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AEP Ohio Says Stipulated ESP Price More Favorable Than Market Rate Offer
September 14, 2011
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The non-unanimous, stipulated electric security plan (ESP) at AEP Ohio would result in generation rates $1.67/MWh lower than the results expected under a Market Rate Offer, AEP Ohio said yesterday in testimony supporting the stipulation.
See 9/7 story for background on stipulation
Specifically, AEP Ohio said that for the period 2012 through May 2015, the stipulated ESP average price will be $61.15/MWh. The forecast weighted average Market Rate Offer price over the same period is $62.82/MWh, AEP Ohio said.
Additionally, the benefit of the discounted capacity that AEP Ohio will make available to competitive retail suppliers under the stipulation (the "RPM set-aside") carries a net present value of $856 million, AEP Ohio testified.
AEP Ohio described the RPM set-aside in greater detail as follows:
- The 2012 set-aside of 21% of AEP Ohio total retail load is approximately 10,000 GWh, which is roughly equal to the entire 2010 load of Toledo Edison Company
- The potential 2013 set-aside of 31% of AEP Ohio total retail load is approximately 15,000 GWh, which is roughly equal to the entire 2010 load of Dayton Power & Light Company (the set aside could be 29% for part of 2013 depending on a securitization schedule)
- The 2014-2015 set-aside of 41% of AEP Ohio total retail load is approximately 20,000 GWh, which is roughly equal to the entire 2010 load of Duke Energy Ohio
Furthermore, AEP Ohio said that the capacity price of $255/MW-Day charged to retail suppliers for load not qualifying for the discounted RPM set-aside is still "substantially lower than the cost-based capacity charges proposed by AEP Ohio," in its original application.
Additionally, the testimony confirms that the RPM set-aside shall be awarded to the migrated customer, and not the supplier, and shall remain with the customer if the customer switches suppliers.
Furthermore, the testimony states that the RPM set-aside shall only be allocated to customers with a validly executed contract with a retail supplier. This shall not include contracts between a governmental aggregator and retail supplier.
AEP Ohio's testimony also discussed, to a limited extent, how any new generation built by the Ohio distribution company, under a nonbypassable surcharge, will be accounted for in the auction to procure default service load for the period starting June 1, 2015. Ultimately, the details of such participation will be developed in a successor stakeholder proceeding, but AEP Ohio did offer the following testimony on the matter:
"Under Paragraph IV.1.r (page 13) of the Stipulation, the manner in which to include any dedicated resources of the EDU in any auction-based SSO procurement process will be developed in a stakeholder process and addressed in any competitive bid process. The net cost concept can work whether the GRR [nonbypassable Generation Resource Rider] unit supplies SSO load or is purely a financial transaction in the PJM market. SSO customers would pay the bid price of the unit if the unit bids and clears into the SSO auction. All customers pay the net cost of the unit – the total cost less the revenues received including those received either from the SSO auction or from the PJM market. Per Paragraph IV.2.d (page 24) of the Stipulation, all revenues, products, and services of the EDU associated with GRR projects will be used to offset the Commission approved cost of the plant. In times when market prices are high it is likely that the GRR unit will clear the SSO auction and provide lower cost energy for SSO customers. Even if the unit does not clear the SSO auction and market prices subsequently rise customers will benefit from the GRR unit as a result of increased revenues received in the market."
Additionally, testimony from NERA Economic Consulting on behalf of AEP Ohio stated the following with regard to the issue:
"As the EDU will own certain generation resources, bidders may be concerned over how these will affect SSO load. It is essential to clarify how energy and capacity from these resources may affect SSO supply responsibility. For example, in New Jersey where distribution utility resources are referred to as 'Committed Supply', energy and capacity from such resources are sold into PJM markets with revenue deficiencies or surpluses accounted for through a non-bypassable charge. This may not be the only arrangement that works and a stakeholder process can explore what is the best alternative for the AEP Ohio EDU. What is most important is that what will be done with such resources is clearly specified and a stakeholder process can achieve such clarity."
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