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Generation Reliability in Ohio

A legal requirement to separate AEP’s generation assets from its transmission and distribution assets in Ohio made the energy they produce subject to market prices starting in 2014. Historically, regulated utility rates have provided a hedge for customers, protecting them from the volatility of market prices.

A significant amount of generation in the state of Ohio will be retired by mid-2015, turning the state into a large importer of energy for the foreseeable future. Current market conditions are such that even environmentally compliant plants may be forced to shutter for economic reasons, resulting in Ohio’s reliance on other states for energy.

In response, AEP Ohio filed two requests with the Public Utilities Commission of Ohio (PUCO) for the establishment of a Purchase Power Agreement (PPA) rider and for the authority to either collect or credit to customers the financial effect of selling the output of several Ohio generating units under the requested PPA rider. The goal of the PPA construct is to provide customers with more stable electricity prices during periods of market volatility while supporting the economic viability of Ohio’s generation, which is at risk due to the numerous challenges in the current PJM market construct. Without this agreement, Ohio is facing a period of unprecedented uncertainty related to the future supply of low-cost reliable energy.

The PUCO took a significant step forward in approving the creation of the PPA Rider, but has not yet authorized the inclusion of any of the requested generating assets in retail rates. Some of our stakeholders have opposed the proposed plan. They believe that the proposed plan is designed to keep coal plants open and will depress market prices, thereby preventing investment in new generation within the state of Ohio. However, AEP Ohio estimates, based on a 10-year projection, the agreement would provide significant incremental cost-saving benefits for customers. And, it would provide for a better economic growth platform for Ohio in the form of more stable electricity prices and would ensure the continued benefits of having local generation resources.

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