Ohio Power/AEP Genco PSA Could Raise Capacity Charge Applicable to Retail Suppliers; Treats SSO, Shopping Customers Differently, Protests Claim

A power supply agreement (PSA) between Ohio Power Company and affiliate AEP Generation Resources Inc., meant to serve Standard Service Offer load for the period between the corporate separation of Ohio Power's generating assets and the start of fully auction-based SSO supply, could result in the charge for capacity provided to retail suppliers exceeding the RPM market price adopted by the Public Utilities Commission of Ohio, and could result in SSO customers paying more for capacity than shopping customers, various protestors said in filings at FERC.

Industrial Energy Users-Ohio said that the PSA proposes to charge Ohio Power $188.88/MW-day for capacity. Although PUCO has allowed Ohio Power to be compensated at $188.88/MW-day for capacity provided under the Fixed Resource Requirement, IEU-Ohio noted that the charge applicable to retail suppliers is limited to the RPM market price, with any difference deferred and collected through a nonbypassable rider.

Industrial Energy Users-Ohio noted that Ohio Power continues to challenge the lawfulness of the Ohio Commission's decision regarding the capacity charge levels, on the basis that the Ohio Commission is preempted from setting a wholesale rate.

Therefore, Industrial Energy Users-Ohio warned that Ohio Power, "can be expected to assert that this Commission's [FERC's] approval of the Capacity Charge of the PSA preempts the Ohio Commission from authorizing the recovery of anything other than $188.88/MW-day for capacity from CRES [competitive retail electric service] providers or AEP-Ohio's retail shopping customers, regardless of the outcomes of the Capacity Case."

"[I]t is critical for this Commission [FERC] to reject the PSA as unlawful under Section 205 to prevent AEP-Ohio from advancing an unwarranted claim, in Ohio, that the Ohio Commission must increase capacity compensation paid by CRES providers to $188.88/MW-day," IEU-Ohio said.

The Ohio Consumers' Counsel raised a similar concern:

"[T]he PSA appears to be structured to compensate AEP Generation Resources at $188.88/MW-day, and not RPM. Section 3.2 of the PSA describes the monthly charges to be paid by the Company to AEP Generation Resources. There it states that the capacity charge for Non-SSO customers is to be based on $188.88/MW-day ... This seems to be incorrect and inconsistent with the Ohio Commission's decisions. Moreover it would appear that these provisions could result in customers making double payments for capacity service -- once at $188.88/MW-day and second, through the RSR [nonbypassable retail stability rider], paying for the difference between $188.88/MW-day and RPM prices."

Industrial Energy Users-Ohio and the Ohio Consumers' Counsel both said that the PSA charges SSO customers a higher capacity charge than shopping customers as well.

OCC noted that under the PSA, Ohio Power is to receive and pay for "Default Generation Service" supplied by AEP Generation Resources "for the Applicable Load" at Ohio Power's Load points. "Applicable Load" is defined as "the aggregate load of Ohio Power's customers during the delivery term." That aggregate load pertains to both the energy supplied by AEP Generation Resources and energy procured through auctions during the transition period.

OCC further noted that the Default Generation Service requires AEP Generation Resources to supply "all Capacity associated with the requirements of Applicable Load."

"This suggests that the unbundled capacity for market-priced SSO energy procured through auction would not be priced at $188.88/MW-day but at the embedded generation rate. Otherwise the PSA does not establish the price of this capacity, since 'Capacity Service' is defined as applying solely to non-SSO load," OCC said.

IEU-Ohio said that the generation charge under the PSA will produce revenue to AEP Generation Resources Inc. at an approximate rate of $355.72/MW-day for capacity for SSO customers.

"Thus, as provided by the PSA, SSO and non-SSO customers are paying substantially different amounts for the provision of the same product," IEU-Ohio said.

Docket: EC13-26 et. al.

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