AEP, one of Ohio’s largest utilities, just reached an exciting new milestone that takes the state further down the path to a clean energy economy.
The utility has reached a settlement that will unlock millions in funding, lower pollution, avoid unnecessary electricity bill increases, and provide customers with more clean energy options.
In AEP’s recent electric security plan case (a process that sets generation rates charged to customers) through 2024, the utility, Environmental Defense Fund (EDF), the Ohio Environmental Council (OEC), and others have reached a settlement that includes the following:
- Less pollution through more renewables: AEP will build or enter into a power purchase agreement for 900 MW of low-carbon solar and wind projects – enough to power almost 2,000 homes for a year. These new projects will allow the state to rely less on polluting coal.
- No unnecessary fixed cost increases: The fixed monthly charge for residential customers will remain at $5.00/month, rather than a whopping $18.40/month that AEP sought. Higher fixed rates mean customers typically pay more regardless of how much they cut their energy use, effectively discouraging them from investing in energy-saving resources like efficiency and residential solar.
- Strengthening grid reliability and resiliency: AEP will spend $10.5 million for one or more microgrid projects, localized power grids that have the ability to disconnect from the main, centralized grid.
- Enhancing electric vehicle (EV) infrastructure: AEP will spend $10.5 million for an EV charging station rebate program.
- Opening the door to future clean energy investments: AEP will implement a more streamlined way to recover costs from projects related to PowerForward, the state’s grid modernization effort, and the Smart City program, which involves $60 million in grants to the City of Columbus for smart transportation systems. This new cost recovery mechanism will lower AEP’s risk for investing in smart grid measures.
These ambitious developments will significantly enhance and diversify Ohio’s clean energy economy.
A history of bailouts
Last year, AEP and FirstEnergy, another utility giant in Ohio, sought enormous bailouts for their unprofitable, old coal and nuclear plants. After the Federal Energy Regulatory Commission (FERC) blocked these pleas, each utility was forced back to the drawing board – and each came back with a very different approach.
While FirstEnergy continued its crusade for customer-funded bailouts, AEP began to re-think its strategy and reached a settlement with the Public Utilities Commission of Ohio (PUCO) for its customer rates through May of 2018. Although the settlement had some promising clean energy components like increased renewable energy, it was still an unnecessary handout.
Specifically, the deal would have forced Ohioans to pay for AEP’s share of two uneconomic coal plants, which are part of the Ohio Valley Electric Corporation (OVEC). These are two old coal plants in Ohio and Indiana, built in the 1950s to supply electricity for a uranium enrichment plant that has since closed. EDF, among others, did not agree to the settlement.
Groups are contesting that deal, and specifically the OVEC bailout piece, at the Ohio Supreme Court, arguing that the provision is unfair because AEP has already been compensated for its share of the OVEC plants (through “transition charges” that AEP recovered during the 10 years following deregulation). The outcome is expected within the next year.
Under the new rate case settlement, AEP will continue to get money for its share of the uneconomic OVEC power plants through 2024. If the Ohio Supreme Court rejects the OVEC bailout, the decision will render the related portion of the new settlement moot and various parties will get back together to determine the path forward. EDF and the OEC would not be at the table because we opposed the original OVEC coal bailout, and we do not support the extension in the new settlement.
Regardless of the impending court decision, AEP’s new settlement exemplifies how utilities can and should include clean energy provisions when setting their overall electricity prices for customers. As the U.S. continues its transition to a cleaner, smarter energy system, more utilities should take this approach.
By Dick Munson