Review of Indiana Michigan Power Company's Fuel Cost Reconciliation Docket for 2019

Client:

Synapse provided expert testimony and analysis to support the Sierra Club in reviewing Indiana Michigan Power Company (I&M)’s fuel cost reconciliation application for the 2019 calendar year in Michigan Public Service Commission Docket U-20224. Synapse testimony focused on evaluating the reasonableness of purchased power costs paid to (1) the Ohio Valley Electric Corporation (OVEC) for power from the Clifty Creek and Kyger Creek plants; (2) American Electric Power Generation (AEG) for power from the share of Rockport owned by AEG. We also reviewed the operational practices of I&M at Rockport Units 1 & 2 and identified the avoidable losses incurred at the share of the plant owned by I&M during times when I&M's own data showed that operating the units would incur net losses, yet it operated them anyways.

We found that I&M purchases power from OVEC, an affiliate company, at above-market prices and passes the unnecessary costs on to ratepayers. I&M does the same with the power purchased from AEG. We also found that I&M regularly self-commits Rockport Units 1 and 2, and as a result of its unit commitment practices, incurred large net losses relative to the market that it passed on to ratepayers. We recommended that the Commission disallow in the present, and in all future reconciliation dockets, recovery of the excess fuel costs incurred at Rockport that were avoidable if I&M had followed the results of its own price-based unit-commitment process. We also recommended that the Commission disallow $2.6 million in excess costs that I&M paid for OVEC services (relative to the market value of the service). Further, we recommended that in all future reconciliation dockets, the Commission disallow recovery of all costs paid to OVEC above the market equivalent cost for those products and services as determined by the value of energy, ancillary services, and market prices for capacity as delivered at OVEC’s zone.