Workshop CC - Ohio Power - AEP Ohio Rates and Tariffs · PDF fileWorkshop CC Ohio Power...

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Workshop CC

Ohio Power Company (AEP Ohio): Current Electric Rates & Tariffs, Potential Impacts from the ESP Extension & Extracting Value …

Shopping Opportunities, Capacity Peak Shaving and Demand Response

Opportunities and Ohio Energy Efficiency & Peak Demand Reduction

Mandates Update & Opportunities

Wednesday, February 22, 2017 11:15 a.m. to 12:30 p.m.

Biographical Information

Andy McCabe, Manager, Business Programs, EE/PDR, AEP Ohio 850 Tech Center Drive, Gahanna, OH 43230 614.883.7876 [email protected]

Andrew McCabe manages Energy Efficiency and Peak Demand Reduction Programs for the commercial and industrial customers served by AEP Ohio. He has a BSEE from Polytechnic Institute of Brooklyn and an MSEE from Polytechnic Institute of New York. In his prior experience, Andrew worked in engineering for AEP Transmission, marketing and sales management for AEG Electric Power Systems, GEC Alsthom, and Alstom, and commercial management with Areva T&D. Andrew has published eight papers on transmission technology and looks forward to making contributions in the energy efficiency business.

Andrea E. Moore, Director – Regulatory Services, AEP Ohio 850 Tech Center Drive Gahanna, Ohio 43230

[email protected]

Andrea Moore is the Director of Regulatory Services for Ohio Power Company (AEP Ohio) in Gahanna, Ohio. In this role she directs the preparation and presentation of regulatory matters to management as well as regulatory bodies. She plans, organizes and directs the development and support of pricing structures, rider and true-up filings, tariff maintenance, pilot programs, special contracts and other pricing initiatives. Prior to joining AEP, Andrea was a Staff Accountant for Mills Pride. Andrea received a Bachelor of Science degree in accounting with finance minor from The University of Rio Grande. She also obtained a Master of Business Administration degree from Franklin University.

Joseph G. Bowser, Technical Specialist, McNees Wallace & Nurick LLC 21 East State Street 17th Floor, Columbus, Ohio 43215

614-719-2852 [email protected]

Joe Bowser is a Technical Specialist in the Columbus, Ohio office of McNees Wallace & Nurick LLC. In this role he focuses on helping clients address issues that affect the price and availability of utility services. As part of his responsibilities, he also provides clients with assistance in evaluating and acting upon opportunities to secure value for their demand response and other capabilities in the base residual auction (“BRA”) and incremental auctions conducted by PJM Interconnection LLC (“PJM”) as part of the Reliability Pricing Model (“RPM”). Prior to joining McNees Wallace & Nurick LLC, Joe worked with the Ohio Consumers’ Counsel as Director of Analytical Services. There he managed the analysis of financial, accounting, and ratemaking issues associated with utility regulatory filings, and assisted in policy development and strategy. Joe also spent ten years at Northeast Utilities, where he held positions in the Regulatory Planning and Accounting departments of the company. He provided litigation support in regulatory hearings and assisted in the preparation of the financial/technical documents filed with state and federal regulatory commissions. Joe began his career with the Federal Energy Regulatory Commission (FERC), where he lead and conducted audits of gas and electric utilities in the Eastern and Midwestern regions of the United States. Joe is a member of the American Institute of Certified Public Accountants, and received a Bachelor of Science degree in Accounting from Clarion State College. He also obtained a Master of Science degree in Finance from Rensselaer Polytechnic Institute.

Ohio Energy Efficiency & Peak Demand Updates –AEP Ohio

21st Annual Ohio Energy Management Conference

EE Programs for Industrial Customers• Efficient Products for Business (Prescriptive)-Lighting,

Variable Speed Drives…• Process Efficiency (Custom)- Process Improvements• Self-Direct-Mercantile; 3 year look-back on projects• Bid4Efficiency-Energy Auction to fund large projects• Continuous Energy Improvement- Low cost/ no cost

operational energy improvements• New Construction-New facilities/Major renovation• Data Center-Upgrade of IT/cooling infrastructure• CHP/WER- Combined Heat and Power, Waste Energy

