AEP Ohio to Propose Nonbypassable Capacity Charge in Modified Electric Security Plan

AEP Ohio intends to file a modified electric security plan by March 30, 2012 that will include, among other things, a proposed nonbypassable generation charge addressing capacity.

Although AEP Ohio said in a news release that specific details of the modified ESP filing have yet to be finalized, AEP Ohio informed PUCO that it, "intends to propose a nonbypassable generation charge for the years 2012, 2013, 2014 and the first five months of 2015 to recover an amount intended to provide certainty and stability for AEP Ohio and certainty for its customers."

"The retail stability charge would enable AEP Ohio to provide ongoing access to its capacity resources based on a uniform charge applicable to all shopping load that is paid by CRES [competitive] providers, in order to further stimulate retail shopping while also avoiding financial harm to AEP Ohio," AEP Ohio said.

In a filing with PUCO, AEP Ohio does not discuss specifically what price the "uniform charge" for capacity would be, e.g. the RPM price, or another price. And although AEP Ohio says that the capacity price paid by retail suppliers would be uniform, AEP Ohio does not address whether Standard Service Offer customers' bypassable rates would continue to reflect AEP Ohio's higher, embedded cost of capacity, or would be adjusted in any way to reflect the nonbypassable charge.

Because details of the nonbypassable charge and capacity price paid by both shopping and SSO customers were not provided, it is unclear what impact the nonbypassable charge would have on the retail market. The charge could be structured in a way that does not impact the current headroom between competitive prices and SSO rates (similar to the nonbypassable capacity stability charge at Duke Energy Ohio), but it is unclear whether the AEP Ohio proposal will take such a form.

"It is AEP Ohio's expectation that adoption of its modified ESP, including the stability charge, would preclude the need for the Commission to adjudicate the issues presented in the 10-2929 docket [the capacity charge docket], provided that the Commission establishes a satisfactory interim mechanism in the 10-2929 docket and expeditiously resolves the ESP proceeding," AEP Ohio said [emphasis added]. AEP Ohio's proposed interim mechanisms have all included a limit on the amount RPM-priced capacity available to shopping customers.

AEP Ohio said that its modified ESP would still provide that an auction would be used to procure SSO supplies and set SSO rates starting June 1, 2015, at which time capacity for non-shopping customers would be sourced from RPM. AEP Ohio would remove its generation from its ratebase as part of this move to RPM and an auction-based SSO.

AEP Ohio asked that PUCO adopt a procedural schedule to enable the modified ESP rate plan to become effective by June 1, 2012. AEP Ohio proposed that its prior ESP continue in the interim.