September 1, 2017, Volume 6, Issue 81

09/01/2017

Update: On August 25, 2017, all parties, except for the residential advocate, reached an agreement resolving the issues of AEP’s third ESP (ESP III). The Settlement extends the term of ESP III through May 31, 2024. The settlement provides for the following:

  • The BTCR Pilot Program is continued and expanded to include an additional 15 participants, for a total of 34 participation slots and will be capped at 420 MW. OMAEG now has ten slots reserved for its members to participate in this program. Members of this program opt-in to a pilot mechanism for determining rates based on single annual transmission coincident peak demand. A preliminary election to participate is required by December 1st of each year and a binding election must be made by February 15th of each year. Participation in this program could result in lower electric rates for OMAEG members.
  • Participation in the interruptible (IRP) program is expanded to allow additional participation beyond the two legacy customers that have participated for years. OMAEG was allocated 30 MW of the Expanded IRP load to be utilized by its members under the terms of the tariff. A participant will receive a monthly credit calculated by multiplying the quantity of the monthly interruptible capacity times the RPM BRA market clearing price for the AEP Zone for PJM’s applicable delivery year times 0.7. A participant may also participate in the PJM demand response program on its own or through a third-party curtailment service provider and retain any proceeds from such. AEP will file a distribution rate case by June 1, 2020, which will reset the distribution riders to zero.
  • Distribution Investment Rider (DIR) revenue caps are established that are significantly lower than those which AEP initially proposed. Initially, AEP proposed caps of $233.8 million, $312 million, $343 million, and $373 million in the years 2018-2021, respectively. Under the Settlement, the caps will be $215 million, $240 million, $265 million, and $290 million for those same years. AEP’s return on equity will be set at 10.0% prospectively; however, AEP will lower its WACC rate upon refinancing of its long-term debt in 2018.
  • The non-bypassable Power Purchase Agreement (PPA) Rider will be separated into an OVEC PPA Rider and a placeholder Renewable Generation Rider (RGR) to recover costs associated with renewable generation projects approved in a separate proceeding. All parties may challenge individual renewable projects that AEP proposes. Notably, OMAEG did not support this provision of the Settlement. Additionally, the provision explicitly explains that the paragraph does not address the effect of any Supreme Court of Ohio decision regarding the lawfulness of the PPA Rider, which OMAEG and others appealed. AEP also retains the status quo for the recovery of OVEC costs through the non-bypassable PPA Rider.
  • A “Smart City Rider” is established to collect the costs associated with microgrids, rebates for Electric Vehicle (EV) charging stations, administration fee, and research and development costs. The modernization Rider will be capped at $21.1 million over four years. AEP agreed not to own any of the EV charging stations or battery resources behind the customer meter unless it is for the purpose of enhancing distribution grid functions.
  • A placeholder PowerForward Rider is established to collect costs, if any, associated with the PUCO’s PowerForward initiative.
  • A placeholder PEV tariff is created, which may be populated in a future proceeding. All parties maintain all rights to challenge the imposition of such a tariff.
  • The proposed Distribution Technology Rider, Submetering rider, and LED lighting tariff will be withdrawn.
  • The Generation Energy and Generation Capacity Riders, Auction Cost Reconciliation Rider, and he gridSMART Phase 2 Rider will continue through the term of the ESP.
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