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Stipulation at AEP Ohio Would Separate Generation, Institute Auction for SSO in 2015
September 7, 2011
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A non-unanimous stipulation in AEP Ohio's electric security plan proceeding contemplates that, starting June 1, 2015, AEP Ohio would source power for Standard Service Offer load through competitive auctions (11-346-EL-SSO et. al.)
Settling parties include AEP Ohio, PUCO Staff, the Retail Energy Supply Association, Constellation Energy, Duke Energy Retail Sales, Exelon, the Ohio Energy Group, and the OMA Energy Group, among others. Notable non-signatories include the Ohio Consumers' Counsel, FirstEnergy Solutions and Industrial Energy Users-Ohio.
The settlement, filed this morning, would cover default service from January 1, 2012 through May 31, 2016. The stipulation is rather complex and represents a radical departure from AEP Ohio's initial proposal, while a transition period prior to the start of the competitive auctions would also create several rate mechanisms unique to the AEP Ohio territory.
The text of the settlement is available here.
Competitive Bidding for 2015
As noted above, the stipulation provides that AEP Ohio (or the surviving electric distribution utility after legal corporate separation by AEP Ohio) will use a competitive bidding process (CBP) to meet its SSO obligation for delivery from June 1, 2015 through May 31, 2016.
With the auction, the stipulation calls for AEP to corporately separate its Ohio generation assets.
The stipulation leaves several CBP-related matters to future proceedings.
However, the settlement would establish the CBP as an auction for 1% slice-of-system tranches (not divided by load class) based upon the format previously approved by the Commission for the FirstEnergy utilities in Case Nos. 08-935-EL-SSO and 10-388-EL-SSO.
Contingent on FERC approval for the dissolution of the AEP pool, the first SSO auction, which shall be for the first 20 tranches of SSO load for delivery from June 1, 2015 through May 31, 2016, would be conducted on or before September 1, 2013; the second auction, for the next 40 tranches of SSO load for delivery from June 1, 2015 through May 31, 2016, would be conducted on or before September 1, 2014; and the auction for the remainder of SSO load for delivery between June 1, 2015 through May 31, 2016 would be conducted by January 1, 2015.
Among other provisions, no party could win more than 75% of the auctioned SSO load.
Successful bidders would provide a full requirements load following product in accordance with PJM's tariff and shall assume all risks including customer migration.
AEP Ohio agrees to drop its proposals for the Facilities Closure Cost Recovery Rider, NERC Compliance Cost Recovery Rider, Carbon Capture and Sequestration Rider, Provider of Last Resort Rider, Environmental Investment Carrying Charge Rider, and Rate Security Rider, most of which were to be nonbypassable. The nonbypassable environmental unit conversion/re-dedication structure is also being eliminated.
Prior to the start of the auctions, automatic annual increases or decreases to the (non-fuel) bypassable base generation rate will be made as necessary to achieve an average rate of $0.0245/kWh starting in January of 2012, $0.0257/kWh in January of 2013 and $0.0272/kWh in January of 2014 to be in effect through May 31, 2015. Thus, with these automatic rate changes implemented under R.C. 4928.143(B)(2)(d), the only other bypassable generation rate that changes for customers during the ESP term prior to implementing an auction-based SSO is the FAC rate.
Capacity
Under the stipulation, the capacity charge for retail suppliers serving load at AEP Ohio will be the PJM RPM-based rate, except that an interim rate of $255/MW-Day effective starting in January, 2012 will be charged to retail providers for all shopping above established thresholds discussed below.
After May 31, 2015, the PUCO State Compensation mechanism will expire and the capacity charge will be the PJM RPM-based capacity rate. AEP Ohio load would participate in the RPM auction for the delivery year starting June 1, 2015 (with the now corporately separated assets no longer dedicated specifically to Ohio load).
"In order to preserve and expand retail shopping in AEP Ohio's service territory and implement AEP Ohio's transition to a fully market-based SSO pricing system more quickly than is possible under an MRO [market rate offer], there will be a set aside of RPM-priced capacity available as follows: 21% of AEP Ohio's total retail load in 2012 (based on total kWh retail sales), 29% in 2013 until securitization is completed when it will become 31% for the remaining portion of 2013 after which securitization is completed (if securitization is completed prior to January 1, 2013, then the applicable set aside for the entirety of 2013 will be 31%), and 41% in 2014 continuing through the first half of 2015," the stipulation states
The RPM "set-aside" will be the retail load for which retail suppliers can avoid paying the $255/MW-Day interim capacity rate.
During this transition period ending May 31, 2015, there will be no exceptions to the RPM-priced capacity set aside levels, such that any and all shopping in excess of the RPM-priced set aside limits will be priced at the $255/MW-Day capacity rate. The RPM-priced capacity set aside provisions include all existing and future shopping load during the transition period.