Recovery

Bid4Efficiency

• Energy Auction for market based incentives on large projects

• Most projects are Custom industrial process improvement

• Auction projects completed in 2016 produced 44+ GWh in savings*

*Preliminary results

2016 CEI Results

‐ Manufacturers ‐ Hospitals ‐ Universities

Cohorts 1‐437 Companies

54 GWh

Cohorts 5‐863 Companies

54 GWh

Projecting 108 GWh Savings

100 Total Participants

First 4 Cohorts - Savings Trend

* 37 companies

Energy Model

Where Does CEI Fit?• An innovative approach to achieve low/no

cost energy savings

Capital intensive for customers

“One and Done” concept

Traditional Programs Holistic

overview of energy savings opportunities

Focused on operations and maintenance activities

SEM Program

Catalyst for Capital Projects

Building an Energy Team

Engaging Employees

Identifying Opportunities

Measuring the Results

25% increase in capital projects for SEM participants

Improved Customer Satisfaction• Utility Account Executives fully involved

– Positive interaction with SEM participants– Technical training opportunity (10-12 workshops)– Connect with all aspects of customer

organization• Peer networking

– Collaborative learning and sharing of ideas• Energy Model – a popular, versatile tool

– Statistical regression model to track site-wide energy usage

CEI Conclusions• Manufacturers, universities, and hospitals

increased savings through the AEP Ohio CEI and Custom programs in 2016

• CEI Energy Model provides a valuable graphic showing overall plant performance

• Great opportunity for operational energy savings for manufacturers

• Adding 8 more cohorts 2017-2020

E-Motor Rewind Pilot• Large motors above 100HP are

frequently rewound on failure instead of replacement

• Motor rewinds can lose up to 1.5% efficiency if not rewound with efficiency requirements

• Pilot – Advanced Energy certified motor rewind facilities assuring post-repair efficiency

E-Motor Rewind PilotProgram Advantages• Rewind less expensive than purchase of new large

motors• Cooler operation of efficient rewind results in longer life• Estimated annual energy savings from 1,974 kWh to

116,000 kWh depending on size and hours of operation• Motors from 100HP to 5000HP • Prescriptive incentives – Customer - $2/HP, Service

Facility - $1/HP

E-Motor Rewind PilotCertified Facilities• Hannon Electric – Canton• Electric Motor &Service – Zanesville• Kentucky Service Company - Lexington

CHP/WER

• Co-generation strategy involving generation of electricity and useful heat

• Typical customers: Industrial, Institutional & Healthcare

• Incentive payment based on measured production; kWh generated

• Overall system efficiency of 60% or greater• Thermal efficiency of 20% or greater

Source:Energy.gov

What is Opt Out • Beginning January 1, 2017 eligible customers

can opt out of the EE/PDR rider• Customers cannot participate in any energy

efficiency programs while opted out• Opt out is a minimum of 3 years – you must

give 12 months notice to opt back in

Who qualifies?1. The customer receives service above the primary voltage level as determined by the utility’s tariff classification

or…. 2. Commercial and industrial customer to which both of the following apply: The customer receives electricity through a meter of an end user

or through more than one meter at a single location in a quantity that exceeds 45 million kWh of electricity for the preceding calendar year.

The customer has made a written request for registration as a self-assessing purchaser pursuant to section 5727.81 of the Revised Code.

EE Report cards

available

FAQ available

Process Step 1- Contact AEP Ohio Energy Efficiency program

and/or AEP Ohio account representative to discuss your options so you can make an educated decision on your company’s best path.

Step 2 -Complete the AEP Ohio Energy Efficiency Notice of Intent to Opt Out following the instructions on the form. The form is to be reviewed by AEP Ohio to validate accounts available for opt out prior to verification (notarization) and prior to filing with the Public Utilities Commission and AEP Ohio.

Process (continued) Step 3 – within 60 days of the Opt Out date, customer

must submit an initial report to the staff of the public utilities commission. The report shall summarize the projects, actions, policies or practices that the customer may consider implementing, based on the customer’s cost-effective criteria, for the purpose of reducing energy intensity.

Step 4- at least once every twenty four months, prepare and submit, to the staff of the commission, an updated verified (notarized) report with the requirements given in Revised Code 4928.6616.

