Duke Energy Ohio wins approval for new electric power plant

Families, businesses and communities served by Duke Energy Ohio will continue to benefit from affordable and reliable electric service. This is a result of the company's new Electric Security Plan, which was recently modified and approved by the Public Utilities Commission of Ohio (PUCO).

In Ohio, an Electric Security Plan is an electric utility's plan for the supply and pricing of power generation service for customers who do not choose a competitive retail electric service provider. The PUCO's ruling, which was issued on April 2, 2015, directs Duke Energy Ohio to move forward with implementing its new plan for three years, beginning on June 1, 2015. The company's current plan went into effect on Jan. 1, 2012, and is set to expire on May 31, 2015.

In its plan application, Duke Energy Ohio proposed using competitive auctions to acquire electricity for its customers who do not choose a provider to supply their generation. This is the same process that the company has followed under its current plan. Duke Energy Ohio plans its next auction in May.

In addition to setting guidelines for the company's electricity procurement, the new plan creates two new riders, which are line items added to utility bills for dedicated purposes.

The Distribution Capital Investment Rider gives Duke Energy Ohio the ability to proactively replace aging infrastructure in order to improve the reliability, safety and efficiency of its electric distribution system, which is the backbone for how the company delivers electricity to customers.

Duke Energy Ohio also received approval for the Distribution Storm Rider, which will track ongoing, annual expenses for restoring power following large-scale storms and natural disasters.

In its original application, Duke Energy Ohio proposed the Price Stabilization Rider as a way to provide wholesale market rate stabilization to customers as additional power plants in our region are retired in the coming years — a trend that experts project is likely to increase electricity costs.

The company recommended using its 9 percent entitlement to the power plants owned by the Ohio Valley Electric Corp. as a hedge against volatile wholesale market prices. OVEC is a joint venture initially formed to supply power to a federal government-owned uranium enrichment plant in Portsmouth, Ohio. After the contract with the federal government ended, the generating capacity and output from OVEC's two power plants has been made available to its sponsoring companies.

Among other details, Duke Energy Ohio proposed in its original application to pass on to customers all of the net revenues from the company's entitlement in OVEC's generation.

The PUCO, in its approval of the modified plan, recognized that uncertainty is expected in the wholesale electricity markets due to future market reform and pending litigation and environmental regulations. The PUCO also agreed with Duke Energy Ohio that a properly structured rider could mitigate wholesale market price volatility. In its order, the PUCO denied the company's specific OVEC proposal, but created a placeholder for the rider that allows Duke Energy Ohio to submit additional information in an effort to request recovery in the future.

As stated, Duke Energy Ohio will begin planning for a May auction to acquire electricity for its customers. The company will also continue to evaluate the PUCO decision in order to gain a clearer understanding of the commissioners' opinions, the potential impact on customers and plan the company's next steps. Duke Energy Ohio and other interested parties retain the right to file applications for rehearing, if they so choose, until early May.

Duke Energy Ohio/Kentucky's operations provide electric service to about 840,000 residential, commercial and industrial customers in a 3,000-square-mile service area and natural gas service to about 500,000 customers.

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