American Electric Power Co. Inc. subsidiary AEP Ohio has reached a power purchase agreement with state regulators and other stakeholders that would help keep its uncompetitive plants running, convert others to natural gas and more than double renewable energy capacity.
The company filed the agreement with the Public Utilities Commission of Ohio (PUCO) on Monday. It was signed by regulatory staff and 10 parties, including the Sierra Club and three competitive retail energy suppliers. The plan requires AEP to enter into an eight-year power purchase agreement for the capacity, energy and ancillary service output of its 2,671 MW ownership share of nine generating units and AEP Ohio's 423 MW share of Ohio Valley Electric Corp. generation.
AEP would purchase power from the unregulated subsidiary plants to guarantee a profit and recover costs through customer charges instead of selling the power on the open market. In addition, it would convert Conesville units 5 and 6 in Coshocton County to co-fired natural gas by the end of 2017 and retire/refuel those units plus Cardinal Unit 1 in Jefferson County to gas only by 2030. The company would also develop 900 MW of wind and solar energy projects in the state over the next five years, more than doubling Ohio's current wind power capacity and almost quadrupling its solar capacity.
AEP Ohio President Pablo Vega called the agreement a "comprehensive plan that helps ensure more stable electricity prices for Ohio consumers and promotes reliable and diverse generation supply to support the Ohio economy." Earlier this month, FirstEnergy Corp. reached a similar agreement with PUCO and 15 other parties to help make four of its coal and nuclear power plants more competitive. PUCO is expected to rule on both deals by early next year.
The agreements have faced strong opposition for months. More than 12,000 members of Ohio Citizen Action have sent letters to PUCO and Gov. John Kasich protesting efforts to keep the outdated coal plants running. Others have compared the deals to corporate largesse.
"If FirstEnergy's deal is a corporate bailout, AEP's deal is a corporate handout," said former PUCO Chairman Todd Snitchler. Snitchler now works with a Columbus, OH-based lobbying firm that represents, among others, the Alliance for Energy Choice and Dynegy Inc., which operates power generating facilities in eight states, including Ohio.
AEP would own up to a 50% stake in the renewable projects and cover the costs with charges to customers. Those assets would be regulated differently than power on the open market.
"Ohio has thrived through its competitive retail and wholesale markets, which AEP favored when they were adopted," said Dynegy CEO Robert Flexon. "This ill-advised action of the PUCO staff only hurts citizens and the competitive profile of Ohio in the long run."
AEP estimates that the plan would save consumers $721 million over the eight-year period.