PJM pushes for consumer protections in AEP plant subsidy case

Dive Brief:

PJM Interconnection has filed an amicus brief with Ohio regulators, calling for consumer protections in American Electric Power (AEP)'s bid to have ratepayers guarantee income from four coal-fired facilities.
Ohio regulators should restrict AEP from bidding its generation at levels below actual costs, which could allow it to surpress generation prices and discourage new power plants from being constructed, PJM Interconnection said.
PJM also said the idea that AEP's generation is necessary to reliability is a "red herring," noting that Ohio has retired more than 6,000 MW of generation recently but it has all been replaced by a functioning capacity market.
Regulators received post-hearing briefs in the case on Monday, according to Power Markets Today, but stakeholder positions on the proposal did not change significantly from earlier hearings. The decison now rests with regulators, who are expected to rule in March on the proposal and a similar one from FirstEnergy.

Dive Insight:

PJM's late intervention into AEP's power purchase agreement [PPA] case was denied by state regulators, so the grid operator this week filed an amicus brief calling for the Public Utilities Commission of Ohio (PUCO) to protect ratepayers in the controversial proceeding.

PJM called for Ohio regulators to require AEP to bid the generation at prices that at least reflect its actual cost, which "ensures that the PPA will not artificially suppress prices in a manner which can hurt development of new generation in Ohio."

In December, AEP reached a settlement deal to guarantee income for selected coal generating units in Ohio in exchange for promises to cease coal use at other facilities and develop 900 MW of renewable energy. Under the agreement, AEP would ink eight-year power purchase agreements to support 2,671 MW of generation the utility says is essential for reliability, but at risk for retirement. The deal would see the utility either retire or convert 1,503 MW of coal generation to natural gas.

But PJM added that the reliability argument is overstated. "Indeed, the Commission and Ohio consumers can be fully assured that the system is reliable in Ohio and the PJM region," the operator said. "Arguments that approval of the stipulation is needed to ensure reliability in Ohio are wide of the mark and represent a proverbial ‘red herring.'"

Under the agreement, AEP's power purchase agreements would end in May 2024. The deal covers 2,671 MW from nine AEP generating units — Unit 1 at the Cardinal coal plant, Units 4-6 at the Conesville plant, Units 1-4 at the Stuart plant and Unit 1 at Zimmer. The PPAs would also cover the utility's 423 MW contractual share of Ohio Valley Electric Corp. generation.

FirstEnergy is currently working on a similar proposal, and wrapped up hearings last month. Its own eight-year settlement is designed to keep two power plants operating: the Davis-Besse Nuclear Power Station in Oak Harbor and the W.H. Sammis coal-fired plant in Stratton.