The set aside of RPM-priced capacity shall be initially allocated on a pro rata basis among the residential, commercial and the industrial classes based upon projected kWh consumption for a period of approximately 4 months after the filing of the Stipulation.
The RPM-priced capacity set aside shall be awarded to customers on a first come, first served basis.
With regard to customers who are receiving generation service from a CRES provider as of the time that the stipulation is filed, the capacity rate to be paid by the CRES provider to AEP Ohio for that customer's load will continue to be the otherwise applicable RPM rate for the remaining period that the contract remains effective (including renewals). As noted above, this grandfathered load will be counted toward the RPM-priced set aside limits. Such grandfathered customers may also exceed the otherwise applicable cap for existing and expanded load at a facility.
Specific rules for the RPM price set-aside, load growth, and grandfathering can be found on page 39 of the settlement.
School Shopping Credits
All GS-1 and GS-2 Schools which are currently shopping, and commencing January 1, 2012 and through May 31, 2015, GS-2 customers that switch to a CRES provider after September 6, 2011, will receive a shopping credit of $10/MWh for the first 1,000,000 MWh of usage per calendar year (prorated for 2015).
Customers who obtain the credit will retain it for the entire term of the ESP. If less than 1,000,000 MWh of load receives the credit, this limitation shall be adjusted in future years so that the annual credit equals ten million dollars per calendar year.
Schools that are GS-1 or GS-2 tariff schedule customers will be exempt from the Market Transition Rider (see below).
Market Transition Rider The stipulation would adopt AEP Ohio's proposed rate re-design of generation rates, including the Market Transition Rider (MTR), with the following changes which are intended to promote economic development and provide stability and certainty regarding retail electric service. First, there will be established, on a revenue-neutral basis among the demand metered customer classes, a nonbypassable demand charge and nonbypassable energy credit designed to stabilize electric service during the transition to deregulation of generation services by retaining some of the benefits associated with high load factor customers under current rates. For GS-3 and GS-4 customers, there will be a non-bypassable demand charge of $6.57/kW-month and an initial energy credit of $0.01545/kWh (the energy credit will be adjusted quarterly) to produce a net charge of $0 quarterly. For GS-2 customers, there will be a non-bypassable demand charge of $3.29/kW-month and an initial energy credit of $0.00228/kWh (the energy credit will be adjusted quarterly) to produce a net charge of $0 quarterly. Any over/under recovery will be reflected in the quarterly adjustment. This "Load Factor" provision shall not apply to any customer with a monthly peak demand of greater than 250 MW. The Load Factor provision will terminate at the end of the ESP on May 31, 2016. AEP Ohio will also maintain an interruptible credit of $8.21/kw-month through the end of the ESP on May 31, 2016 for existing IRP-D customers. The incremental cost associated with this interruptible credit (approximately $5 million) shall be collected through the nonbypassable Economic Development Rider. Retail Market Enhancements By the end of 2011, the ninety (90)-day Notice Requirement that certain customers must give before they can enroll with a CRES provider will be eliminated. Effective by the June 1, 2015 SSO auction, the 12 month minimum stay requirements for industrial or large commercial customers will be eliminated. Effective by the June 1, 2015 SSO auction, the provision that residential and small commercial customers that return in summer must stay until April 15th of the following year will be eliminated. AEP Ohio will also discuss reducing the current $10 switching fee. Customers that have previously waived POLR charges who return from shopping during the ESP term will be served at the applicable SSO rate, and AEP Ohio's application to institute a separate market-based rate for such return customers will be dismissed. Other Terms The Turning Point solar project will be moved into another docket and potentially included under the GRR. Additionally, AEP Ohio's capacity plan contemplates a new 500 MW combined cycle facility being supported under the GRR. Should any generation be supported by the GRR, such output shall be bid into the PJM energy and capacity markets and shall be financially settled to ensure that customers receive the agreed upon energy, capacity and renewable energy credits determined by the Commission. A future proceeding will address the manner in which dedicated resources participate in the SSO auctions. AEP Ohio will not, as originally proposed, use revenue from customers voluntarily selected a utility-offered renewable option to decrease its alternative energy compliance costs for other customers. Such optional green tariff revenue will only be used to retire RECs for customers electing the voluntary green rider.
AEP Ohio shall add capacity (PLC) and transmission (NSPL) information to the Master Customer List.
AEP shall establish a nonbypassable rider, Generation Resource Rider (GRR), to address any generation costs undertaken pursuant to R.C. 4928.143(B)(2). The rider shall act as a place-holder until such time as the Commission approves any project-specific costs to be included in the GRR.
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