Merchant Generator Cites "Inability" of Capacity Markets to Appropriately Pay Long-Term Investors

By Paul Ring • ring@energychoicematters.com

A merchant generator has again cited the inability of capacity markets to, "actually pay long-term investors in an appropriate fashion."

Specifically, during a third quarter earnings call, Nicholas Akins, AEP president and chief executive officer, discussed headwinds facing AEP's merchant generation business, which is due to grow substantially from the corporate separation of the Ohio Power assets.

One of those headwinds is the low gas price environment, Akins said, but, "The other is the capacity markets themselves and the inability for those markets to actually pay long-term investors in an appropriate fashion. That's something that we are working on as well."

Akins said that AEP is, "pursuing changes within the PJM market construct to enable long-term investment decisions to be made," indicating such long-term investments are not enabled by the capacity market.

Akins further called the impact of distributed generation another headwind facing the merchant generation business. "Although it's pretty minimal in our territory, you think about those things," Akins said.

In reporting earnings, AEP said that as of September 2013, 58% of total Ohio Power load had switched to a competitive supplier.