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AEP Seeks Approval from FERC to Split in Two

aep-electric-utility-splitAmerican Electric Power (AEP), one of the larger electric utilities in the U.S., is attempting to divide its Ohio operations in two. One part will generate power and the other will distribute it. AEP delivers electricity to over 5 million customers in 11 states and owns about 38,000 megawatts (MW) of generating capacity. State regulators have already declared their support for the split, which leaves the final step of gaining federal approval. If the Federal Energy Regulatory Commission (FERC) approves their request, the new arrangement will go into effect in 2014.

If approved, roughly 9,200 MW will be transferred from generation owned by AEP Ohio to an entirely new firm, AEP Generation Resources. Additionally, AEP is looking to move their 1,300 MW of generating capacity from the John E Amos Plant, as well as 800 MW from the Mitchell Plant, to Appalachian Power. The remaining 800 MW from the Mitchell Plant will be handed over to Kentucky Power.

AEP President and CEO Nicholas Akins commented, “These FERC filings are an important next step in our transition to full competition in Ohio. We have requested approval to transfer ownership of a portion of our Ohio generation-related assets from AEP Ohio into a separate unregulated generation company, to transfer other generation assets currently owned by AEP Ohio to Appalachian Power and Kentucky Power to help satisfy their long-term capacity requirements in the PJM interconnection, and to end the current system interconnection agreement for our Midwest utilities.”

Consumers are expected to benefit from this plan as it will lead to a system where prices are set by market forces. This means that electric providers will participate in an auction to establish which will serve AEP customers. Many providers will be chosen to participate but only the ones with the lowest prices will be selected. The AEP power plant company will have no unfair advantage since they will simply be another bidder in the auction.

Toward the start of 2011, the only Ohio electric utility that separated the delivery portion from its power plants was FirstEnergy. State regulators have been encouraging other companies to do the same, and now, AEP, Duke Energy, and Dayton Power & Light have each made progress in this type of corporate separation.

Sarah Battaglia
Energy Curtailment Specialists, Inc.

Sarah can be found on LinkedIn and Google+.

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