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AEP Ohio's electric security plan IV

Role of the Commission

In formulating its decision in a case, the Commission must balance the interests of many parties and stakeholders while adhering to its mission, “to assure all residential and business consumers access to adequate, safe and reliable utility services at fair prices, while facilitating an environment that provides competitive choices.”

The Commission must balance this responsibility with an obligation to ensure Ohio’s regulated utilities the ability to continue to provide adequate, safe and cost-effective services to Ohio’s consumers and continue to invest in infrastructure improvements and innovative technologies.

In every case that comes before the Commission, a formal record is created. The case record includes written testimony, public testimony and cross-examination of expert witnesses. The Commission cannot make arbitrary decisions; information that is not in the formal record cannot be considered by the Commission in formulating its decision in a case.

Working as the neutral arbiter, it is the Commission’s goal to put Ohio in a position as a leader in developing regulatory certainty, rate stability and modernized grid technologies.

ESP 101

State law requires electric distribution utilities to provide their customers a default generation service. This is called a standard service offer, or SSO. An SSO may be in the form of either an electric security plan (ESP) or market rate offer (MRO). Electric distribution utilities are required to file applications with the PUCO to establish either an ESP or MRO.

ESPs establish the pricing and supply of generation service, and may include distribution system investments, grid modernization, economic development and job retention initiatives and energy efficiency measures. The PUCO is tasked with determining whether an ESP, including its pricing and all other terms and conditions, is more favorable in the aggregate as compared to the expected results that would otherwise apply under an MRO.

AEP Ohio’s electric security plan

The PUCO approved AEP Ohio’s first ESP in March 2009, setting gradual increases for the base price of electric generation through December 2011.

In 2012, the PUCO approved AEP Ohio’s second ESP, in effect until May 31, 2015. The second ESP brought AEP Ohio’s SSO load to be fully provided through competitive auctions. The second ESP also directed AEP Ohio to separate its generation assets from its distribution business.

In 2015, the PUCO approved AEP Ohio’s third ESP, in effect until May 31, 2018. The third ESP again planned for AEP Ohio’s SSO load to be fully provided through competitive auctions.

In November 2016, AEP Ohio filed a proposal to modify and extend its third ESP by six years.

What did AEP Ohio request in its ESP filing?

In November 2016, AEP Ohio filed a proposal to modify and extend its ESP through May 2024. 

The proposed ESP would maintain the competitive bidding process.  AEP Ohio proposes to use the power from the Ohio Valley Electric Corporation (OVEC) entitlement to serve a bypassable portion of its SSO load, instead of including the cost and revenues of that entitlement in the PPA Rider.

AEP Ohio proposes a Distribution Technology Rider (DTR) in order to modernize the company’s infrastructure. The proposed rider would allow for the installation of electric vehicle charging stations, microgrid technology, smart street lighting controls and a next generation utility communication system throughout the company’s territory. The DTR would also allow for the enhancement of security for AEP Ohio’s critical distribution infrastructure.

AEP Ohio proposes a pilot program to establish a bypassable Competition Incentive Rider (CIR) as an addition to the SSO non-shopping rate above the auction price. The purpose of this rider is to incentivize shopping, while recognizing that there may be costs associated with providing retail electric service that are not reflected in the SSO bypassable rates. Revenue collected from the CIR would be refunded to all customers through the SSO Credit Rider.

AEP Ohio proposes a Renewable Generation Rider (RGR) to recover costs of renewable generation investment. The RGR would work as a placeholder until such time that the Commission might approve charges for specific projects.

AEP Ohio’s modified ESP proposal also includes several other new riders and tariffs, including: a Sub-metering Rider, an Automaker Credit Rider, an LED Lighting Tariff, a Basic Transmission Cost Recovery (BTCR) provision for County Fairgrounds, a pilot BTCR program for single coincident peak rate design for certain customers, a modification to the Auction Cost Reconciliation Rider (ACRR), a modification to the Distribution Investment Rider, a modification to the Economic Development Rider and an increase to the distribution customer charge with an offsetting reduction to the distribution energy charge.

How did the PUCO rule on AEP Ohio’s application?

On August 25, 2017, AEP Ohio, PUCO staff and numerous other parties reached a settlement agreement in the electric security plan case.

The settlement agreement was signed by PUCO staff, AEP Ohio, the Ohio Energy Group, the Ohio Hospital Association, Mid-Atlantic Renewable Energy Coalition, Environmental Law and Policy Center, Ohio Partners for Affordable Energy, Industrial Energy Users-Ohio, the Electric Vehicle Charging Association, Ohio Manufacturers’ Association Energy Group, Interstate Gas Supply, Inc., Ohio Environmental Council and Environmental Defense Fund, Retail Energy Supply Association, Natural Resources Defense Council,  Constellation NewEnergy, Inc., and the Sierra Club.  Non-opposing parties include: Commerce Energy, Inc., Walmart Stores East, L.P. and Sam’s East Inc., and The Kroger Company. 

The PUCO modified and approved the settlement agreement effective through May 31, 2024. 

The agreement continues to use a competitive bidding process to establish default generation rates for AEP Ohio’s customers who have not elected to receive service from a competitive supplier.

The agreement relinquished the changed to the fixed customer charge and volumetric portion of AEP Ohio’s distribution rates that the utility sought in its initial application. The proposed Sub-metering Rider, LED Lighting Tariff, and modification of the PPA Rider and ACRR were also withdrawn in the settlement agreement. 

The Commission declined to adopt the Competition Incentive Rider (CIR), however instead created a place holder, and will evaluate it in an upcoming distribution rate case.

The Commission modified the settlement to remove an obligation for AEP Ohio to file a specific rate design proposal in its next distribution rate case that would increase the utility’s fixed customers charge. In doing so, the Commission noted it is instead examining all of Ohio’s electric distribution utilities’ rate designs through its PowerForward initiative.

AEP Ohio will pursue two programs throughout its territory related to the Smart City Columbus project. AEP Ohio will administer a $10 million rebate program for electric vehicle charging stations. The company will make rebates available to qualifying public, government, workplace and multi-unit residences, with a portion reserved for low-income areas. AEP Ohio will also pursue microgrid projects with non-profit or public-serving customers. AEP Ohio will collect up to $10.5 million during the term of the ESP for the microgrid projects.

The agreement allows AEP Ohio to continue to recover its incremental costs from annual upgrades to its distribution infrastructure and vegetation management program until the utility files a new distribution rate case. AEP Ohio will be required to file a distribution rate case with the PUCO by June 1, 2020.

AEP Ohio will also continue to fund its low-income Neighbor-to-Neighbor bill assistance until new rates are effective following the distribution rate case.

How might my bill be affected?

According to the company's testimony in support of the stipulation, the average residential customer using 1,000 kilowatt hours (kWh) would experience a monthly bill increase of $0.11.

Did the PUCO consider public opinion in this case?

The PUCO held five local public hearings to provide the public an opportunity to express their views regarding AEP Ohio’s electric security plan application.  Hearings were held throughout AEP Ohio’s service territory including Columbus, Marietta and Bucyrus.

For more information

To view AEP Ohio’s ESP application, visit and click on the link in the Docketing Information System (DIS) and enter case number 16-1852-EL-SSO.