AEP Ohio Says State Rate Cannot Usurp FERC Role in Setting Capacity Costs

Interpreting the PJM Reliability Assurance Agreement as eliminating a Fixed Resource Requirement (FRR) entity's ability to seek relief from FERC regarding the cost paid for capacity under an FRR plan where a state-established compensation mechanism is set would, "render[] the provision invalid or illegal," the AEP Ohio companies said in replies to motions to dismiss filed by the Public Utilities Commission of Ohio and other intervenors (FERC Docket ER11-2183, 12/13).

Columbus Southern Power and Ohio Power have applied to institute a cost-based rate at FERC to govern capacity payments made by retail suppliers to AEP Ohio under the FRR plan. PUCO moved to dismiss the FERC proceeding by arguing that under the RAA, such relief is pre-empted where a state has established compensation for such capacity, which PUCO expressly did two weeks ago by adopting the price from the Reliability Pricing Model auction.

However, AEP Ohio claimed that any such pre-emption runs contrary to FERC's exclusive jurisdiction for wholesale ratemaking.

"Nowhere in any Commission orders approving the FRR compensation mechanism is there any suggestion that state commissions could usurp this Commission's exclusive jurisdiction to set wholesale sales rates for FRR Entities or that FRR Entities agree to waive their Section 205 rights if state commission's attempt to do so," the AEP companies said.

The AEP Ohio companies cited FERC's recent decision regarding rates paid by utilities for combined heat and power mandated by California as reiterating that FERC's, "authority under the FPA includes the exclusive jurisdiction to regulate the rates, terms and conditions of sales for resale of electric energy in interstate commerce," and that efforts by a state commission to set the rate for the wholesale sale of electric energy are preempted by the Commission's exclusive jurisdiction.

The AEP Ohio companies also argued that POLR rates in Ohio do no compensate the FRR entities for capacity costs.