Ohio Energy. Workshop CC. Wednesday, February 22, :15 a.m. to 12:30 p.m.

Transcription

1 Ohio Energy 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, :15 a.m. to 12:30 p.m.

2 Biographical Information Andy McCabe, Manager, Business Programs, EE/PDR, AEP Ohio 850 Tech Center Drive, Gahanna, OH 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 aemoore@aep.com 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 jbowser@mwncmh.com 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.

3 Ohio Energy Efficiency & Peak Demand Updates AEP Ohio 21 st Annual Ohio Energy Management Conference

4 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

5 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

6 2016 CEI Results 100 Total Participants Manufacturers Hospitals Universities Cohorts Companies 54 GWh Cohorts Companies 54 GWh Projecting 108 GWh Savings

7 First 4 Cohorts - Savings Trend * 37 companies

8 Energy Model

9 Where Does CEI Fit? An innovative approach to achieve low/no cost energy savings Traditional Programs Capital intensive for customers SEM Program Holistic overview of energy savings opportunities One and Done concept Focused on operations and maintenance activities

10 Catalyst for Capital Projects Engaging Employees Identifying Opportunities Measuring the Results 25% increase in capital projects for SEM participants Building an Energy Team

11 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

12 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

13 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

14 E-Motor Rewind Pilot Program 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

15 E-Motor Rewind Pilot Certified Facilities Hannon Electric Canton Electric Motor &Service Zanesville Kentucky Service Company - Lexington

16 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

17 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

18 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 of the Revised Code.

19 EE Report cards available FAQ available

20 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.

21 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

22 Contact Information AEP Ohio Business Incentives Program Business Outreach or AEP Ohio Notice of Intent to Opt Out or Business Outreach or AEP Ohio Customer Service Engineer

23 AEP Ohio Distribution Reliability and Technology Programs

24 Overview of Technologies and Reliability Plans gridsmart Phase II Case No EL-RDR Advanced Metering Infrastructure (AMI) Distribution Automation Circuit Reconfiguration (DACR) Volt Var Optimization (VVO) Electric Security Plan III (ESP III) Extension Case No 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

25 gridsmart Phase II Technologies

26 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

27 DACR Distribution Automation Circuit Reconfiguration (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

28 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

29 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.

30 ESP III Extension Technologies and Plans

31 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.

32 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 ,700 outages caused by trees inside our Rights-of- Way( ROW ) versus during outages caused by trees inside our ROW.

33 Proposed DIR and Vegetation Management Spend DIR - $225M Each year 2018 through 2024 (Capital Spend) Incremental Vegetation Spend 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

34 Proposed Distribution Technology Plan Technology 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 Smart Lighting Next Generation Utility Communication System Distribution Substation Security Technology 10 Microgrids 202,000 smart lighting controls 1,000 LED replacements 4 years for Phase 1 $52M 4 Years for Phase 1 $30M Replacement of existing system 4 Years $69M Technology deployed in up to 100 critical substations 4 years for Phase 1 $30M $1.5 million per year ongoing O&M $2.1 million per year ongoing O&M No incremental increase in ongoing O&M $1million $400,000 per year ongoing O&M

35 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.

36 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:

37 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 vehicles 1 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 imports 2 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. 1 U.S. Department of Energy, Alternative Fuels Data Center, Emissions from Hybrid and Plug-in Electric Vehicles (June 2016), available at 2 This 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 Plugin Electric Vehicles (2014), available at

38 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.

39 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.

40 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.

41 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

42 Proposed ESP III Ext. Bill Impact Year 1 Columbus Southern Power Rate Zone SSO Monthly Bills Household Current Proposed Change Tariff 1,000 kwh usage $134 $ % R-R Bill 2,000 kwh usage $254 $ % R-R Bill 4,000 kwh usage $495 $ % R-R Bill Small Business 1,000 kw demand and 100,000 kwh usage $15,349 $15, % GS-2 Primary 1,000 kw demand and 350,000 kwh usage $33,108 $32, % GS-3 Primary Industrial Business 20,000 kw demand and 8 million kwh usage $552,042 $528, % GS-4 20,000 kw demand and 12 million kwh usage $791,094 $756, % GS-4 Ohio Power Rate Zone SSO Monthly Bills Household Current Proposed Change Tariff 1,000 kwh usage $142 $ % RS Bill 2,000 kwh usage $271 $ % RS Bill 4,000 kwh usage $527 $ % RS Bill Small Business 1,000 kw demand and 100,000 kwh usage $16,933 $16, % GS-2 Primary 1,000 kw demand and 300,000 kwh usage $32,692 $32, % GS-2 Primary Industrial Business 20,000 kw demand and 8 million kwh usage $608,677 $585, % GS-4 Transmission 20,000 kw demand and 12 million kwh usage $876,246 $841, % GS-4 Transmission

43 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.

