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AEP-Ohio’s Electric Security Plan

AEP-Ohio’s Electric Security Plan

Docket for case number 11-346-EL-SSO

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 January 2001, provided for a five-year market development period. During this time, the utilities’ rates were frozen to allow a competitive retail market to develop.

As the end of the market development period neared, there was a growing concern that 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 transition customers to market-based rates, the Public Utilities Commission of Ohio (PUCO) worked with Ohio’s electric utilities to develop rate stabilization plans.

The rate stabilization plans, along with other changes, eliminated market uncertainty and provided customers with stable rates. Most of these plans expired at the end of 2008. In 2008, the Ohio General Assembly passed Senate Bill 221 to keep electric rates stable going forward, create jobs, implement energy efficiency and expand Ohio’s alternative energy industry. The new law incorporated a system under which rates would be approved by the PUCO beginning in 2009.  Senate Bill 221 also outlined alternative paths for electric utilities to implement different forms of market-based pricing.

Electric Security Plan 101

An electric security plan (ESP) is a rate plan for the supply and pricing of electric generation service. The PUCO approved AEP-Ohio’s first ESP in March 2009, setting gradual increases for the base price of electric generation through December 2011. For Columbus Southern Power customers, total annual bill increases were capped at 7 percent in 2009 and 6 percent in 2010 and 2011. Ohio Power customers saw total bill increases capped at 8 percent in 2009, 7 percent in 2010 and 8 percent in 2011.

History of the proceeding

AEP filed an ESP application in January 2011. The PUCO held five local public hearings across Ohio, gathering input about the application from more than 60 witnesses.

In December 2011, the PUCO modified and approved a September 2011 agreement. Under the ESP, AEP would have transitioned to a market-based generation rate structure over a four and a half year period between January 2012 and May 2016.

In February 2012, the PUCO revoked the ESP after determining it did not serve in the public’s best interest. The PUCO directed AEP to file a modified ESP application and reopened intervention in the ESP case to allow any party to participate in the proceedings.

What did AEP-Ohio request in its modified ESP filing?

On March 30, 2012, AEP-Ohio filed a modified ESP application.    AEP-Ohio’s proposed it would separate its generation assets from its distribution and transmission assets. The modified ESP would set generation prices through 2014, and transition to competitive market-based auctions beginning in 2015.

How did the PUCO rule on the ESP?

On Aug. 8, 2012, the PUCO modified and approved AEP’s ESP application. The PUCO ruling allows AEP to transition to a fully competitive market based structure by June 1, 2015.

AEP’s base generation rates will be frozen through May, 31, 2015.  AEP will auction 10 percent of its standard service offer load beginning in 2013.  In June 2014, 60 percent of AEP’s SSO load will be provided by competitive auctions, increasing to 100 percent in January 2015.  On June 1, 2015, AEP’s SSO will be fully provided by competitive auctions.

In order to ensure no customers are unduly burdened by any unexpected rate impacts the Commission established a cap such that no customer rate increase will exceed 12 percent during the term of the ESP. The rates affected by this provision are the Retail Stability Rider, Distribution Investment Rider, Pool Termination Rider and Generation Resource Rider.

Did the PUCO consider public opinion in this case?

Yes. The PUCO held four local public hearings to provide customers an opportunity to testify. Hearings were held in Canton, Columbus, Chillicothe and Lima during April and May 2012. An evidentiary hearing was held at the PUCO’s officers during May and June 2012.