The agreement would require AEP Ohio to sign an eight-year power purchase agreement, ending May 31, 2024, for the capacity, energy and ancillary service output of AEP’s 2,671-MW ownership share of nine generating units and AEP Ohio’s 423-MW share of Ohio Valley Electric Corp.’s generation. The nine generating units include Cardinal 1, Conesville 4-6, Stuart 1-4 and Zimmer 1. The agreement includes significant environmental improvements to the units, including converting Conesville units 5 and 6 to co-fire natural gas by Dec. 31, 2017, subject to regulatory approval; and retiring, refueling or repowering Conesville 5 & 6 and Cardinal 1 to use only natural gas by the end of 2029 and 2030, respectively. Eleven parties, including the Sierra Club, Ohio Energy Group and the Mid-Atlantic Renewable Energy Coalition, will sign or not oppose the agreement.
AEP Ohio has committed to develop at least 900 MW of wind and solar energy projects in Ohio over the next five years, continue to support energy efficiency programs, begin grid modernization efforts, and provide up to $100 million in customer credits during the term of the agreement. PUCO is expected to rule on the agreement in 2016.
FirstEnergy (NYSE: FE) signed a similar settlement agreement with PUCO earlier in December that outlines an eight-year rate provision associated with a power purchase agreement that includes the Davis-Besse Nuclear Power Station, the coal-fired W.H. Sammis plant and a portion of the output of Ohio Valley Electric Corp. units in Ohio and Indiana.
While AEP and FirstEnergy say the agreements will result in slight increases in power prices for customers, Dynegy (NYSE: DYN) President and CEO Robert Flexon has spoken publicly against both, saying that AEP was just awarded $1.2 billion in the recent PJM Capacity Auction, and that all of its Ohio generating plants are required to run through May 31, 2019, even without the PPA.
“Dynegy will continue to fight for market-based policies that treat all forms of power generation equally through advocacy and litigation, if necessary, to prohibit these power purchase agreements from being enacted," said Robert Flexon, president and CEO of Dynegy. "Public policy should always put the interests of Ohioans first, not those of AEP shareholders. We continue to strongly encourage the PUCO commissioners to oppose and vote down this adverse anti-market public policy.”
Dynegy co-owns the Conesville, Stuart and Zimmer plants covered in AEP's PPA, but will not receive any of the revenues.