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AEP Ohio reaches settlement in next phase of smart grid plan

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Essential Energy Insights - January 2021


AEP Ohio reaches settlement in next phase of smart grid plan

AEP Ohiowill finally move forward with the delayed second phase of its smart grid programas part of an agreement reached with the staff of the Public Utilities Commissionof Ohio and other intervenors.

The utility filed a plan inSeptember 2013 to expand its gridSMART project to more communities. Under the secondphase of the program, the company said it planned to install advanced metering infrastructurefor approximately 894,000 customers, use distribution automation circuit reconfiguration(DACR) to improve the reliability of 250 circuits, and improve 80 distribution circuitsthrough volt var optimization, or VVO.

AEP Ohio,the trade name of Ohio Power Co.,began smart meter installationsin 2010 and said it will have installed more than 1 million AMI meters upon completionof the program. (Case No. 13-1939-EL-RDR)

The secondphase, however, was seemingly on hold until AEP Ohio filed a settlement with PUCO in December 2015 tied to itspower purchase agreement and rate rider for several coal plants.

As partof this agreement, approved by PUCO on March 31 (Case Nos. 14-1693-EL-RDR, 14-1694-EL-AAM),the utility agreed to deploy 160 circuits of VVO technology with costs to be recoveredunder the gridSmart Phase II rider with no shared savings or incentive ROE. AEPOhio also agreed to advance its energy efficiency and peak demand charge plan inorder to achieve an energy savings goal of 1.33% annually and a demand reductiongoal of 0.75% annually by the end of the 2017-2019 planning period.

If thecontroversial PPA agreement is eventually disallowed, AEP Ohio will make a $20 millionrecoverable capital investment in VVO technology.

The settlementin the smart grid expansion filed April 7 allows AEP Ohio to move forward with thedeployment of AMI meters and DACR while it finalizes engineering feasibility andselection studies geared toward maximum customer and company benefits. In addition,AEP Ohio must work on developing the technology in order to provide customers andcompetitive retail electric service providers with interval energy data.

The filingnotes that deployment of the AMI meters is expected to take approximately four yearsfrom approval of the stipulation, with the DACR deployment expected to take approximatelysix years.

AEP Ohioalso will conduct a full-system feasibility study "to determine the full extentof cost justified future possible deployments of AMI, DACR and VVO" with anyadditional deployments of smart grid technology to be outlined in a potential Phase3 rider filing.

In addition,AEP Ohio will establish a gridSMART collaborative process to discuss benefit analysis,provide updates on deployment activity, annually report customer savings, discussaccess to interval data, and review performance and environmental metrics, amongother activities.

AEP Ohioagreed to work with PUCO staff and CRES providers on a time-of-use transition planwith costs associated with this plan and the interval data portal recovered throughthe gridSMART rider.

The Officeof the Ohio Consumers' Counsel did not sign on to the smart grid expansion settlementand explained in an April 11 letter to PUCO that it has concerns about the agreement.

"AEPOhio originally proposed, in its application, that customers pay approximately $250,000,000for deployment of phase 2 of its gridSMART program. The settlement contains evenmore projects, some of which are not even true smart grid projects," the OhioConsumers' Counsel wrote in its letter. "And the additional projects will furtherincrease the amount customers will pay for the smart grid. The total cost of theprojects is not even included in the settlement, and thus the agreement's totalfinancial impact on customers is not known."

The utilityin 2013 estimated annual savings from the program of $6 million to $7 million eventually.In its original filing, AEP Ohio estimated $427,000 in total capital cost per deployedDACR circuit through the life of the technology. AMI is estimated at $180 per installedmeter, and the utility estimates VVO costs at $250,000 per deployed circuit throughthe life of the technology.

The OhioConsumers' Counsel said it takes issue with AEP Ohio's request for an expeditedschedule in the case.

"Thestipulators have taken approximately three years to reach an agreement, althoughthe process included several long periods of time when no formal negotiations occurred,"the letter states. "As a matter of fair PUCO processes, AEP Ohio's timelineshould not become [Ohio Consumers' Counsel]'s problem for consumer advocacy. Therewill need to be considerable discovery and analysis of the projects and consumercosts associated with the settlement."