AEP: Ohio Restructuring Focused On "Surgical" Provisions Allowing Utility Investment In New Generation

Discussing updates to efforts at the Ohio legislature to restructure the state's electricity market, AEP CEO Nick Akins said that the company is focused on developing "surgical" provisions that would allow AEP Ohio investment in new generation, rather than broader re-regulation that would implicate the utility's obligation to serve, or which would require AEP Ohio to assume capacity obligations for customers

Akins cited in particular a desire for AEP Ohio to invest in natural gas generation, renewables, and distributed energy resources

AEP's desired legislation would strengthen existing provisions concerning utilities' ability to invest in new generation based on a "need," and the company is seeking more prescriptive legislation concerning treatment of such investments at PUCO

Akins said that the focus on such "surgical" provisions is meant to avoid legislation being bogged down by more challenging discussions which arise if broader re-regulation is proposed, such as changing the utility's current obligation to serve, or making the utility responsible for capacity obligations (Akins noted AEP Ohio had already proposed a capacity-type construct via PPAs which ran into problems due to federal jurisdictional issues)

Akins said the company expects results from its legislative efforts in 2017, stating a formal bill, and sponsor, could be announced in the second quarter

While previously AEP had discussed seeking legislation that would allow the transfer of its former utility-owned generation back to the utility (the generation that was to have been subject to the sought PPA), the focus is now on allowing utility investment in new generation.

AEP also provided an update concerning disposition of its remaining merchant generation (referred to as the PPA assets; as previously reported the non-PPA assets are being sold to a joint venture of Blackstone and ArcLight Capital Partners in a sale which is nearing completion)

Regarding the PPA merchant assets, Akins said that the company continues to be in discussions with the other co-owners to make decisions regarding retirement, consolidation of interest and/or sales to complete this process. AEP expects this process to be completed sometime in 2017.