Contact Information• AEP Ohio Business Incentives

ProgramBusiness Outreach 614-610-9649 [email protected]

• AEP Ohio Notice of Intent to Opt Out– [email protected] or– Business Outreach 614-610-9649 or– AEP Ohio Customer Service Engineer

AEP Ohio Distribution Reliability and Technology

Programs

Overview of Technologies and Reliability Plans

• gridSMART Phase II – Case No. 13-1939-EL-RDR– Advanced Metering Infrastructure (AMI)– Distribution Automation Circuit Reconfiguration (DACR)– Volt Var Optimization (VVO)

• Electric Security Plan III (ESP III) Extension – Case No. 16-1852-EL-SSO

– Distribution Investment Rider (DIR)– Vegetation Management– Distribution Technology Plan

• Plug In Electric Vehicle Charging Stations• Microgrids• Smart Street Lighting• LED Street Lights• Next Generation Utility Communication System• Substation Security

gridSMART Phase II

Technologies

Advanced Metering Infrastructure (AMI)AMI Meters• 894,000 meters to be installed in over 30 communities• Rollout period of 4 years• Customer Option to Opt Out

– Opt out requires monthly manual meter reading fee of $24. AMI Benefits• Online availability of usage data

– Allow customers to better understand the quantity of usage as well as time of usage to better understand and reduce their usage, saving money

• Meters read Remotely and Securely– Remote meter reads means increased reliability through fewer bill estimates and

operational savings that will be returned to customers• More robust pricing options

– Customers will be able to participate in time-of-used programs• Power outage detection

– Smart meters can allow the Company to detect if a power outage is effecting one customer or the community. This will allow for quicker detection so service can be restored faster

Distribution Automation Circuit Reconfiguration (DACR)

DACR• DACR will be placed on approximately 250 distribution circuits

serving more than 330,000 customers• Circuits selected will provide the greatest efficiency in reducing

customer minutes of interruption

DACR Benefits• DACR for Phase II will provide up to 30 percent reduction in customer

minutes of interruption • Provides power outage data in real time allowing crews and

dispatchers to restore power more quickly

Volt Var Optimization

VVO• Install Volt Var on over 160 circuits serving approximately 230,000

customers• VVO allows the system to automatically receive voltage levels on

circuits and operate regulating devices which lowers energy

VVO Benefits• Previous installation of VVO has shown a 2 to 3 percent reduction in

energy and demand, lowering the end user consumption with nothing required by the customer, leading to bill savings

Phase II Investment & Rate Impacts

• AEP Ohio will invest approximately $516 million to deploy Phase II technologies over 7 years

• The typical bills shown are for each year. Years 4 -7 do not include the reduction in the project costs that will occur due to operational savings. These savings will be determined through an audit process and will reduce the total project cost once approved.

ESP III Extension Technologies and

Plans

Distribution Investment Plan• Continues the Company’s Comprehensive Reliability plan to continue to

replace aging infrastructure (DIR) in order to improve or maintain the reliability of our service to our customers.

– Distribution Investment Rider – the continuation of the DIR Plan will allow the Company to be proactive in asset replacement, avoiding outages by addressing aging infrastructure prior to power outages that impact reliability.

• Under the 2013 DIR work plan, – Avoided approximately 306 outages– Had the potential to avoid almost 30,983 outages, – Completed work on circuits that would potentially reduce total customer outage

minutes by 20,400.• Under the 2014 DIR work plan,

– Avoided approximately 816 outages– Had the potential to avoid almost 41,888 outages, – Completed work on circuits that would potentially reduce total customer outage

minutes by 31,200.

Vegetation Management Successes Since Inception• Invested more than $450 million to keep trees away from our 31,000

miles of overhead lines;• Implemented a four-year trim cycle of our lines;• Completed the first full trim cycle of all 31,000 miles in 2014 while

simultaneously trimming 6,817 miles into our second cycle;• Cleared nearly half our total line miles for the second time during

2014 and 2015;• Reduced outages caused by trees by 80 percent, thereby improving

customers’ service:During 2010 - 2,700 outages caused by trees inside our Rights-of-Way(“ROW”) versus during 2015 - 531 outages caused by trees inside our ROW.

