COLUMBUS, Ohio, Feb. 27, 2012 – AEP Ohio, a unit of American Electric Power (NYSE: AEP), filed today with the Public Utilities Commission of Ohio (PUCO) a motion for relief and request for expedited ruling related to the Commission’s Feb. 23 order, specifically regarding generation capacity charges.
Upon rejecting the settlement agreement, the PUCO recognized that the case to determine a capacity charge that competitive retail generation suppliers would pay AEP Ohio needed to proceed independently and that a procedural schedule would be established. While a more permanent decision remains pending regarding the appropriate capacity charge, AEP Ohio is requesting interim relief and an expedited ruling in order to avoid undue prejudice, in the form of substantial and adverse financial impacts.
“AEP Ohio has committed significant capital investment in its Ohio generation fleet under what was a regulated environment to serve our customers’ generation needs,” said Nicholas K. Akins, AEP president and chief executive officer. “The settlement agreement allowed AEP Ohio a reasonable transition to market over a period of time. Without that transition, we will basically be giving the capacity we built to competitive suppliers for the taking.”
The company estimates that if it is required to flash cut to RPM-priced capacity this year, it would cause the company’s projected 2012 earnings to drop by 27 percent and produce a return on equity (ROE) of 7.6 percent. Projected earnings for 2013 also would drop significantly by 67 percent and produce an ROE of 2.4 percent.
In the filing, AEP Ohio is asking the PUCO to maintain the status quo of what was proposed and in place for 2012 by the previously approved stipulated agreement pending an expedited resolution of the proceeding. In that agreement, AEP Ohio was to provide a percentage of its generation capacity to competitive retail suppliers at the deeply discounted RPM price.
The company also has proposed another alternative to the Commission that would permit RPM-priced capacity for any customer that has shopped for generation supply to date, while allowing AEP Ohio to use a reduced cost-based rate for new shopping, pending resolution of the proceeding.
“We feel these proposed interim solutions give the Commission alternatives to dealing with the capacity issue fairly and without prejudice until the proceeding can be resolved,” said Joseph Hamrock, AEP Ohio president and chief operating officer. “Making AEP Ohio flash cut to RPM-priced capacity would have a significant financial impact on AEP Ohio and cause uncertainty and instability for our customers, the company and its investors.”
AEP Ohio has proposed a procedural schedule for resolution of this case that fully submits the record for decision in 60 days and a decision on the proceeding within 90 days.
AEP Ohio provides electricity to nearly 1.5 million customers of major AEP subsidiaries Columbus Southern Power Company and Ohio Power Company in Ohio, and Wheeling Power Company in the northern panhandle of West Virginia. AEP Ohio is based in Gahanna, Ohio, and is a unit of American Electric Power. News and information about AEP Ohio can be found at aepohio.com.
American Electric Power is one of the largest electric utilities in the United States, delivering electricity to more than 5 million customers in 11 states. AEP ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the U.S. AEP also owns the nation’s largest electricity transmission system, a nearly 39,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined. AEP’s transmission system directly or indirectly serves about 10 percent of the electricity demand in the Eastern Interconnection, the interconnected transmission system that covers 38 eastern and central U.S. states and eastern Canada, and approximately 11 percent of the electricity demand in ERCOT, the transmission system that covers much of Texas. AEP’s utility units operate as AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana and east Texas). AEP’s headquarters are in Columbus, Ohio.
This report made by American Electric Power contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP believes that its expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: Electric load and customer growth; weather conditions, including storms; available sources and costs of, and transportation for, fuels and the creditworthiness of fuel suppliers and transporters; availability of generating capacity and the performance of AEP’s generating plants; the ability to recover regulatory assets and stranded costs in connection with deregulation; the ability to recover increases in fuel and other energy costs through regulated or competitive electric rates; the ability to build or acquire generating capacity when needed at acceptable prices and terms and to recover those costs through applicable rate cases; new legislation, litigation and government regulation including requirements for reduced emissions of sulfur, nitrogen, mercury, carbon and other substances; timing and resolution of pending and future rate cases, negotiations and other regulatory decisions (including rate or other recovery for new investments, transmission service and environmental compliance); resolution of litigation (including pending Clean Air Act enforcement actions and disputes arising from the bankruptcy of Enron Corp.); AEP’s ability to constrain its operation and maintenance costs; AEP’s ability to sell assets at acceptable prices and on other acceptable terms, including rights to share in earnings derived from the assets subsequent to their sale; the economic climate and growth in its service territory and changes in market demand and demographic patterns; inflationary trends; its ability to develop and execute a strategy based on a view regarding prices of electricity, natural gas and other energy-related commodities; changes in the creditworthiness and number of participants in the energy trading market; changes in the financial markets, particularly those affecting the availability of capital and AEP’s ability to refinance existing debt at attractive rates; actions of rating agencies, including changes in the ratings of debt; volatility and changes in markets for electricity, natural gas and other energy-related commodities; changes in utility regulation, including membership and integration into regional transmission structures; accounting pronouncements periodically issued by accounting standard-setting bodies; the performance of AEP’s pension and other postretirement benefit plans; prices for power that AEP generates and sells at wholesale; changes in technology, particularly with respect to new, developing or alternative sources of generation and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes and other catastrophic events.