PUCO Grants AEP Ohio Waiver to Retain Generation Entitlement

The Public Utilities Commission of Ohio granted AEP Ohio a waiver of its corporate separation plan 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.

As previously reported, AEP Ohio said that it intends to liquidate the power delivered under the retained OVEC Inter-Company Power Agreement through the PJM market, including capacity, energy and ancillary service components such that future SSO competitive bidding process auctions would not be affected by AEP Ohio's retention of its entitlements to the OVEC generation under the ICPA.

"We find that AEP Ohio's proposal to retain the OVEC contractual entitlements, while liquidating the power delivered under the ICPA [Inter-Company Power Agreement] through the PJM market, will ensure that the Company's corporate separation is completed by December 31, 2013, as scheduled," PUCO said.

PUCO conditioned its approval on the following:

"AEP Ohio shall cause the energy from its OVEC contractual entitlements to be sold into the day-ahead or real-time PJM energy markets, or on a forward basis through a bilateral arrangement. Any forward bilateral sales must be done at a liquid trading hub at the then-current market wholesale equivalent price. Intercontinental-Exchange or a similar publicly available document shall be used as a form of measure of the then-current market wholesale equivalent pricing. Staff, or, at the Commission's discretion, an independent auditor, shall semi-annually audit AEP Ohio's records to ensure compliance with this provision."

These conditions will apply during AEP Ohio's current ESP period and beyond, until the OVEC contractual entitlements can be transferred to AEP Genco or otherwise divested, or until otherwise ordered by the Commission, PUCO said. If AEP Ohio seeks to deviate from selling the OVEC power into the PJM market, the company must request and obtain prior Commission approval.

"With respect to the retail rate impact of AEP Ohio's retention of the OVEC contractual entitlements, we agree with the Company's request to defer and address the retail rate issues related to OVEC in the next ESP proceeding," PUCO said.

Case No. 12-1126-EL-UNC