AEP Ohio agrees to reduced $295M distribution rate increase

AEP Ohio has agreed to cut its proposed increase in electric distribution rates to about $295 million as part of a settlement filed with state regulators.

AEP Ohio, the trade name of Ohio Power Co., in June 2020 proposed a $402.1 million base rate increase premised upon a 10.15% return on equity and a 7.9% rate of return on a rate base valued at $3.105 billion.

The American Electric Power Co. Inc. subsidiary on March 12 filed a joint stipulation with the Public Utilities Commission of Ohio (dockets 20-585-EL-AIR, 20-586-EL-ATA, and 20-587-EL-AAM) seeking a $295 million increase in its revenue requirement.

AEP Ohio and parties that signed the settlement also agreed to an overall rate of return of 7.28% and an ROE of 9.7%. The utility would maintain the capital structure of 45.57% debt and 54.43% equity proposed in its original application.

AEP Ohio also agreed to revenue caps on its distribution investment rider of $57 million in 2021; $91 million in 2022, with the potential to be increased to $96 million if certain reliability standards are met; and $116 million in 2023, with the potential to be increased to as much as $126 million based on reliability benchmarks.

Separately, AEP Ohio agreed to a nearly $154 million cap on its enhanced service reliability rider largely consisting of its vegetation management program.

The company will also withdraw its demand-side management proposal.

AEP Ohio's total base distribution revenue requirement under the stipulation is about $955.1 million, reduced from $1.066 billion.

In addition to AEP Ohio, the agreement is signed by several intervenors, including the staff of the PUCO, the Ohio Energy Group, Ohio Manufacturers' Association Energy Group and the Office of the Ohio Consumers' Counsel.

The PUCO staff in November 2020 recommended state regulators slash AEP Ohio's request to a revenue increase in the range of $237.2 million to $257.7 million with a rate of return in the range of 7.15% to 7.70%. The staff recommended an ROE in the range of 8.76% to 9.78%.