Public Utilities Commission American Electric Power-Ohio’s Electric Security Plan

History of Electric Deregulation in Ohio

A law enacted in 1999 restructured Ohio’s electric industry by changing the way customers shop for electricity. The law, which took effect on Jan. 1, 2001, provided a five-year market development period. During this period, the utilities’ rates were frozen to allow a competitive resale market to develop.

As the end of the market development period neared, there was a growing concern that, due to the limited number of competitive electric suppliers and low degree of market activity, an immediate shift to market-based rates in 2006 would not be in the best interest of customers. To minimize the effects of rate “sticker shock” and gradually transition customers to market-based rates, the Public Utilities Commission of Ohio (PUCO) worked with Ohio’s electric utilities to develop rate stabilization plans (RSPs).

The RSPs, coupled with other rate modifications, eliminated market uncertainty and provided customers with stable, predictable rates. Most of these plans expire at the end of 2008. In 2008, Gov. Ted Strickland and legislative leaders worked to pass Senate Bill 221 to keep electric rates stable going forward, create jobs and expand Ohio’s green energy industry. The new law incorporates a system under which rates would be set by the PUCO beginning Jan. 1, 2009 and outlines a path for electric utilities to implement market-based pricing.

Electric Security Plan (ESP)

On July 31, 2008, American Electric Power-Ohio (AEP) filed an application at the PUCO to establish an electric security plan (ESP) to comply with Senate Bill 221. The company’s ESP is its plan for the supply and pricing of electric generation service over the next three years. The plan requested the recovery of costs for fuel used to generate electricity, electricity purchased wholesale, emission allowances and federally mandated carbon taxes. The goals of the plan include price stability, ensuring an adequate supply of electricity, promoting economic development, job retention, energy efficiency and conservation.  On March 18, 2009, the PUCO modified and approved AEP’s ESP.  The plan will be in effect through Dec. 31, 2011.

How will electric generation rates change?

The ESP established fair and reasonable increases for the base price of generation.  For Columbus Southern Power customers, annual increases to the total bill will be capped at 7 percent in 2009 and 6 percent in 2010 and 2011. Ohio Power customers will have annual total bill increases capped at 8 percent in 2009, 7 percent in 2010 and 8 percent in 2011. The effective date ESP is January 1, 2009.  However, the company's tariffs, including the new rates went into effect on April 1, 2009. 

The increases will result in the following generation rates per kilowatt hour (kWh):

What else is addressed by the ESP?

The approved ESP will allow AEP to implement its gridSMART program that will enable the company to improve reliability, reduce costs and allow customers to better control their electric bills through advanced metering technology. The ESP also establishes an enhanced vegetation management program in which the company will employ additional resources and increase the level of vegetation management work performed.

Did the PUCO take public opinion into consideration?

Yes.  The PUCO held five local public hearings Canton, Columbus, Lima and Marietta in which 124 customers provided testimony.