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PJM completes Ohio Valley Electric Corp. integration

Highlights

An issue with day-ahead clearing prices has been resolved

Integration creates a new PJM transmission zone

New York — The PJM Interconnection integrated the Ohio Valley Electric Corporation as a new transmission zone within PJM at midnight Saturday, which includes 2,200 MW of coal-fired generation capacity along with 705 miles of 345-kilovolt transmission lines, the grid operator said Monday.

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"PJM determined that OVEC met the membership requirements outlined in the PJM Operating Agreement and that its integration would not cause any reliability challenges for PJM," the grid operator said in a statement Monday.

PRICING ISSUE

PJM also notified stakeholders Monday about "an issue" with posting the OVEC Residual Aggregate locational marginal price component of its posted day-ahead clearing prices for December 2, according to an email.

The issue from Saturday has been resolved, PJM spokesman Jeff Fields said in an email. PJM is still investigating the cause of the problem and will have additional information to post tomorrow, Shields said.

OVEC and its subsidiary Indiana-Kentucky Electric were formed in 1952 to provide power to uranium enrichment facilities near Portsmouth, Ohio, owned by the Atomic Energy Commission, a US Department of Energy predecessor.

OVEC owns and operates two coal-fired power plants, the 1,300-MW Clifty Creek Generating Station located along the Ohio River in Jefferson County, Indiana; and the 1,086-MW Kyger Creek Generating Station located on the Ohio River in Gallia County, Ohio.

Brian Chisling, OVEC's corporate attorney said during a November 2017 PJM Markets and Reliability Committee meeting that the company has no plans to retire the units.

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OVEC sells the full volume of its power output at cost to its eight electric utility and cooperative owners, the largest being American Electric Power, Buckeye Power and Duke Energy Ohio, with roughly 40%, 18% and 9% respective equity interests.

The US Federal Energy Regulatory Commission approved the PJM tariff changes associated with the OVEC integration in February (ER18-459 and ER18-460). OVEC sells power to its offtakers through an inter-company power agreement that constitutes a commission-filed, cost-based power sales agreement that will terminate on June 30, 2040, according to FERC's approval order.

STAKEHOLDER CONCERNS

Some parties raised concerns during the stakeholder process regarding various ways in which the OVEC integration could increase costs for PJM members or their customers. For example, American Municipal Power argued in a FERC filing that PJM failed to demonstrate that the benefits of OVEC's integration outweigh the associated costs to wholesale transmission customers.

Additionally, Ohio Consumers' Counsel told FERC that OVEC's generating units, which are eligible for subsidies via Ohio commission-approved retail rate riders, would "distort PJM's wholesale capacity and energy markets to the detriment of consumers."

PJM's independent market monitor, Monitoring Analytics, also submitted a filing to FERC that raised concerns regarding whether eligibility for Reliability Must Run status is appropriate for OVEC's generating units. RMR agreements are cost-of-service contracts that can be reached when a power plant owner wants to shut a facility that the grid operator determines is needed for reliability.

FERC, however, found the filing parties complied with the requirements set forth in the relevant agreements and the protests raised by AMP and the IMM were beyond the scope of the proceeding.

"As OVEC has not submitted a deactivation notice for either of OVEC's generation facilities, concerns regarding Reliability Must Run contracts are speculative at this time," FERC said.

The federal regulators also found the application of retail rate riders to OVEC's generating units had no relation to whether the criteria for integrating transmission facilities into PJM's system had been met, so FERC rejected the Ohio Consumers Counsel's arguments as beyond the proceeding's scope.

-- Jared Anderson, jared.anderson@spglobal.com

-- Edited by Matt Eversman, newsdesk@spglobal.com