CHAOS: PUCO Pulls Approval for AEP Ohio Electric Security Plan

The Public Utilities Commission of Ohio (PUCO) this morning disapproved AEP-Ohio's electric security plan (ESP) as it was outlined in a settlement agreement submitted by 21 of 31 parties to the case, and initially approved by PUCO, with modifications, in December.

Among other things, the electric security plan established a three-year transition to market-based rates, with competitive auctions setting default service rates starting June 1, 2015

"Upon consideration of arguments raised by parties who did not sign the settlement agreement and upon becoming aware of the actual impacts of the agreement, the Commission found that approving the agreement does not benefit ratepayers and is not in the public interest," PUCO said.

The Commission has ordered AEP to return its rates, as mandated by Ohio law, to levels "similar" to those in place in December 2011. These rates will remain in place until a new rate plan is adopted, PUCO said.

While this will mean a return to lower base generation rates, the upshot of this ruling would appear to be that all retail suppliers should, until a new rate plan is approved, be charged the lower, RPM-price for capacity under AEP Ohio's Fixed Resource Requirement, as they were charged in 2011, as an alternative capacity charge has not been established outside of the now-rejected electric security plan settlement

Update: Here is the exact language from PUCO's order: "[W]e direct AEP-Ohio to file, no later than February 28, 2012, new proposed tariffs to continue the provisions, terms, and conditions of its previous electric security plan, including but not limited to the base generation rates as approved in ESP I, along with the current uncapped fuel costs and the environmental investment carry cost rider set at the 2011 level, as well as modifications to those rates for credits for amounts fully refunded to customers, such as the significantly excessive earnings test (SEET) credit, and an appropriate application of capacity charges under the approved state compensation mechanism established in the Capacity Charge Case.

However, recognizing that the capacity charge issue is now no longer settled, PUCO directed the attorney examiners to establish a procedural schedule in the Capacity Charge Case, which had been rendered moot by the stipulation but now presents a live controversy

"Our decision effectively hits the reset button on AEP's electric security plan, allows us to start over from the beginning, ensure that we have a complete picture of any proposal, and balance the interests of all customers and the utility," Chairman Todd A. Snitchler stated.

"Ohio remains committed to continuing down the path towards fully competitive markets," Snitchler said.

Specifically, PUCO said that it is, "concerned by AEP's recent proposal before the Federal Energy Regulatory Commission (FERC) to divest some of the company's generation assets into neighboring states."

"AEP's FERC filing fails to ensure that all generation assets currently owned by AEP will be bid into the company's 2015 base residual auction. By taking quick, decisive action to rescind its December order and revoke asset divestiture, the Commission ensures that its consideration of this issue will not be pre-empted by FERC," PUCO said.

PUCO also acknowledged that small businesses and residential customers were negatively impacted by the order approved last December, due to a re-allocation of costs between high and low load factor customers.

PUCO claimed that, "[b]ills for certain customers significantly exceeded what was expected based on the record in the case."

"The evidence in the record inadvertently failed to present a full and accurate record of the actual bill impacts to be felt by customers," Snitchler said. "This is particularly true with respect to low load factor customers who have high electricity demand for short periods and low usage the rest of the time," Snitchler said.

While PUCO today revoked the settlement agreement filed by AEP and other signatory parties in September 2011, AEP's underlying application filed on Jan. 27, 2011 remains in place. AEP has 30 days to amend or withdraw the application. PUCO has reopened intervention in the case to allow any party to participate in the proceedings and will issue a procedural schedule for the case when AEP responds.