Proposed DIR and Vegetation Management Spend

• DIR - $225M Each year 2018 through 2024 (Capital Spend)

• Incremental Vegetation Spend2018 2019 2020 2021 2022 2023 2024

O&M $26.5M $27.6M $28.8M $30.1M $31.4M $32.6M $34.0M

Capital $1.2M $1.3M $1.4M $1.5M $1.7M $1.8M $1.9M

Proposed Distribution Technology PlanTechnology Deployment Timeline Capital O&M

Electric Vehicle Chargers

250 Level 2 Public Smart Chargers, 25 DC Fast Chargers 1,000 Residential Chargers

4 years for Phase 1 $6.4M

$775,000 per year ongoing O&M

Microgrids 10 Microgrids4 years for Phase 1 $52M

$1.5 million per year ongoing O&M

Smart Lighting

202,000 smart lighting controls 1,000 LED replacements

4 Years for Phase 1 $30M

$2.1 million per year ongoing O&M

Next Generation Utility Communication System

Replacement of existing system 4 Years $69M

No incremental increase in ongoing O&M $1million

Distribution Substation Security Technology

Technology deployed in up to 100 critical substations

4 years for Phase 1 $30M

$400,000 per year ongoing O&M

AEP Ohio’s Commitment to Technology

• AEP Ohio is committed to using advanced technology to expand the services it provides its customers and to enhance its customers’ experience

• In addition, AEP Ohio is committed to support the success of the Smart Columbus challenge– In December 2015, the United States Department of

Transportation (“DOT”) announced a federal grant, the “Smart City Challenge,” to award $40 million to a single U.S. city to implement new technologies and innovative techniques to improve its transportation system.

– The DOT received seventy-eight applications from cities wishing to participate in the Smart City Challenge, and after narrowing the applications to seven finalists, the DOT selected Columbus, Ohio and the surrounding area as the winner on June 23, 2016.

Smart Columbus

• As explained by the Department of Transportation (DOT), the goals of Columbus’s winning Smart City proposal are to “demonstrate how advanced data and intelligent transportation systems (ITS) technologies and applications can be used to reduce congestion, keep travelers safe, use energy more efficiently, respond to climate change, both connect and create opportunities for underserved communities, and support economic vitality.” The Smart Columbus program is also intended to “provide safety improvements, enhance mobility, increase ladders of opportunity by incentivizing reinvestment in underserved communities, reduce energy usage, and address climate change.”

Detailed information about the Smart City Challenge can be found on the U.S. Department of Transportation’s website: https://www.transportation.gov/smartcity.

Plug-In Electric Vehicle Charging Stations

• A key factor to promote PEV adoption is increased investment in charging station infrastructure

• PEVs are estimated to emit approximately 60 percent of the CO2 emissions of internal combustion vehicles1

• PEVs can be expected to cost approximately $1.00 per gasoline-gallon equivalent in electricity costs, providing a significant boost in average incomes and a reduction in petroleum imports2

• AEP Ohio estimates that, at the conclusion of deployment, avoided greenhouse gases for the electric vehicle charging station component of the Plan will be approximately 10,283 Tons per year. There would also be avoided carbon monoxide, particulate matter, and other emissions, which have not been estimated at this time.

1U.S. Department of Energy, Alternative Fuels Data Center, Emissions from Hybrid and Plug-in Electric Vehicles (June 2016), available at http://www.afdc.energy.gov/vehicles/electric_emissions.php.2This assumes 290 watt-hours per mile, conventional vehicle mileage of 29 miles per gallon, and 12 cents per kilowatt-hour electricity cost. See Electric Power Research Institute, Total Cost of Ownership for Current Plug-in Electric Vehicles (2014), available at http://www.epri.com/abstracts/Pages/ProductAbstract.aspx?ProductId=000000003002004054.

Microgrids

• Microgrid implementation for critical community facilities– Police and Fire– Grocery and Gas– Social Service Agencies– Sewer and Water facilities

• Microgrid benefits– Improved resiliency and reliability for critical infrastructure– Reduced system peak demands– Integration of intermittent renewable generation– Clean energy generation and reduced emissions

• AEP Ohio estimates that, at the conclusion of deployment, avoided greenhouse gases for the microgrid component of the Plan will be approximately 3,176 Tons per year. There will also be some avoided sulfur dioxide, particulate matter, and other emissions, which have not been estimated at this time.

