As we have seen, AEP’s power plant shell game in WV is directly connected to the company’s transfer of 50% of the company’s Mitchell plant, located near Moundsville, WV, from AEP subsidiary Ohio Power to AEP subsidiary Kentucky Power. We have also seen that AEP adjusted that share down from 80%, not based on any need for power in WV, but because they were forced to close two expensive and obsolete coal burning units at AEP’s plant at Big Sandy, KY. This case is closely connected to a similar case at the WV PSC, because AEP wants to sell the other half of the Mitchell plant to Appalachian Power, its WV subsidiary.
On May 28, AEP filed a memorandum of understanding at the KY PSC asking for approval of a settlement in the case concerning the transfer of half of the Mitchell plant to Kentucky Power.
The settlement approves the transfer but requires the following:
9. Effective June 1,2015, the Company will increase the availability of Tariff C.S.-I.R.P. to 75,000 kW. Further, effective June 1,2015, the Company will offer credits under Tariff C.S.-I.R.P. of $3.68 /kW/month for interruptible load which qualifies under PJM’s rules as capacity for the purposes of the Company’s FRR obligation. This interruptible service will be consistent with PJM’s Limited Demand Response, Emergency – Capacity Only Program, subject to any limitations on the availability of that Program by PJM. If insufficient MW s are available for PJM enrollment by Kentucky Power, the Company shall offer to substitute one of the other PJM Emergency Demand Response Programs that is available. To be eligible for the credit, customers must have load over one MW at a single site and commit to a minimum 5-year contract term. Any such credits will be collected through the newly-established Purchased Power Clause to be implemented pursuant to Paragraph 15 of this Memorandum of Understanding.
12. The Company agrees to institute a new two-year Demand-Side Management (“DSM”) program to help fund energy management programs for schools affected by KRS 160.325. The mmual funding level will be $75,000 in 2014 and $50,000 in 2015. Further, Kentucky Power agrees to increase its aggregate annual spending on cost-effective DSM and energy efficiency measures through Commission-approved DSM programs to $4 million in 2014; $5 million in 2015; and $6 million in 2016,2017, and 2018. The Company also will seek to maintain a minimum spending level of $6 million for Commission-·approved cost-effective DSM and energy efficiency measures in years after 2018. The Sierra Club may pmiicipate in the Company’s DSM collaborative and receive the Company’s periodic reports and evaluations of its DSM programs.
19. The Company agrees to issue a non-binding Request For Proposals for 100 MW of wind power for the purpose of incorporating the results of the RFP in its Integrated Resource Plan that will be filed in December 2013.
Note references to Kentucky Power’s Integrated Resource Plan. Yes, our neighbor Kentucky, a major coal producing state, requires its utilities to file Integrated Resource Plans. The WV Legislature should take notice.
While the settlement allows the Mitchell transfer to Kentucky Power to go through, it also requires the AEP company to institute significant bill cutting opportunities to Kentucky Power customers by way of new demand management programs and energy efficiency investments. The interruptible load program, in particular, will provide benefits for KY rate payers, because customers can get direct credits on their bills for signing up for the program.
I have not been following the KY case closely, but it is likely that, once the demand management and efficiency programs are in place, and Kentucky Power buys the 100 MW of wind power capacity, the purchase of the Mitchell plant share will result in an excess of capacity for the company. The settlement is a step forward because:
- The effectiveness of demand side resources will be clearly demonstrated in the coming years, now that Kentucky Power has taken the first step.
- KY has integrated resource planning, so that generating resources can be adjusted downward in future years as demand side resources reduce the need for future capacity, and are considered on an equal footing with generating resources.
- The KY settlement has demonstrated that AEP’s world will not end if they agree to effectively implement real least cost solutions to their capacity shortages.
AEP needs to get real in its negotiations with WV customers. They made initial steps in KY, now is the time to move forward in WV.