Ohio Valley Electric Corporation (OVEC) 2018 & 2019 Rider Audits for the Office of the Ohio Consumers’ Counsel

Ohio Office of Consumers’ Counsel
Project completed.

Synapse provided expert testimony and analysis to support Office of the Ohio Consumers’ Counsel (OCC) in three separate dockets by reviewing the riders that Duke Energy Ohio (Duke), Ohio Power Company (AEP), and Dayton Power and Light (DP&L) used to pass on to ratepayers and the cost associated with each’s share of the Ohio Valley Electric Corporation (OVEC) power plants. The specific cases were:

-    Case No. 18-1004-El-RDR/Case No. 18-1759-EL-RDR: AEP Ohio Power Purchase Agreement Riders for 2018 and 2019
-    Case No. 20-167-EL-RDR: Duke Ohio Reconciliation Rider for 2019.
-    Case No. 20-165-EL-RDR: DP&L Reconciliation Rider for November 1, 2018 – December 31, 2019

Synapse's testimony in each docket focused on reviewing the audits. We evaluated the costs that each company paid for the OVEC power, the value of the power in the market, and therefore the above-market costs that each was asking the Commission (PUCO) to pass on to ratepayers through the rider. We also evaluated the analysis each company performed at the time it applied for, and received each respective rider, and the projected net revenues or losses each projected that the riders would provide. We reviewed the information and data available on the prudence of the Company’s unit commitment practices.

We found that in each case, the company’s analysis that it submitted at the time it applied for the rider in a prior dockets showed projections of substantial losses, yet the Commission approved each rider as a hedge. During the audit period, we found that each company incurred substantial above market costs for power from OVEC. These amounted to $24.9 Million for Duke in 2019, $74.5 Million for AEP Ohio between 2018 and 2019, and $14.9 Million for DP&L between November 2018 and the end of 2019. Additionally, we found that the companies and OVEC did not economically commit and dispatch the plants into the market and did not use daily economic analysis to drive its unit commitment decisions. Based on the hourly plant data and market prices, we found strong evidence that the plants were uneconomically committed in many hours.

In each case, we recommended that the PUCO disallow the entire above-market costs collected from ratepayers during the audit period. We also recommended that the PUCO find that the OVEC plants were uneconomically committed during the audit period, and require the Company to start documenting its commitment practices at the units. We also recommended that the PUCO introduce a fuel adjustment clause-type analysis process to determine whether the Company and OVEC operated the plants under least-cost supply principles.