Ohio Energy Report: January 2023

Brakey Energy Welcomes New Team Member

We are pleased to welcome Brandon Powers to the Brakey Energy team! Brandon recently joined our company as an Energy Procurement Associate.

Brandon holds a B.A. in Economics from The Ohio State University and has a background in banking, financial markets, and derivatives. Before joining Brakey Energy, he worked in banking, focusing on mortgages and consumer loans. Brandon is a car enthusiast and enjoys spending his free time at car meets, playing bass guitar, bowling, learning foreign languages, and rooting on the Ohio State Buckeyes.

If you are interested in soliciting quotes for either power or gas, please reach out to Brandon directly.

AEP Files ESP V with the PUCO

On January 6, 2023, American Electric Power (AEP) Ohio filed its fifth Electric Security Plan (ESP V). This ESP would start on June 1, 2024 after AEP’s current ESP expires and would continue through May 31, 2030.

At the center of the ESP V application is AEP’s proposal to maintain its Competitive Bidding Process (CBP) to secure load for Standard Service Offer (SSO) customers. AEP plans to conduct two SSO auctions per year with varied length contracts. In order to address unexpected increases in SSO loads due to aggregation defaults or premature customer drops to the SSO that became prevalent in 2022, AEP is proposing a Government Aggregation Standby Rider that will establish a standby service charge that aggregators could elect to pay in order to offset risk to suppliers of standing by to serve such load. If a government aggregation program does not elect to pay the rider, any customers that return to the SSO service during the term of the aggregation program will be served at then-market prices for a minimum period of two years.

AEP’s ESP V proposes three new tariffs and several new riders. The new tariffs proposed include the Residential Senior Citizen Tariff, the Residential Plug-in Electric Vehicle Tariff, and the Public Transit and School Bus Plug-in Electric Vehicle Tariff. New riders proposed include the Customer Experience Rider, the Ohio First Rider, Rural Access Rider, and a new Energy Efficiency Rider.

AEP plans to continue, in some instances with modification, riders such as the Enhanced Service Stability Rider and the Distribution Investment Rider that are intended to facilitate improvements to AEP distribution networks and ensure service reliability for customers in its Ohio service territory. ESP V also proposes the continuation and modification of the Interruptible Power-Discretionary Legacy Rider (IRP-L) and Interruptible Power-Discretionary Expanded Rider (IRP-E). AEP is seeking a gradual reduction to the IRP-L credit and a limitation of the IRP-E to existing customers with at least 1 megawatt (MW) of load or those new customers that gain approval for eligibility for the IRP-E through a reasonable arrangement.

AEP’s transmission pilot program would continue through the term of ESP V. This program permits eligible customers to opt out of paying the standard Basic Transmission Cost Rider (BTCR) rate and, instead, pay for transmission service based on how they use power during the AEP Zone’s single highest coincident peak. The Industrial Energy Users of Ohio (IEU-Ohio) was instrumental in creating AEP’s transmission pilot program, which can result in significant savings for some large energy users.

A technical conference to allow interested parties the opportunity to learn more about AEP’s ESP V application will be held on January 31, 2023 at the offices of the Public Utilities Commission of Ohio (PUCO). The conference event can be viewed on the PUCO’s YouTube channel.

FE’s Second SSO Auction Results Filed for 2023/2024 Delivery Year

FirstEnergy (FE) Ohio customers that take generation service under the utility’s SSO will likely see higher electric costs beginning June 1, 2023 after the results of FE’s second CBP auction were announced earlier this month.

On January 10, 2023, FE held its second SSO auction for the 2023-2024 Delivery Year (DY). The auction secured 33% of FE’s SSO load for the DY and cleared at a price of 9.77¢ kWh. This is approximately 20% lower than the average clearing price from the first SSO auction held in October 2022 that secured 33% of FE’s load for the 2023-2024 DY.

Despite the average pricing from winning bidders clearing lower than the previous auction, Matt Brakey shared in an interview with Cleveland.com that the auction is “still producing prices so high that no customer will want to be defaulting to the (SSO) come June 2023.” Starting in late 2021 and into 2022, aggregators like NOPEC sought to return customers to their utility’s SSO. Matt Brakey predicts that the opposite will be true this spring and by May, residential and non-residential customers will be leaving the SSO in order to purchase electric generation at lower market prices.

