By Ted Caddell
American Electric Power went before the Public Utilities Commission of Ohio last week in a rare oral argument to support its request for a power purchase agreement (PPA) for its share of an aging, coal-fired power plant.
If granted, the costs, or benefits, involved wouldn’t amount to much. But as a precedent, it would be significant.
At issue is AEP’s approximately 435-MW share of the 1,000-MW Kyger Creek plant in Chesire, Ohio. The company said the plant is old and at a disadvantage in the state’s deregulated wholesale power market.
AEP said Kyger Creek needs a guaranteed revenue stream to keep the plant operating and bolster the reliability of the regional power grid.
AEP is seeking permission for a long-term (10 to 15 years) PPA from Kyger Creek at a price that would cover the plant’s operating costs plus a profit (13-2385-EL-SSO).
The plant’s output would then be sold in PJM’s day-ahead and real-time markets. If the market price exceeds the PPA, Ohio customers will receive credits. When it is below the PPA, customers will foot the bill.
Opponents have called the proposal a bailout for a power company that was already given a good deal when the state opened the retail market to customer choice. AEP Ohio received $927 million in stranded-cost recovery as a part of the switch to a deregulated market.
Waiting in the wings are more requests just like it. AEP has another request that would cover four more plants. Duke Energy and FirstEnergy have similar requests before PUCO.
Terri Flora, AEP spokeswoman, acknowledged that it is a difficult argument to make before the commission and customers.
“We are getting a lot of feedback, either for or against, and now it is just wait and see,” she said. “It really comes down to how much of a player Ohio wants to be in generation. It is not about us, really; it is about providing rate stability, as well as economic development, and keeping decent plants alive for the reminder of their lives.”
She scoffed at opponents’ use of the term bailout. “Some of the interveners use words that are intended to scare,” she said. “This is simply a financial hedge. If we had had this PPA in place this time last year, they would have seen a credit to their bills.”
Flora said she thinks PUCO will issue a ruling within two months.