Smart Street Lighting

Benefits of Smart Lighting• Rapid Light Repair – Controls let Company know power is out sooner• Energy Saving through faster detection of day burners• Increased customer satisfaction and operational savings through few

call center requests• Increased efficiency on detecting reason for outage• Potential future use for dimming lights when not needed (the

Company will not utilize this immediately)• Faster response to lighting restoration• AEP Ohio estimates that, at the conclusion of deployment, avoided

greenhouse gases for the smart street lighting component of the Plan will be approximately 133 Tons per year. There will also be some avoided sulfur dioxide, particulate matter, and other emissions, which have not been estimated at this time.

Next Generation Utility Communication System

• Provide reliable voice communications in order to ensure the safe and efficient operation of the distribution grid by Company employees and contractors

• Field crews and personnel have the ability to initiate an emergency call for help

• NextGen UCS will provide coverage for more than 90% of AEP Ohio’s service territory.

Security for Distribution Substations

• AEP Ohio proposes to install modern intrusion deterrence and detection technology to protect critical distribution substations from theft and vandalism

• AEP Ohio has experienced more than 250 incidents over the last eight years of individuals scaling or cutting substation fences to steal copper wiring

• AEP Ohio has also experienced more than 50 additional acts of vandalism and other theft at its substations

• Over the last ten years,17 AEP Ohio customers have experienced nearly 17 million customer minutes of interruption (CMI) associated with vandalism and theft at distribution substations

Proposed ESP III Ext. Bill Impact Year 1

Household Current Proposed Change Tariff1,000 kWh usage $134 $135 1.2% R-R Bill2,000 kWh usage $254 $250 -1.8% R-R Bill4,000 kWh usage $495 $478 -3.5% R-R Bill

Small Business1,000 kW demand and 100,000 kWh usage $15,349 $15,353 0.0% GS-2 Primary1,000 kW demand and 350,000 kWh usage $33,108 $32,674 -1.3% GS-3 Primary

Industrial Business20,000 kW demand and 8 million kWh usage $552,042 $528,806 -4.2% GS-420,000 kW demand and 12 million kWh usage $791,094 $756,216 -4.4% GS-4

Household Current Proposed Change Tariff1,000 kWh usage $142 $143 1.1% RS Bill2,000 kWh usage $271 $266 -1.7% RS Bill4,000 kWh usage $527 $510 -3.2% RS Bill

Small Business1,000 kW demand and 100,000 kWh usage $16,933 $16,963 0.2% GS-2 Primary1,000 kW demand and 300,000 kWh usage $32,692 $32,370 -1.0% GS-2 Primary

Industrial Business20,000 kW demand and 8 million kWh usage $608,677 $585,416 -3.8% GS-4 Transmission20,000 kW demand and 12 million kWh usage $876,246 $841,343 -4.0% GS-4 Transmission

SSO Monthly Bills

Ohio Power Rate Zone

SSO Monthly Bills

Columbus Southern Power Rate Zone

This presentation is based on AEP Ohio’s understanding of the issues and rulings of current and prior cases before the Public Utilities Commission of Ohio, some of which may be subject to change or clarification. Further, the presentation is not attempting to address legal issues or impose any obligations on the Company that do not otherwise exist.

© 2017 McNees Wallace & Nurick LLC www.mcneeslaw.com

AEP-Ohio ESP III– Electric Rates & Tariffs, Shopping Opportunities for Customers, PJM Capacity Auctions

and Demand Response Update, Ohio Energy Efficiency & Peak Reduction Update, and CBP Auction Update

AEP-Ohio (“Ohio Power”)

21ST Annual Ohio Energy Management ConferenceFebruary 22, 2017

Joe Bowser - Technical Specialist

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Outline for Today’s Presentation

ESP III – June 2015 thru May 2018 Rider PPA Implemented ESP III – Extension Application PJM Capacity Auctions/Demand Response

Opportunities Generation Supply Shopping Energy Efficiency/Peak Demand Reduction Programs

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ESP III – Case No. 13-2385

ESP III covers the three-year period June 1, 2015 through May 31, 2018 Provides for full transition to market Standard Service Offer (SSO) rate will be based on competitive bid

auctions that procure energy and capacity for periods synchronized to the PJM planning year (June through May)

