Ohio Power Seeks to Extend Current Capacity Charges Applied to Retail Suppliers Beyond May 31

Ohio Power Company has petitioned PUCO to maintain the tiered capacity prices applicable to retail suppliers, including the $255/MW-day charge for competitive load in the second tier, until PUCO issues a merit decision in the capacity charge case (1 0-2929-EL-UNC).

In a March 7 entry, PUCO granted in part AEP Ohio's requested relief, establishing a two-tier capacity pricing mechanism for retail suppliers taking capacity under the AEP Ohio Fixed Resource Requirement, in lieu of full RPM pricing for all competitive load. Specifically, under the mechanism adopted in the March 7 entry, retail suppliers pay a market-priced capacity charge of $146 per MW-day up to the first 21 percent of shopping customers in each customer class. All government aggregations receive unlimited tier-one market-priced capacity. A second-tier capacity price of $255 per MW-day applies to all competitive load beyond the first 21 percent of shopping customers in each class.

The March 7 entry also specifically held that this interim mechanism, "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."

Notably, the 2012/13 RPM price will be about $20/MW-day.

Stating that a decision on the merits of the capacity charge case is unlikely to be issued prior to May 31, 2012, AEP Ohio has now sought a further freeze of capacity rates at the current interim levels. Specifically, this would continue a Tier 1 charge of $146/MW-day (notwithstanding that this will no longer reflect the current RPM price with new RPM rates taking effect June 1), and a Tier 2 charge of $255/MW-day.

"Without freezing the current capacity rates, AEP Ohio will be financially harmed by RPM pricing and parties may be forced to engage in additional litigation that can and should be avoided if the status quo is preserved pending the imminent outcome of the forthcoming merit decision," AEP Ohio said.

AEP Ohio justified its request by arguing that, notwithstanding PUCO's clear directive that the capacity rate would revert to RPM pricing effective June 1, 2012, "it is evident that the Commission intended to decide the merits prior to June 1 and without having to impose full RPM pricing prior to reaching a merit decision."

AEP Ohio cites PUCO's directive for an expedited schedule for the capacity charge case as supporting this interpretation, but it begs the question of why PUCO established a clear end date of May 31, 2012 for the interim capacity prices, and a reversion to RPM pricing, if the Commission's intent was to never revert to RPM pricing prior to a decision on the merits.

Indeed, PUCO specifically ordered that, "AEP-Ohio's motion for relief be granted, as determined above, until May 31, 2012." (emphasis added).

Whether or not an extension of the interim relief is appropriate for the reasons put forth by AEP Ohio is a discrete matter which the Commission can duly consider just as it adjudicated the initial request for relief, but arguing that PUCO originally intended for the interim relief to extend indefinitely, until a decision on the merits, runs contrary to the plain language of the March 7 entry.