PUCO Sets Interim Capacity Charges for AEP-Ohio, Limiting Load at RPM Price

The Public Utilities Commission of Ohio (PUCO) today established an interim two-tier capacity pricing system for AEP-Ohio. The interim capacity charges take effect immediately and will remain in place through May 31, 2012.

“The interim capacity charges approved today strike a fair balance between AEP and competing electric suppliers,” Chairman Todd A. Snitchler stated. “This short-term resolution provides a level playing field on which AEP’s competitors can continue to vie for customers’ business while we revisit the capacity charge issue and the electric security plan on a more permanent basis.”

Capacity charges are costs billed by AEP to competing electric suppliers that sell power to customers using AEP’s infrastructure. Competitive suppliers pay capacity charges to ensure that there is enough electricity on the power grid to meet their customers' demands.

Under the two-tier pricing system, suppliers will pay a market-priced capacity charge of $110 per megawatt (MW) day up to the first 21 percent of customers in each customer class. All government aggregations will receive unlimited tier-one market-priced capacity. The second-tier capacity pricing of $255 per MW-day will be applied beyond the first 21 percent of customers in each class. The Commission will hold a hearing no later than April 17, 2012 to begin determining long-term capacity charges.

The specific ordering language was: "We implement the two-tier capacity pricing mechanism proposed by AEP-Ohio in its motion for relief, subject to the clarifications contained in our January 23, 2012, entry, including the clarification including mercantile customers as governmental aggregation customers eligible to receive RPM-priced capacity. Under the two-tier capacity pricing mechanism, the first 21 percent of each customer class shall be entitled to tier-one RPM pricing. All customers of governmental aggregations approved on or before November 8, 2011, shall be entitled to receive tier-one RPM pricing. The second-tier charge for capacity shall be at $255.00/MW-day. This interim rate will be in effect until May 31, 2012, at which point the rate for capacity under the state compensation mechanism shall revert to the current RPM in effect pursuant to the PJM base residual auction for the 2012/2013 year"

Separately, the Commission approved interim tariffs filed by AEP-Ohio, with specific exceptions. The interim tariffs approved today take effect immediately and spell out the rates, terms, and conditions of electric service. Under the interim tariffs, AEP will continue the provisions of its previous electric security plan, setting rates back to levels similar to those in place in December 2011. The interim tariffs will remain in place until the Commission adopts a new electric security plan (ESP).

The Commission determined that AEP’s interim tariff filings for the phase-in recovery rider (PIRR), the fuel adjustment clause (FAC), and the transmission cost recovery rider (TCRR) were not consistent with the utility’s previous electric security plan as directed by the Commission. As a result, AEP must re-file tariffs that eliminate the PIRR and that reflect unblended FAC and TCRR rates. The unblended FAC and TCRR rates will take effect on March 9, 2012.

“My fellow commissioners and I anticipate a revised ESP application from AEP by the end of this month that will continue to move the utility towards the competitive market,” Snitchler stated. “Once we receive AEP’s filing, we will carefully weigh the interests of the utility and its customers as we work to complete the transition to a market-based rate structure in an expeditious manner. We believe full competition is in the best interest of Ohio’s utilities, ratepayers, and the state as a whole.”

The Commission also approved the merger of AEP-Ohio operating companies Columbus Southern Power and Ohio Power. The Commission previously approved the merger on Dec. 14, 2012 as a part of the consolidated AEP ESP agreement. The merger became final at the end of 2011.