Company had requested Power Purchase Agreement (PPA) Rider – to include the net benefit or cost to AEP-Ohio from its 440 MW OVEC (Ohio Valley Electric Corporation) entitlement – PUCO approved the PPA rider but as a placeholder rider at a rate of zero – PUCO prescribed the issues to be addressed in a separate application, for it to consider allowing cost recovery – related case for other generation units – PPA Case 14-1693 –filed October 3, 2014

PPA Rider Update – Stipulation in PPA case (14-1693) dated 12/14/15 provided that a filing would be made by 4/30/2016 to extend the ESP III term through 5/31/2024 – (“ESP Extension”)

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Application for New Affiliate Power Purchase Agreement (PPA) (Case No. 14-1693-EL-RDR)

Application made in late 2014 To include the net benefit or cost to AEP-Ohio of these coal- fired

generating units: (approx. 2,670 MW)A. Cardinal 1B. Conesville 4, 5, and 6C. Zimmer 1D. Stuart 1, 2, 3, and 4

This case started out on a parallel path with the ESP III case, in which the net cost or benefit of OP’s OVEC entitlement was sought to be recovered through Rider PPA

OVEC entitlement was added to this case in the May 2015 Amended Application

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Affiliate PPA Agreement Continued . . . Joint stipulation filed in the case on December 14, 2015 Key points of the Joint Stipulation:PPA rider term of 8 years (through 5/31/2024) OVEC entitlement will be included in the PPAAnnual compliance reviews by the PUCOAs noted earlier, AEP to file for extension of ESP III term through 5/31/2014 PUCO order issued on March 31, 2016 approving the stipulation with modifications

In an Application for rehearing dated 5/2/16, AEP recommended PUCO adopt an OVEC-only PPA rider12/7/16 – AEP-Ohio filed OVEC-only Rider PPA rates to be effective January 1, 2017:

Secondary $0.0013858/kWhPrimary $0.0011781/kWhSub/Trans. $0.0009318/kWh

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ESP Extension Case (16-1852-EL-SSO)

Case filed in 2016 Would extend the current ESP term through May 2024. Request to extend the Interruptible Power Rider (IRP) for the full

term of the amended ESP (through May 31, 2024). The IRP would be available to current IRP tariff customers as well as 250MW of additional interruptible load. The application also requests that the IRP credit be increased from $8.21/KW-Month, the current rate, to $9/KW-Month starting June 2016.

Proposes to include a provision that would permit GS-3 and GS-4 customers with interval metering capability the opportunity to opt into a pilot mechanism under the BTCR (Basic Transmission Cost Rider) based on each eligible customer’s single annual transmission coincident peak demand.

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ESP Extension Case Continued. . . Implement bypassable recovery of AEP-Ohio’s interest in the Ohio

Valley Electric Corp. (“OVEC”) plants. Power would be dedicated to serve SSO customers.

Implement nonbypassable placeholder rider, the Renewable Generation Rider, that would allow AEP-Ohio to collect for the life of the plant its investment in renewable generation projects. Power from these renewable projects would be dedicated to customers.

Continue the nonbypassable Distribution Investment Rider (“DIR”) with increased annual caps on spending.

Continue nonbypassable Enhanced Service Reliability Rider (“ESRR”) to recover costs of vegetation management.

Continue nonbypassable gridSMART Rider. Extend the CBP process for SSO procurement.

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ESP Extension Case Continued. . . Implement new nonbypassable Distribution Technology Rider

(estimated costs at less than $10/month for non-residential customers).

Continue the distribution decoupling rider, the Pilot Throughput Balancing Adjustment Rider (“PTBAR”).

Implement new nonbypassable placeholder rider, the Sub-Metering Rider.

OTHER CHARGES Continue Energy Efficiency and Peak Demand Rider (“EE/PDR”). Continue Economic Development Rider (“EDR”). Implement bypassable charge to SSO customers, Competitive

Incentive Rider (“CIR”), and nonbypassable credit, SSO Credit Rider, to effectively reassign distribution costs to the SSO (proposed nonbypassable credit of $0.18/MWh for GS Primary, and $0.15/MWh for GS Sub/Trans).

