PUCO, PJM Protest AEP Complaint Over Capacity Costs

The Public Utilities Commission Of Ohio, PJM, and several other parties have filed protests at FERC against AEP Ohio's complaint seeking to raise the capacity costs paid by competitive retail suppliers (EL11-32).

As first reported by Matters (4/5), AEP has sought to remove the ability for states to set the rate for capacity compensation under the Fixed Resource Requirement in certain situations, with such compensation instead determined by FERC.

As the complaint is essentially AEP's third bite at the apple (with FERC having denied its initial application to raise capacity costs, see 1/21), much of the protests restate previously reported arguments against AEP's requested relief. These include arguments that AEP's proposal, which would include a 20-fold increase in capacity costs paid by competitive suppliers but no increase in the costs paid by default service customers, would significantly harm the retail market. Such arguments need not be repeated here.

Additional arguments addressing novel issues raised by AEP's complaint include PUCO's protest that FERC's January decision in Docket ER11-2183 concerning AEP's capacity costs was "dispositive," and that AEP's complaint is a collateral attack on this order.

Furthermore, PUCO noted that it is addressing capacity costs in several Ohio dockets, including AEP's new proposed electric security plan, where AEP sought to price the capacity costs paid by competitive suppliers at $299.81/MW-day and $387.78/MW-day at Columbus Southern Power and Ohio Power Company, respectively.

PUCO argued that AEP's "unsolicited" filing in Ohio to establish such capacity compensation rates contravenes the very premise of its section 206 complaint at FERC -- that PUCO lacks jurisdiction to set such rates.

PJM also disputed AEP's latest tactic, in which AEP has argued that the language of the Reliability Assurance Agreement (RAA) which grants state regulators the ability to set the capacity compensation rate does not reflect the original intent of settling parties.

"AEP's effort violates a fundamental principle of contract interpretation, i.e., that '[i]f a contract is not ambiguous, extrinsic evidence cannot be used as an aid to interpretation,'" PJM noted.

"AEP does not allege that the RAA is ambiguous," PJM added, stating that the words in the RAA were chosen to reflect the settling parties' intent.