AEP Ohio Seeks Waiver to Retain Generation Entitlement

AEP Ohio has sought a waiver to its corporate separation plan from the Public Utilities Commission of Ohio to allow it to retain contractual entitlements from generating resources owned by Ohio Valley Electric Corporation (OVEC), as other owners of OVEC have not consented to the assumption of these entitlements by AEP Generation Resources, Inc.

AEP Ohio said that under the Inter-Company Power Agreement (ICPA) between OVEC and OVEC's owners (various investor owned utilities or their affiliates, referred to as sponsoring companies), AEP Ohio must obtain consent from all of the other sponsoring companies before AEP Ohio can transfer the contractual entitlements to AEP Generation in a manner that would relieve AEP Ohio from ongoing liabilities.

"The OVEC Sponsoring Companies, however, have withheld their required consent," AEP Ohio reported.

"AEP Ohio engaged OVEC and the Sponsoring Companies in a series of meetings and negotiations in an attempt to obtain the required consents. As part of this effort, American Electric Power Company offered to issue a parent company guarantee in support of AEP Generation's obligations under the ICPA. On August 15, 2013 AEP Ohio received a negative response from the majority of Sponsoring Companies to AEP Ohio's formal proposal seeking the Sponsoring Companies' consent to the transfer of interest to AEP Genco in a manner that would relieve AEP Ohio from ongoing liabilities. Without consent from all of the Sponsoring Companies (and the lenders) AEP Ohio is not able to transfer the contractual entitlements to AEP Generation," AEP Ohio said.

"[T]he best solution under these circumstances is for the Commission to approve this narrow amendment to AEP Ohio's corporate separation plan such that the OVEC contractual entitlements will be exempt from AEP Ohio's impending corporate separation. AEP Ohio, as a result, would retain its rights and obligations under the ICPA," AEP Ohio said.

AEP Ohio said that none of the retail rate issues relating to OVEC are being proposed for resolution in its waiver request, but will be resolved in other cases

"Rate matters relating to OVEC during the ESP II term were decided in Case Nos. 11-346-EL-SSO or otherwise remain pending before the Commission in Case No. 12-3254-EL-UNC relative to establishing auction-based rates; the Company will address OVEC rate issues for the period following May 2015 in its upcoming ESP III filing," AEP Ohio said.

"Regarding treatment of OVEC during the ESP III term, it is sufficient for now to say that AEP Ohio intends to liquidate the power delivered under the ICPA through the PJM market -- including capacity, energy and ancillary service components such that future competitive bidding process auctions would not be affected by AEP Ohio's retention of its entitlements to the OVEC generation under the ICPA," AEP Ohio said.

"Because the OVEC power supply will be liquidated in the PJM market and not used to actually serve shopping or non-shopping customers, continued development of the competitive market in Ohio will not be adversely affected by the proposed solution. Stated differently, AEP Ohio's wholesale competitive bidding process to procure SSO supply will not be curtailed through retention of the ICPA purchases and competitive suppliers will continue to serve shopping customers," AEP Ohio said.

"Thus, there is no need to address rate issues in deciding this narrow amendment to the corporate separation plan that has become necessary," AEP Ohio said.

Case No. 12-1126-EL-UNC