No procedural schedule for processing the case has yet been issued

49


PJM Demand Response Programs

PJM permits demand resources to be counted like a capacity resource

Customers may commit their interruptible load into PJM’s emergency program

In PJM’s emergency program, customers receive payments for committing to reduce load if called upon by PJM to do so (because PJM is capacity short)

Through the 2017-18 PJM delivery year, the current demand response products will continue – these products are: 1)“Limited DR” Program, must be available from June through

September on weekdays - customer commits to being interrupted up to 60 hours max. per year, during as many as 10 separate events, with 2 hours’ advance notice

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New Capacity DR Programs Implemented by PJM

2) Extended Summer Demand Resource - available June thru October, and the following May. Provides for unlimited interruptions of up to 10 hours each, between the hours of 10:00 a.m. and 10:00 p.m.

3) Annual Demand Resource - available any day of the year for unlimited interruptions of up to 10 hours each; between the hours of 10:00 a.m. and 10:00 p.m. for June thru October, and the following May; and between the hours of 6:00 a.m. and 9:00 p.m. for November thru April

4) For the 2016-17 and 2017-18 delivery year there is also a new Capacity Performance (CP) demand response product – must be available any day of the year for unlimited interruptions during the same hours as the Annual product above. Non-compliance charge rates are generally higher than for the Annual product

51


PJM Demand Response Programs –Continued . . .

Beginning with the 2018-19 delivery year, demand response will be either CP or Base Capacity (BC). The BC product is similar to the current Limited DR product in that it must be available June through September, but on any day

2018-2019 Base Residual Auction clearing prices (August 2015):CP $164.77/MW-dayBC $149.98/MW-day

The current plan is that beginning with the 2020-2021 delivery year, all demand response must be CP, pending approval of PJM proposal to introduce a new summer DR product

Clearing Prices 2017-2018: CP $151.50/MW-day Limited $106.02/MW-day XS and Annual $120.00/MW-day

52


PJM Capacity/Demand Response Continued . . .

The 2019-2020 Base Residual Auction was held in May 2016

PJM also has Economic Load Reduction Programs (ELRP), that provide for compensation based on load reductions scheduled a day-ahead, or when dispatched by PJM

Demand resources may participate in PJM DR programs by utilizing a Curtailment Service Provider (CSP)

53

Clearing Prices: (2019-2020)Load $96.77/MW-dayCP $100.00/MW-dayBC $80.00/MW-day


2020-2021 BRA Auction

Next Base Residual Auction (2020-2021) will be held in May 2017

PJM has proposed a new summer period DR product Product availability – June thru Oct. and May DR would receive 6 months of capacity revenue Product similar to the current Extended Summer DR product

except the penalty structure would be like the CP product and the product only clears in the auctions if there are other winter resources/capability that are offered

54


Peak Shaving

Customers may be able to reduce their capacity costs by managing their Peak Load Contribution (PLC)

PLC is determined between June 1 and Sept. 30 of the prior delivery year, based on customer loads during the PJM 5 CP hours

PJM’s 5 CP hours in the summer of 2016:8/11/2016 HE 1600 151,9457/25/2016 HE 1600 150,9318/12/2016 HE 1600 146,8897/27/2016 HE 1700 144,5438/10/2016 HE 1700 143,357

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OP’s CBP Auction to Establish SSO Prices For the ESP III

Auctions for ESP III conducted in April 2015, May 2015, November 2015, March 2016, and November 2016 to date

To procure energy, capacity, and market based transmission and transmission ancillary services

Future auctions scheduled for March 2017 Three delivery periods are covered:

Blended Price June 2015 thru May 2016 $54.87/MWH June 2016 thru May 2017 $52.37/MWH (100%) June 2017 thru May 2018 $51.13/MWH (83%)

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AEP-Ohio(Percent of Electric Load Shopping)

AEP-OHIO Sept. 30, 2016

Sept. 30, 2015

Sept. 30, 2014

Sept. 30, 2013

Residential Sales

34.1% 35.1% 32.5% 27.1%

Commercial Sales

86.0% 85.7% 84.2% 78.8%

Industrial Sales

97.5% 88.1% 79.9% 74.5%

Total Sales 71.5% 69.9% 66.3% 60.6%

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Shopping For Your Electric Generation Supply?

