American Electric Power Co. Inc. (AEP) has denied charges itcapitalized on the turbulence in the Midwest electricity markets inlate June by allegedly engaging, along with other power marketersin the region, in “abusive price gouging” that contributed topower prices soaring into the thousands of dollars.

In the complaint filed at FERC, Steel Dynamics Inc., asteelmaker in Indiana, charged that AEP, via subsidiary IndianaMichigan Power, and other undisclosed power marketers in the ECARregion with the authority to sell at market-based rates took”unfair advantage with abusive prices” during the Junesupply-demand crisis in the electricity markets.

Specifically, Steel Dynamics has asked the Commission toinvestigate the power-supply situation that existed in the Midwestin the waning days of June; to probe the reasons for the”extraordinary high” prices; to determine whether customer refundsare warranted; to suspend all grants of authority to sellelectricity and capacity at market-based rates; to set an emergencyelectricity price ceiling of $100/MWh; and to impose harshpenalties on those failing to comply with a FERC order in the case.It has requested that the Commission issue an interim decisionuntil it completes its investigation. FERC has set Aug. 7th as thedeadline for receiving industry protests and comments on thecomplaint [EL98-54].

Columbus-OH-based AEP acknowledged that Steel Dynamics wasparticularly vulnerable to the market upheaval because it, likesome other industrial power customers, had opted for low-price,high-risk interruptible contracts. “As part of the negotiations[with Steel Dynamics], we offered them the standard tariffs that wehad available for industrial customers. They wanted us to be morecreative. And so we came back…with an even lower interruptiblerate,” AEP spokesman Pat Hemlepp told NGI on Monday.

“They’ve saved millions of dollars over the years in electricitybecause of this contract.” But when “the other portion of thecontract about being interrupted comes into play [as it did inJune], then they want the same protection that customers that arepaying the higher, firm rates get. And that’s not fair to othercustomers.”

“That’s true” that Steel Dynamics was vulnerable because of itsIT power contract, agreed Frederick H. Ritts, a Washington D.C.attorney for the steel producer. “But that does not explain thehigh prices. Prices last summer were maybe $100 a MWh, but not 3 to4 to 5 to $6,000.

AEP, the sole supplier to the Steel Dynamics, interruptedservice to the company’s Indiana steel plant in late June,according to Hemlepp. Steel Dynamics had the option to “buythrough” at the high market rates then, he said, but decidedagainst that and instead curtailed its operations. Steel Dynamicsdeclined to disclose in its FERC complaint the price at which itwas offered electricity after its power was interrupted by AEP.Hemlepp said he didn’t know the price.

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