AEP reaches settlement on coal-fired power plants in Ohio

American Electric Power Co. (AEP) Ohio said it has reached a settlement with Public Utilities Commission of Ohio staff, environmental groups, the consumer group Ohio Partners for Affordable Energy, and other parties for long-term contracts agreement with its coal-fired generators.

The agreement is expected to be ruled in early 2016 by the Public Utilities Commission of Ohio, according to Bloomberg. The AEP said in a statement on Monday that the agreement would require AEP Ohio to enter into an eight-year purchase agreement of coal-powered power plants also owned in part by AEP.

The purchase agreement would provide guaranteed income for the capacity, energy and ancillary service output of AEP's 2,671 MW ownership share of nine generating units, and AEP Ohio's 423 MW contractual share of Ohio Valley Electric generating fleet until May 2024.

AEP said that the purchase would raise the monthly house bill by 62 cents in the first year. But when coupled with its recently approved Electric Security Plan, rates will be $9/month less than rates a year ago. The settlement agreement would also result in savings to consumers of $721 million over its eight-year life, AEP claimed.

The AEP agreement also includes a commitment to convert some of its coal-fired generators to natural gas or retire them entirely, according to RTO Insider. The company also commit to developing at least 900 MW of wind and solar projects over the next five years to support energy efficiency programs and to provide up to $100 million in customer credits.

AEP Ohio CEO Pablo Vegas said the agreement shows where the company would like to go in terms of the mix of renewable energy and other sources, according to The Colombus Dispatch.

The CEO said that the agreement represents a big win for Ohio, and reflects a market and a regulatory environment in which natural gas is much more viable than coal as a fuel for power plants. Vegas said that AEP will not build any more coal plants.

However, the agreement didn't garner universal approval. The Ohio Consumers' Counsel (OCC) has issued a release criticizing it. The OCC said that consumers should not be charged a penny more than the cost of power in the market.

The rival energy company Dynegy Inc. said that AEP's proposal is an illegal subsidy that will disrupt Ohio's competitive electricity market. While environmental groups such as the Ohio Environmental Council said that the deal is much to favor AEP's interest over all others.