AEP Ohio Seeks Expedited FERC Action on Capacity Charge Complaint

FirstEnergy Solutions has opposed AEP Ohio's motion to reinstate the bifurcated capacity pricing mechanism applicable to retail suppliers, while AEP Ohio has asked FERC to expedite ruling on its complaint concerning the state compensation mechanism for capacity pricing.

As noted earlier this week, AEP Ohio is seeking to limit RPM-priced capacity to 21% of volumes (the terms of its now rejected electric security plan), with competitive load above this set-aside paying a higher price for capacity of $255/MW-day.

AEP Ohio claimed that this structure would maintain the "status quo."

FirstEnergy Solutions rebutted that, "AEP Ohio's bifurcated capacity pricing scheme existed only as a creation of the [electric security plan] Stipulation and, with the Stipulation now having been properly rejected by the Commission, it has ceased to exist along with the Stipulation."

"AEP Ohio has a right to seek rehearing of the Feb. 23, 2012 Entry, but it does not have a right to cherry-pick one element from a defunct Stipulation and claim that that element alone should be retained in order to maintain the 'status quo,'" FirstEnergy Solutions said, stating that all capacity must now be charged at the RPM price.

FirstEnergy Solutions also countered AEP Ohio's statement that requiring AEP Ohio to provide RPM-priced capacity to all competitive load would significantly decrease AEP Ohio's earnings.

"For example, although AEP Ohio now projects the impact of RPM-based capacity pricing as driving down its estimated ROE from 10.4% to 7.6% in 2012, a level it now claims is somehow confiscatory, AEP Ohio witness Allen forecast an ROE for AEP Ohio of 7.71% in 2012 with all provisions of the Stipulation in place, including, presumably, the anti-competitive bifurcated capacity pricing. Thus, after AEP Ohio's property is 'confiscated,' AEP Ohio will be earning almost exactly what it forecast it would earn under the proposed ESP," FirstEnergy Solutions said.

Separately, at FERC, AEP subsidiary Ohio Power asked FERC to expeditiously rule on its previously filed complaint against PJM in which AEP Ohio argues that FERC's interpretation of Schedule 8.1, Section D.8 of the PJM Reliability Assurance Agreement is unjust and unreasonable. Under that interpretation, FERC agreed that language of the RAA permits a state commission to establish a state compensation mechanism for capacity provided to retail suppliers which preempts a Fixed Resource Requirement entity from seeking to establish the price at FERC. PUCO has set the state compensation mechanism as the RPM price.