes that a demonstration of customer preferences that are increasingly shifting towards renewable energy is insufficient to establish a need for utility scale wind and solar investments to be owned and/or operated by the utility and recovered from all ratepayers through a nonbypassable rider. Furthermore, Staff is concerned that the existence of such a directive could potentially serve to crowd out the other types of programs described above," Staff's witness further testified

Staff's witness testified that, "Staff believes that the purported benefits associated with the proposed projects do not relate to need as Staff would define the term. However, Staff certainly recognizes that various parties, including the Company, may define what constitutes a need in a different manner than Staff and may find these benefits compelling. It will be the Commission who will ultimately decide whether or not to broaden the definition of need."

Case No. 18-0501-EL-FOR

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