Ohio Valley Electric Corporation (OVEC) 2020 Rider Audits

Citizens Utility Board of Ohio
Project completed.

Synapse provided expert testimony and analysis to support Ohio Citizens Utility Board of Ohio and the Union of Concerned Scientists in PUCO Case 21-477-EL-RDR, reviewing the 2020 Audits of the Riders that Duke Energy Ohio (Duke), Ohio Power Company (AEP), and Dayton Power and Light (DP&L) used to pass on to ratepayers the cost associated with each’s share of the Ohio Valley Electric Corporation (OVEC) power plants.

Synapse's testimony in the docket focused on reviewing all three 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. Finally, we reviewed the capital investment and environmental upgrades that the Companies made at the plants during the Audit period.

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 the Companies incurred a combined $117.9 million in above market costs for power from OVEC. These amounted to $31.9 million for Duke’s share of OVEC, $69.0 million for AEP Ohio’s share of OVEC, and $17.0 million for DP&L’s share of the OVEC plants. Additionally, we found that the companies and OVEC did not economically commit and dispatch the plants into the market the majority of the time 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.

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.