PUCO Staff Cites Qualitative Considerations for AEP Ohio ESP, Including Mechanism for Utility-Owned Generation

While Staff of the Public Utilities Commission of Ohio found on a quantitative basis that prices under a Market Rate Offer (MRO) are more favorable than the pricing under AEP Ohio's proposed electric security plan (ESP), Staff said in testimony on the ESP that other considerations should be taken into account by the Commission, including rate "stability" and a mechanism for utility-built generation.

Staff presented expected prices under a Market Rate Offer, under a variety of capacity prices and blended with existing electric security plan prices as required for any transition to an MRO.

Staff said that the average rate under the term of AEP Ohio's proposed ESP is 6.392 cents per kWh, while the average rate under a blended MRO using RPM prices for capacity is 6.051 cents per kWh; the average rate under a blended MRO using a capacity price of $146.41/MW-day is 6.152 cents per kWh; and the average rate under a blended MRO using a capacity price of $255/MW-day is 6.280 cents per kWh.

"I conclude that under all three of these quantitative scenarios the ESP as proposed by AEP is not more favorable than the blended MRO utilizing the forecasted market rates," Staff's witness said.

However, "I believe there are other considerations, which cannot be quantified, that the Commission should take into account when making its final decision," Staff's witness said. Staff noted that it has previously indicated in prior proceedings (most recently in the Staff comments filed in DP&L's MRO, Case No. 12-426-EL-SSO), that, although either an electric security plan or a market rate option would fulfill the obligation under R.C. 4928.141, "the electric security plan can offer advantages for the ratepayers of the applicant, the applicant, and the public at large."

"While the market is subject to fluctuations and may be at times unpredictable, the proposed ESP would provide a transition to market by allowing for rate certainty and stability such that customers, and the utility, know what to expect," Staff's witness said.

"Further, if there is an established need for additional generation in the future, the GRR [nonbypassable Generation Resource Rider for any ratebased generation developed by the utility] provides a mechanism to enable the Commission to allow for the construction of generation facilities, while committing to the diversity of state supply, and allowing the applicant to fulfill its REC obligations," Staff's witness said.