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The Public Utilities Commission of Ohio (PUCO) has adopted a capacity pricing system designed to transition AEP-Ohio to a fully competitive retail entity.

The PUCO's decision establishes a cost-based capacity price of $188.88/MW/day but requires AEP to charge competitive electric suppliers at a lower market-based capacity price. The utility can defer the difference between the adjusted reliability pricing model (RPM) and the cost-based price.

The RPM price is set through an auction process designed to create price signals that stimulate utility investment in reliability, including electric transmission and generation assets. The current adjusted RPM prices are $20.01/MW/day for this year and 2013, $33.71/MW/day for 2013 and 2014, and $153.8/MW/day for 2014 and 2015.

While AEP is allowed to defer the difference between the RPM price that it collects from competitors and the cost-based capacity price, the total amount to be deferred will depend upon the number of customers who switch to a competitive supplier, according to the PUCO, which says it plans to establish a capacity deferral recovery mechanism in AEP’s pending electric security plan case.

The new capacity pricing system takes effect on Aug. 8 and will remain in place through May 31, 2015. The existing interim two-tier capacity pricing adopted by the PUCO earlier this year will remain in effect for one additional billing cycle through Aug. 7.

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