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Diverse opponents challenge AEP justification for renewable energy in Ohio

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Diverse opponents challenge AEP justification for renewable energy in Ohio

American Electric Power Co. Inc. has attracted broad opposition to building out wind and solar projects in Ohio as the utility increasingly moves away from coal-fired power generation.

When AEP's Ohio Power Co. subsidiary asked the Public Utilities Commission of Ohio to declare a need for new investment in renewable energy, objectors included Ohio coal producers, a state consumer advocate, a manufacturers' group and even an energy company's solar subsidiary.

Ohio Power, which does business as AEP Ohio, wants to add 900 MW of wind and solar generation over the next five years in order to satisfy a 2015 settlement agreement with the Sierra Club.

Opponents of the plan say the designation could allow AEP Ohio to charge customers for its generation instead of relying on the competitive retail market.

"The crux of AEP Ohio's [proposal] is to request authorization to shift the costs of unnecessary renewable energy generation facilities to captive ratepayers," said Michael Cope, president of the Ohio Coal Association, in testimony to the commission. "This shifting of anticompetitive subsidies directly contravenes the seminal tenets of Ohio competitive retail electric service policy."

Richard Brown, principal engineer at consulting firm Exponent Inc., also submitted testimony on behalf of the coal association stating AEP was essentially seeking a subsidy for renewable energy projects the public does not need. The new renewable generation would increase costs for consumers and lower profits for unsubsidized energy sources without eliminating the need for new traditional sources of power, he testified. The Ohio Manufacturers' Association and other groups made similar statements to the commission.

"If the AEP organization believes it makes economic sense to invest in 900 MW of renewable generation, it is free to make that investment with shareholder funds, just like any other project developer," said Frank Lacey, founding partner and president of Electric Advisors Consulting LLC, a firm testifying on behalf of electricity and natural gas retailer Direct Energy LP. "AEP Ohio is not really seeking permission to build these solar facilities; it is seeking approval to recover the cost of these projects from ratepayers."

Mizuho Securities USA LLC recently downgraded AEP's valuation citing, among other issues, the opposition to the Ohio projects.

Katie Rever, director of legislative and regulatory affairs for Interstate Gas Supply Inc., said in testimony "primarily supporting" the company's IGS Solar LLC subsidiary that the commission should not take actions to benefit "a select set of preferred companies."

"The most effective way to deploy solar assets is through pro-competitive solar policies, not through utility-subsidized solar generation as AEP is proposing," Rever said.

Supporters of the proposal, including environmental groups such as the Sierra Club and the Natural Resources Defense Council, said the region is behind others in renewable energy deployment.

"Many customers who want renewable energy may not have the appropriate credit ratings, experience, or access to capital to develop renewable energy projects on their own or to enter into long-term contracts to support renewable development," said Michael Goggin, vice president of Grid Strategies LLC, in testimony on behalf of the Sierra Club. "Ohio would benefit from AEP Ohio developing renewable energy projects because the utility can take advantage of economies of scale, low-cost financing, and development expertise that some customers cannot take advantage of."

The projects could also provide long-term rate stability, cleaner air and water and local economic impact while having a minimum anti-competitive effect, said Bruce Burcat, the executive director of the Mid-Atlantic Renewable Energy Coalition.

A study by Navigant Consulting, commissioned by AEP, found that a "strong majority" of the utility's customers believe it is important for AEP to increase its portfolio of renewable energy. The company estimates that developing wind and solar resources in the state could ultimately help to lower transmission rates and reduce the cost of energy by "several million dollars a year."

However, opponents of the proposal said AEP is incorrectly representing its customers' preferences as a necessity.

Noah Dormady, an Ohio State University public policy professor testifying for the state's Consumers' Counsel, said AEP's survey was generally flawed in measuring its customers' "true attitudes, preferences and especially willingness to pay for renewable energy."