February 1, 2013

Update:  On January 30, 2013, the PUCO issued its decision on the various petitions for rehearing on the AEP-Ohio ESP case. The PUCO’s original decision on AEP-Ohio’s application was issued on August 8, 2012. The OMAEG and numerous other parties filed applications for rehearing contesting several and various portions of PUCO’s August 8, 2012 order. Below is a summary of the PUCO’s Order regarding the various issues raised.

1. 12% Rate Cap. OMAEG and others requested rehearing and clarification on PUCO’s order capping rate increases at 12%. PUCO granted OMAEG’s request and clarified that the 12% cost cap calculation includes the Retail Stability Rider (RSR), Distribution Investment Rider (DIR), Pool Termination Rider (PTR) and Generation Resource Rider (GRR). In addition, the 12% rate cap applies throughout the entire term of the ESP. AEP was provided 90 days to implement a system in its customer billing system to account for the 12% rate cap. AEP was further directed to update its bill format to include a customer notification alert if a customer’s rate increases by more than 12% and indicate that the bill amount has been decreased automatically in accordance with the rate cap.
2. Other Items Granted Rehearing. While the PUCO denied most requests for rehearing, it did grant rehearing and issued clarifications on the following requests:
   1. Fuel Adjustment Clause. PUCO clarified that it did not intend to establish June 2013 as the date by which the FAC rates of each service zone would be merged and granted AEP’s request to facilitate a final reconciliation and true-up of the FAC upon termination of the FAC rates.
   2. CRES Provider Issues. PUCO found that AEP’s switching rules, charges, and minimum stay provisions are inconsistent with the state’s objectives. AEP was directed to eliminate its minimum stay and notice provisions effective January 1, 2014.  PUCO also reduced AEP’s switching fee from $10.00 to $5.00, which CRES suppliers may pay for the customer.
   3. Distribution Investment Rider (DIR). The PUCO granted AEP’s request to facilitate a final reconciliation and true-up of the DIR at the end of the ESP.
   4. gridSMART. PUCO directed AEP to make a filing with the PUCO for the review and reconciliation of the final year of Phase I gridSMART rider within 90 days after the expiration of this ESP 2.
   5. Storm Damage Recovery Mechanism. PUCO revised the process for filing for storm damage recovery to allow AEP to amend its filing to include all incurred costs after 30 days of the December 31 filing.
   6. Pool Modification Rider/PTR. PUCO ordered that the termination of the Pool Agreement is a pre-requisite to AEP’s transition to full structural corporate separation.
   7. Pollution Control Revenue Bonds. Because of the PUCO’s decision in the Corporate Separation Case, the 90-day filing requirement contained in PUCO’s original order is no longer necessary.

    

3. Denial of Remaining Requests for Rehearing. The PUCO denied all other requests for rehearing, including the following raised by OMAEG:
   1. Statutory Test. OMAEG argued that the PUCO improperly conducted the statutory price test by only considering the time period between June 1, 2013 and May 31, 2015.
   2. Retail Stability Rider (RSR). OMAEG argued that the deferral contained within the RSR is unlawful per ORC 4928.144, and even if the RSR is justified, the PUCO overestimated the value of RSR to $508 million.

Based upon the PUCO’s denial of numerous party arguments, and simple clarification of the items granted, parties now have sixty (60) days to appeal the PUCO’s decision to the Ohio Supreme Court, but are limited to specific issues argued on rehearing.