Price to Compare (PTC) – your avoidable charges if you shop, typically expressed in cents/kWh – PTC includes:

Generation Energy Rider (Rider GEN-E) Auction Cost Reconciliation Rider (Rider ACRR) Generation Capacity Rider (Rider GEN-C) Rider AER (Alternative Energy Rider) charges

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© 2016 McNees Wallace & Nurick LLC www.mwn.com

Transmission Rates Prior to ESP III, market-based and non market-based

transmission costs recovered through the bypassableTransmission Cost Recovery Rider (TCRR)

TCRR terminated in May 2016 New Basic Transmission Cost Rider (BTCR) effective June

1, 2015 recovers non-market based transmission costs andis a non-bypassable rider

For SSO customers, market-based transmission costs areincluded in the CBP bids, effective 6/1/15

Transmission Under-Recovery Rider (TURR) – non-bypassablerider recovering a prior period transmission cost under-recoveryterminated in early 2016

59


Energy Efficiency/Peak Demand Response and Renewable Resources

EE/PDR SB 221: scope of programs and opt out SB 310: expansion of opt out opportunities Energy Mandates Study Committee

recommendations Renewable energy opportunities

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Rider EE-PDR (Energy Efficiency and Peak Demand Reduction Cost Recovery Rider)

AEP-Ohio recovers costs it incurs to comply with Ohio’s energy efficiency and peak demand portfolio requirements through Rider EE-PDR.

Current Rider EE-PDR rates as of February 2017 are: GS-2, GS-3, and GS-4 $0.0002912/kWh,plus $0.79/kW

61


Senate Bill 310 – Changes to Renewable Energy, Peak Demand, and Energy Efficiency Mandates

Senate Bill 310 was signed into law on June 13, 2014 and became effective on September 12, 2014

Legislation revises the energy mandates for energy efficiency/peak demand reduction and renewable energy that were established in SB 221 SB 310 paused the compliance requirements for 2015 and 2016

at 2014 levels The impacts of the mandates are to be studied by the Energy

Mandates Study Committee created in SB 310, which is required to submit a report to the Ohio General Assembly by September 30, 2015

Legislation prompted by changes in the energy and economic landscape

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Senate Bill 310 Continued . . . If the Ohio General Assembly does nothing further to modify Ohio’s

electricity mandates, the escalation in compliance requirements will resume toward existing targets with full implementation required by 2027

An EDU has two options regarding its current energy efficiency mandate compliance plans Continue to implement plan with no amendments through the end of

2016 Amend plan by submitting an amendment to the Commission no later

than 30 days after the effective date of SB 310 Streamlined opt-out of EE/PDR benefits and costs available to eligible

customers Eligible customers are defined as those that receive service above

primary voltage or a commercial or industrial customer that receives more than 45 million KWh at a single location and have made a written request to self-assess the KWh tax

The streamlined opt-out is available on January 1, 2017

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Energy Mandates Study Committee Report Report issued on Sept. 30, 2015 - recommendations: 1) Continue the current freeze on the escalation of the mandates

indefinitely 2) Provide for an expedited review of EDU portfolio plans and

expand the industrial streamlined opt-out to all mercantile customers

3) Expand the counting of all energy efficiency (EE) projects back to 2008 to reduce costs

4) Enact legislation that would allow EDUs to offer voluntary EE programs rather than mandated EE programs

5) Declare that the Ohio General Assembly retains statutory authority with respect to Energy Policy and Dispatch Protocols

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AEP-Ohio’s EE/PDR Plan (16-0574)

6/15/16 – AEP-Ohio files testimony 12/9/16 – a stipulation is filed in the case Stipulation provides for a 4-year plan running from 2017

through 2020 Plan is subject to an annual cost cap of $110.3 million,

excluding lost distribution revenues and Rider IRP-D costs Company committed to work to develop, prior to 1/1/17, a

streamlined process for eligible customers to provide the Company a notice of intent to opt-out of the EE/PDR

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Takeaways Opportunities to reduce your electric bills by obtaining

service from competitive suppliers of generation service Additional opportunities to reduce your bill by

implementing energy efficiency measures Current ability to participate in PJM demand response

programs for customers with curtailable load – the programs may, and usually do change

Peak shaving is another option for reducing electric bills Reducing your electric bill requires customers to be

proactive To learn more, contact:

Joe Bowser [email protected]

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Questions?

Useful Web Sites:

AEP www.aep.com PUCO www.puco.ohio.gov PJM www.pjm.com IEU-Ohio www.ieu-ohio.org FERC www.ferc.gov

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