I'm on vacation this week. At best my posts are going to be reposts (shocking, I know).
At the behest of Ohio regulators in 2011, [American Electric Power] agreed to split its Ohio operations into two companies: one that delivers power and handles billing, and one that owns and operates power plants.
The separation means that AEP’s power plants will no longer directly serve the utility’s customers in the state. Instead, the plants will sell electricity on the open market, while the delivery business will purchase electricity on the market for its customers. AEP’s power plants probably will serve a portion of the company’s customers, but only through a competitive-bidding process in which other companies have the opportunity to offer a lower price.
AEP, which was reluctant to split its Ohio operations, has responded by focusing on the delivery business.
Meanwhile, the Ohio power plants are a shrinking asset. Because of environmental rules and the age of some of the plants, the company has announced a series of shutdowns that will occur over the next few years.
Also, AEP is in the process of transferring two plants away from Ohio regulation. The plants, both of which are in West Virginia near the Ohio line, will be regulated in nearby states that allow a utility to sell electricity directly to consumers.
Once the moves are complete, AEP will have 8,668 megawatts of power-plant capacity in the new Ohio power-plant subsidiary, which will be down from 11,652 megawatts today.
Akins says the company is responding to an economic climate in which there is little reason to build power plants in Ohio. The state’s electricity demand has been flat, and the regulatory structure provides no clear way to pay for plant construction.