July 6, 2012
Update: On July 2, 2012, the PUCO issued an order on the merits of AEP-Ohio’s request to charge shopping customers its fully embedded cost of generating capacity.
Recall that AEP Ohio requested permission from the PUCO to charge competitive suppliers AEP-Ohio’s fully embedded cost of capacity at $355 per megawatt-day (“MW-D”), which is significantly higher than the PJM RPM price for capacity that otherwise would apply. The PUCO struck a middle ground between the positions of AEP-Ohio and its customers and competitive suppliers by holding that AEP-Ohio’s costs of generating capacity are not as high as what AEP-Ohio stated and are actually $188.88/MW-D. The PUCO found that the state compensation mechanism should be cost based and, thus, AEP-Ohio is entitled to recover its costs of capacity at $188.888. However, in order to stabilize the market and encourage shopping, the PUCO found that AEP-Ohio is permitted to charge competitive suppliers only the PJM RPM price, which is currently about $20/MW-D. The PUCO authorized AEP-Ohio to defer the difference between the $188.88/MW-D and the PJM RPM price plus carrying costs for future recovery. This total deferred amount is dependent on the number of customers who shop, or switch to a CRES provider, and will be addressed in AEP-Ohio’s ESP case, which is currently pending before the PUCO. PUCO Chairman Snitchler said that permitting AEP-Ohio to recover the difference would help stabilize the market and AEP-Ohio’s transition to market. The new capacity charge will take effect on August 8, 2012 or the date when the PUCO rules on AEP-Ohio’s ESP case, whichever is sooner. Until then, the interim capacity pricing mechanism extended on May 30, 2012 will remain effect. The PUCO intends to issue a decision on the ESP case by or before August 8, 2012.
Commissioners Porter and Slaby issued a separate, concurring opinion. Commissioner Roberto issued a partial dissent. She stated that she agrees with the $188.88/MW-D and permitting AEP-Ohio to charge only the auction-based prices. However, she disagrees with the deferral of the difference, she is issuing a separate dissenting opinion. Specifically, Commissioner Roberto believes that deferring costs “is an unnecessary, ineffective, and costly intervention into the market that [she] cannot support.”
