AEP Retail Says Capacity Prices in ATSI Zone Could Result in "Unlevel Playing Field" for Retail Suppliers

AEP Retail Energy Partners LLC has requested a modification to the procedural schedule regarding consideration of the FirstEnergy Ohio utilities' electric security plan (ESP), and an opportunity to present additional testimony, in light of the results of the PJM Base Residual Auction for the 2015/16 delivery year, whose results were posted only six business hours prior to the filing date of intervenor testimony.

As previously noted, the annual resource clearing price for the American Transmission Systems, Inc. (ATSI) zone, in which the FirstEnergy Ohio EDCs are located, was $357/MW-day, separating from the Rest of RTO price of $136/MW-day. AEP Retail said that with scaling factors and adjustments necessary to convert the auction price into a price paid by load, the actual capacity price paid by load in the ATSI zone during the delivery year 2015/2016 is likely to approach or exceed approximately $400/MW-day.

AEP Retail said that, "the dramatic dislocation in RPM auction clearing prices is new evidence that CRES [competitive retail electric service] providers from outside the ATSI zone could face an unlevel playing field in competing for FirstEnergy customers in comparison to CRES providers owning capacity within the ATSI zone such as FirstEnergy Solutions."

AEP Retail said that this is because of transmission bottlenecks, reflected in the separation of the ATSI capacity clearing price, that could affect the ability and price at which suppliers from outside the zone are able to sell energy into ATSI.

AEP Retail further said that the spiked capacity prices, "cast into question the very foundation of FirstEnergy's application -- its ability to 'capture' low energy and capacity rates through competitive bids received in October 2012 and extending out to the 2015/2016 delivery year."

"[T]he prices that FirstEnergy hoped to 'capture' would not be continued low energy and capacity prices, but would instead reflect the locational constraints within the ATSI system that benefit FirstEnergy's competitive retail and wholesale generation affiliate, FirstEnergy Solutions," AEP Retail said.

Specifically, AEP Retail asked PUCO to require the FirstEnergy EDCs to file supplemental testimony that analyzes the non-unanimous ESP stipulation in light of the announced results of PJM's May 2012 Base Residual Auction and to provide non-signatory intervenors a "meaningful" opportunity to seek further discovery, file additional testimony, and prepare for hearings on the FirstEnergy EDCs' application in light of these updates.

"This Commission should direct FirstEnergy to explain why it is in the interests of its customers, the interests of competition, and the State of Ohio itself, to proceed with a three year auction in October, 2012 and January, 2013, when those risks appear likely to be at their zenith given the unknowns about generation retirements and transmission construction in the ATSI zone that are likely to continue to be unresolved at those times, particularly as it affects the 2015/2016 period," AEP Retail said.