44 AEP-Ohio ( Ohio Power ) 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 21ST Annual Ohio Energy Management Conference February 22, 2017 Joe Bowser - Technical Specialist McNees Wallace & Nurick LLC

45 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 McNees Wallace & Nurick LLC

46 ESP III Case No 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 filed October 3, 2014 PPA Rider Update Stipulation in PPA case ( ) 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 ) McNees Wallace & Nurick LLC

47 Application for New Affiliate Power Purchase Agreement (PPA) (Case No 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 1 B. Conesville 4, 5, and 6 C. Zimmer 1 D. 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 McNees Wallace & Nurick LLC

48 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 PPA Annual compliance reviews by the PUCO As 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 rider 12/7/16 AEP-Ohio filed OVEC-only Rider PPA rates to be effective January 1, 2017: Secondary Primary Sub/Trans. $ /kWh $ /kWh $ /kWh McNees Wallace & Nurick LLC

49 ESP Extension Case ( EL-SSO) Case filed in 2016 Would extend the current ESP term through May 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 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 McNees Wallace & Nurick LLC

50 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 McNees Wallace & Nurick LLC

51 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 McNees Wallace & Nurick LLC

52 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 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 McNees Wallace & Nurick LLC

53 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 and 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 McNees Wallace & Nurick LLC

54 PJM Demand Response Programs Continued... Beginning with the 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 Base Residual Auction clearing prices (August 2015): CP $164.77/MW-day BC $149.98/MW-day The current plan is that beginning with the delivery year, all demand response must be CP, pending approval of PJM proposal to introduce a new summer DR product Clearing Prices : CP $151.50/MW-day Limited $106.02/MW-day XS and Annual $120.00/MW-day McNees Wallace & Nurick LLC

55 PJM Capacity/Demand Response Continued... The Base Residual Auction was held in May 2016 Clearing Prices: ( ) Load $96.77/MW-day CP $100.00/MW-day BC $80.00/MW-day 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) McNees Wallace & Nurick LLC

56 BRA Auction Next Base Residual Auction ( ) 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 McNees Wallace & Nurick LLC

57 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 ,945 7/25/2016 HE ,931 8/12/2016 HE ,889 7/27/2016 HE ,543 8/10/2016 HE , McNees Wallace & Nurick LLC

58 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%) McNees Wallace & Nurick LLC

59 AEP-Ohio (Percent of Electric Load Shopping) AEP-OHIO Sept. 30, 2016 Sept. 30, 2015 Sept. 30, 2014 Sept. 30, 2013 Residential Sales Commercia l Sales 34.1% 35.1% 32.5% 27.1% 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% McNees Wallace & Nurick LLC

60 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 McNees Wallace & Nurick LLC

61 Transmission Rates Prior to ESP III, market-based and non market-based transmission costs recovered through the bypassable Transmission 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 and is a non-bypassable rider For SSO customers, market-based transmission costs are included in the CBP bids, effective 6/1/15 Transmission Under-Recovery Rider (TURR) non-bypassable rider recovering a prior period transmission cost under-recovery terminated in early McNees Wallace & Nurick LLC

62 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 McNees Wallace & Nurick LLC

63 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 $ /kWh, plus $0.79/kW McNees Wallace & Nurick LLC

64 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 McNees Wallace & Nurick LLC

65 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, McNees Wallace & Nurick LLC

66 Energy Mandates Study Committee Report Report issued on Sept. 30, 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 McNees Wallace & Nurick LLC

67 AEP-Ohio s EE/PDR Plan ( ) 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 McNees Wallace & Nurick LLC

68 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 McNees Wallace & Nurick LLC

69 Questions? Useful Web Sites: AEP PUCO PJM IEU-Ohio FERC McNees Wallace & Nurick LLC