Ohio Commission Continues Above-Market Interim Capacity Charges at AEP Ohio

The Public Utilities Commission of Ohio today continued the application of interim capacity charges at AEP Ohio which are above the RPM market price for capacity, reversing an earlier order which had stated that the interim rates were to cease, in favor of the RPM price, after May 31, 2012.

Specifically, PUCO has extended the tiered, interim capacity rates applicable to competitively served load put into effect by its March 7, 2012, entry -- namely, a limited quantity of Tier One capacity at $146/MW-day and Tier Two capacity at $255/MW-day -- until July 2, 2012, unless the Commission issues an order in the AEP Ohio capacity case prior to that time.

The RPM price for capacity will be about $20/MW-day for the 2012/2013 year delivery year, starting June 1, 2012.

In its March 7 entry, PUCO had stated that the interim capacity 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."

Unlike in its March 7 entry, where PUCO specifically said what capacity rate would be used after the stated termination date for the interim rate, PUCO's new order makes no mention of what capacity rate shall prevail after July 2 to the extent PUCO has not issued a final order in the capacity rate case by that time.

"[F]or the reasons presented in the Commission's March 7, 2012, entry, in particular the evidence in the record that supports a range of capacity costs, as well as AEP-Ohio's participation in the Pool Agreement, the Commission concluded that 'as applied to AEP-Ohio, ... the state compensation mechanism could risk an unjust and unreasonable result," PUCO said.

"The circumstances faced by AEP-Ohio that prompted the Commission to approve the request for interim relief have not changed," PUCO said in granting the extension.

The interim capacity rates are charged to retail suppliers for capacity provided to suppliers under AEP Ohio's Fixed Resource Requirement. As previously noted, the amount of Tier One capacity is capped at the first 21 percent of competitively served load in each customer class, plus all government aggregations. All other competitive load pays the higher Tier Two capacity price.

Commissioners Cheryl Roberto and Lynn Slaby concurred in result only, in order to promote regulatory stability during the pendency of the matter.

Commissioner Andre Porter dissented, largely due to the divergence of the Tier One capacity price (which remains at $146/MW-day) from the new RPM price for 2012/13, which is about $20/MW-day. The Tier One rate was originally derived from the RPM price in effect at the time the Tier One rate was developed.

"If this Commission is to adopt anything else other than RPM based rates for 100% of shopping load, in which case I would have significant reservations, then a record of evidence must be cited in support of the decision. At most, I believe that a case record could be cited to support an extension of the interim capacity price to be 'RPM-based' for tier-one customers, i.e. approximately $20/Mw day as of June 1, 2012, with tier-two customers remaining at the previously approved $255 Mw day," Porter said.