AEP Pursuing "Restructuring," Not Re-regulation In Ohio, Says Proposal Intended To Preserve Customer Choice in Supplier

AEP is, "pursuing restructuring in Ohio," said CEO Nick Akins during an earnings call

"Note this is restructuring, not re-regulation," Akins said, stating that the proposal is intended to preserve the ability of customers to shop for an alternative supplier

How default service would be structured under AEP's proposal, and how power from utility-owned assets would be disposed of, remains to be seen.

"Our proposal for legislation is now being discussed with various stakeholders and involves the ability to transfer existing generation and invest in new generation such as natural gas and renewables by [utility] AEP Ohio," Akins said

"The proposed legislation strikes a balance between our ability to invest and maintain generation in the state and the customers’ ability to choose generation suppliers. This overall process would allow AEP Ohio to move forward with the transition of generation resources in a responsible way that would benefit the State of Ohio and AEP and its customers. The legislation would address any potential FERC jurisdictional matters while allowing the state to take control of its own resources as well as any transition envisioned under initiatives such as the clean power plan," Akins said

The legislation includes not only the ability for AEP Ohio to transfer affiliated generation assets that were to be included under a PPA with AEP Ohio, which was approved by PUCO but which ran into FERC jurisdictional issues, back into the utility, but also includes a mechanism for AEP Ohio to make investments in future generation.

"I think re-regulation has the connotation that everything is going to be slammed back into the wires company and there won’t be any ability to shop and other participants can’t participate in a market. So we are focused on reaching that balance of the ability for the utility to invest, but also others to invest as well, and customers to be able to choose. So that’s really the distinction. Re-regulation just has a larger connotation to it, and it actually is a much heavier lift to put the entire genie back in the bottle," Akins said

The former PPA assets to be encompassed under the sought legislation comprise a second "tranche" of merchant assets that are currently under a strategic review

In the absence of restructuring legislation, AEP will continue with its strategic review process for this second tranche of generation. AEP said that it will make a decision on such assets in Q1 or Q2 next year depending on whether the legislation gains traction.

Meanwhile, AEP is continuing with its strategic review process for its first "tranche" of merchant assets -- these assets were not included under the PPA and include the natural gas units and the Gavin coal station. Initial bids were received in the second quarter with final bids due in August. AEP expects that the process will move toward the conclusion of the strategic review in the coming months, with an announcement later this quarter or early next quarter.