AEP Reaches Settlement on Ohio Coal-Fired Power Plants

American Electric Power (AEP), through its subsidiary AEP Ohio, announced on Dec. 14 that it had filed a stipulated agreement with the Public Utilities Commission of Ohio (PUCO) in support of the company's expanded power purchase agreement.

Details of the Agreement

The stipulated agreement, which the company expects the PUCO to rule on in early 2016, would require AEP Ohio to enter into an eight-year power purchase agreement (PPA) for the capacity, energy, and ancillary service output of AEP's 2,671-MW ownership share of nine generating units and AEP Ohio's 423-MW contractual share of Ohio Valley Electric Corp. generation. The nine generating units are Cardinal Unit 1 in Brilliant; Conesville Units 4, 5, and 6 in Conesville; Stuart Units 1-4 in Aberdeen; and Zimmer Unit 1 in Moscow. The PPA would run through May 31, 2024.

The agreement includes converting Conesville Units 5 and 6 to cofire natural gas by Dec. 31, 2017, and retiring, refueling, or repowering Conesville Units 5 and 6 and Cardinal Unit 1 to use only natural gas by the end of 2029 and 2030, respectively. The company said this is a significant acceleration in ceasing coal operations at the units.

AEP Ohio also committed to the following:

• Developing at least 900 MW of wind and solar energy projects in Ohio over the next five years.
• Continuing its support of energy efficiency programs.
• Moving forward with grid modernization efforts, including the installation of smart meters, distribution automation, and Volt-VAR optimization.
• Providing up to $100 million in customer credits during the term of the agreement.

The agreement is expected to be signed or unopposed by 11 parties, including the PUCO staff, Sierra Club, Ohio Partners for Affordable Energy, Ohio Energy Group, Ohio Hospital Association, Mid-Atlantic Renewable Energy Coalition, as well as three competitive retail energy suppliers.

"We are pleased to have reached an agreement on a comprehensive plan that helps ensure more stable electricity prices for Ohio consumers and promotes a reliable and diverse generation supply to support the Ohio economy," said Pablo Vegas, AEP Ohio president and COO.

Opposition to the Agreement

AEP Ohio has been working on the deal for more than a year, but not everyone is happy about it. Dynegy Inc., which co-owns the Conesville, Stuart, and Zimmer plants, suggested that approval of the agreement by the PUCO would be supporting "anti-market subsidies to a large investment grade company." It noted that the PPA guarantees power prices that are significantly higher than current market prices.

AEP acknowledged that the agreement would involve a monthly increase in the first year of 62 cents for a residential customer using 1,000 kWh per month. However, it said that when combined with the company's recently implemented electric security plan, that customer would actually see a decrease of $9 per month from the same period a year ago.

Dynegy pointed to more than $1.2 billion in revenues awarded to AEP through the PJM capacity auction over the next three planning years as an indication that the PPA is unwarranted. It said the amount "is more that $660 million over and above the amount expected at the time of AEP's original subsidy request."

"Ohio has thrived through its competitive retail and wholesale markets, which AEP favored when they were adopted. This ill-advised action of the PUCO staff only hurts the citizens and competitive profile of Ohio in the long run," said Robert C. Flexon, president and CEO of Dynegy.

Dynegy, while having an ownership share in three of the plants, will not receive any of the above market revenues from the proposed AEP PPAs.

"Dynegy will continue to fight for market-based policies that treat all forms of power generation equally through advocacy and litigation, if necessary, to prohibit these power purchase agreements from being enacted," Flexon said. "We continue to strongly encourage the PUCO commissioners to oppose and vote down this adverse anti-market public policy."

-Aaron Larson, associate editor (@AaronL_Power, @POWERmagazine)

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