FRANK LEWIS

PDT Staff Writer

Portsmouth is one of 15 Ohio cities in which businesses who shop for their electric service will most likely see a large increase in rates if state regulators approve AEP’s proposed cost-based price increases for electric generation capacity, the Ohio Manufacturers’ Association says.

The OMA claims 255 commercial and industrial customers in Portsmouth currently shop for the best rates on power.

“That’s the number of customers who have switched from the incumbent AEP utility distribution company that everybody’s wires are connected to. They’re the traditional generation company,” said Ryan Augsberger of OMA. “We have had over the last few years the ability for customers to shop. This is not talking about residentials. This is mostly going to be larger businesses who are pretty savvy with their electrical needs and the same thing with commercial businesses.”

According to the OMA report, those companies include hospitals, manufacturers, government entities and others, and the figures released by the OMA reflect the capacity impact on shopping customers.These companies have gone to suppliers such as Constellation, Direct Energy, AEP Retail (the retail arm of AEP), First Energy Solutions, and choose a company that gives them a better rate. However, one of the prices embedded in the price customers pay to the competitive companies is the capacity charge paid to AEP for the right to use the utility’s generation capacity.

The OMA said AEP has proposed three different capacity prices, each of which is significantly higher than regional, auction-based market prices for capacity that otherwise would apply to competitive suppliers in AEP Ohio’s service territory. The first is $146 per megawatt day; the second, $255 per megawatt day; and the third, $355 per megawatt day.

The OMA said it has calculated the difference in price for the participating commercial and industrial customers in each of 15 cities, and then showed the difference in what those companies would pay in each of the proposed rates.

In Portsmouth currently, the market is dictating that the capacity cost should be $1,288,220. The auction-based market price for capacity is set by the Electric Grid Operator, PJM, which operates the grid in 13 states. They have an auction, and that is how the price for capacity is set. If the price for capacity would go to $146 per megawatt day, the total cost would be $2,717,790. At $255 per megawatt hour, that cost would go to $4,746,825; and finally at $355 per megawatt hour - the cost would rise to $6,608,325.

OSCO President John Burke traveled to Columbus earlier this month to describe for PUCO members the potential impact on OSCO of certain provisions of AEP Ohio’s proposed Electric Security Plan (ESP) and capacity pricing plan. Burke told Commissioners that AEP’s proposals, in particular a nonbypassable Retail Stability Rider and capacity prices the Ohio Manufacturers Association says are dramatically higher than current market rates, would “create operational strain” on OSCO. He explained that AEP Ohio’s proposed rate structure would “thwart the company’s ability to proactively manage its electricity costs and mitigate the impact of the rate hike by shopping with competitive suppliers.”

Burke told Commissioners the result would be significantly higher electricity costs for OSCO, which he said would undermine the company’s competitiveness.

“In view of the fact that state leaders and the PUCO are committed to competitive markets for electricity, the best solution for Ohio would be to resolve the AEP Ohio capacity case in a way that allows customers to maximize savings while auction-based capacity prices are at historic lows over the next three years,” said Kevin Schmidt, the OMA’s director of energy services. “Those savings would allow manufacturers to continue to invest and grow in Ohio and also be better positioned to mitigate the impact of higher capacity prices that auction-based market pricing may produce in the future, as we already have seen in other utility service territories.”

Frank Lewis may be reached at 740-353-3101, ext. 232, or at flewis@heartlandpublications.com.