On Aug. 8, the Public Utilities Commission of Ohio (PUCO) approved AEP Ohio’s modified electric security plan (ESP), which includes a schedule to transition the state’s electricity market into a competitive electricity market by June 2015. This new order will become effective with bills rendered September 1.
Important elements of the modified ESP approved by PUCO include:
Load auctions blended with base rates over transition period
During the three-year duration of this newly adopted Electric Security Plan, electric generation rates will be frozen at current levels. AEP will blend these electric generation rates with load auctions to be held over the term of the ESP. AEP will conduct an energy-only auction for 10% of its standard service offer (SSO) load on completion of its pending corporate separation plan. AEP will then conduct an added energy auction for 60% of its SSO load commencing June 1, 2014 and then finally a third energy auction for 100% of its SSO load commencing January 1, 2015. The plan also provides a “relief valve” ensuring that no ratepayer’s bill will be impacted by more than 12 percent over the term of the ESP. AEP has until the end of this year to file the competitive bidding process for these auctions.
Recovery of deferred capacity costs through a non-bypassable charge
On July 2, the PUCO adopted a capacity pricing system that established a cost-based capacity price of $188.88 per MW-day but requires AEP to charge competitive electric suppliers, like Constellation, at a lower market-based capacity price, known as the Reliability Pricing Model (RPM) price. AEP was permitted to defer the difference for future recovery in that case. This ESP dealt with the issue of how AEP will recover these deferred costs. The ESP allows for the utility to begin recovery of that deferred amount through a newly introduced charge that will be paid by both shopping and non-shopping customers.
AEP generation rates set fully by auction starting June 2015
Starting in June 2015, AEP’s generation rates (including energy and capacity) will be fully set by a competitive bidding process. This gives consumers the chance to save on electricity supply costs and affords businesses with the chance to work with a competitive electricity supplier on an energy management strategy to reduce long-term energy costs. A competitive market is believed to ultimately help the state’s economy by preserving and creating jobs.
Constellation customers that have any questions about this change are encouraged to contact their business development managers. If you’re reading this and have a question, please don’t hesitate to comment on this post.