Ohio delays review of AEP coal rider request

OREANDA-NEWS. May 29, 2015. Ohio regulators today decided to await the results of the forward capacity auction in the largest US wholesale power market and the final federal proposal for limiting power sector CO2 emissions before reviewing American Electric Power's (AEP) proposal to ensure income for its midwest coal-fired power plants.

The Ohio Public Utility Commission in February approved AEP's electric security plan for the three years starting on 1 June, while rejecting the proposal to allow ratepayers in AEP's Ohio utility territory to support 3,100MW of the company's merchant coal fleet in Ohio and Indiana. AEP and other parties have asked for a rehearing of that order.

The state commission today denied most rehearing requests but said it will defer ruling on the validity of the power purchasing agreements until the PJM capacity auction results and the Environmental Protection Agency's Clean Power Plan are finalized. Both are expected in August.

AEP's coal rider proposal is being keenly watched by rival companies Duke Energy and FirstEnergy, which have made similar requests before the Ohio commission.

The proposal involves AEP Ohio customers paying the company's merchant generating arm for the costs of owning and operating coal units. The utility in exchange will receive all of the capacity, energy and ancillary services revenues collected from those units' participation in the PJM Interconnection regional transmission organization.

The PJM forward capacity auction for 2018-19 should have taken place this month. But PJM delayed the auction by three months to give federal energy regulators enough time to approve a proposed reform that would reward the most reliable part of the generation fleet. That reform is expected to benefit coal plants in PJM, including those in AEP's fleet.

The commission's February decision did not rule out the concept of passing through the cost of merchant coal generation to ratepayers, even though the specific proposal by AEP drew objections. The limited three-year term of the proposal was among the key objections commissioners raised.

AEP on 15 May, in a separate proceeding, filed an amended version of a power purchasing agreement that would be valid so long as the plants are on line. The company says the merchant plants over the next decade will earn \\$554mn-\\$770mn more from PJM capacity and energy markets than the cost to ratepayers of the power purchase agreements.

But AEP believes such agreements still are necessary because they provide financial certainty for the merchant fleet over a longer horizon than PJM can allow.

The Clean Power Plan casts a shadow over the potential coal rider because it will impose CO2 emission intensity targets for power plants in Ohio and other states.

Both the CO2 plan and the PJM auction results will affect the financial needs of generating plants and the reliability of the grid, commission chairman Andre Porter said today. The commission said it will monitor developments in both external cases.