FE’s remaining SSO load will be secured through a third auction scheduled for March 20, 2023. Brakey Energy will continue to monitor the SSO auctions for FE and the rest of Ohio’s electric distribution utilities (EDUs) and will report outcomes in future newsletters. If you have any questions about the SSO auction process or about SSO rates for FE or any of Ohio’s EDUs, please contact Katie Emling.

Winter Storm Elliott Impacts PJM Grid to Potentially Set AEP 1CP

On December 23 and 24, 2022 Brakey Energy issued two transmission coincident peak alerts for the AEP Zone in response to Winter Storm Elliott that brought snow, strong winds, and subzero temperatures to much of the country, particularly the PJM region. As shown in the table below, the AEP transmission zone reached a peak load of 22,783 MW for the hour ending 6:00 PM on December 23. Brakey Energy suspects that there is a strong probability that this hourly load could set AEP’s one Coincident Peak (1CP) for 2023 which would establish AEP customer’s Network Service Peak Load (NSPL) values, or “transmission tags,” for the 2024 calendar year.

The AEP Zone has not seen a load this high since February 2015, when the winter peak load reached 24,725 MW. That load set the 2015 AEP 1CP that established AEP customer’s NSPL load for the 2016 calendar year.

Table 1: Single Highest Load for AEP through January 25, 2023

Brakey Energy will continue to monitor weather and load forecasts throughout the remainder of the winter and summer coincident peak seasons to determine if any future AEP loads could topple the current peak set on December 23.

Residential Corner

The highly competitive generation offers we highlighted in the past for residential customers have long disappeared. We have been recommending since October 2021 that customers with expiring contracts default to the SSO until Spring 2023. We will provide a new and urgent contracting recommendation then. The SSO rate varies by electric distribution utility but is materially below current market conditions. To the extent you are in an expiring contract, make sure you provide notice to your supplier that you would like to default back to the SSO as to avoid being swept up in an extremely expensive holdover provision.

Regarding natural gas, AEP Energy is currently offering a 24-month fixed price contract for $5.69 per hundred cubic feet with no early termination fees. We think this offer represents a compelling value. This is especially true because customers can cancel at any time and enter into a lower priced agreement if it becomes available. Please note that the price listed will vary based on service territory.

Natural Gas Market Update

The NYMEX price for January settled at $4.709 per Million British Thermal Units (MMBtu) on December 28, 2022. This price is down 29.8% from December’s price of $6.712 per MMBtu. This settlement price is used to calculate January gas supply costs for customers that contract for a NYMEX-based index gas product.

The graph below shows the year-over-year monthly NYMEX settlement prices for 2019, 2020, 2021, 2022, and 2023 to-date. Prices shown are in dollars per MMBtu of natural gas.

Figure 1: NYMEX Monthly Natural Gas Settlement Prices

Figure 2 below shows the historical January 26, 2021 through January 26, 2023 Around the Clock (ATC) forward NYMEX natural gas prices in dollars per MMBtu for the balance of 2023 (labeled “Custom Strip” in the graph below) and calendar years 2024, 2025, 2026, and 2027. In response to a warmer-than-normal January, natural gas prices for the balance of 2023 and future calendar years have decreased in comparison to late 2022 prices.

Figure 2: ATC Calendar Year NYMEX Natural Gas Prices

*Pricing courtesy of Direct Energy Business.

Electricity Market Update

Figure 3 below shows the historical January 26, 2021 through January 26, 2023 ATC forward power prices in dollars per Megawatt hour (MWh) for the balance of 2023 (labeled “Custom Strip” in the graph below) and calendar years 2024, 2025, 2026, and 2027 for the AD Hub. Power prices have followed falling gas prices.

Figure 3: ATC Calendar Year Power Prices for the AD Hub

* Pricing courtesy of Direct Energy Business.

Calendar of Events

27TH ANNUAL OHIO ENERGY SAVINGS & MANAGEMENT CONFERENCE

Tuesday, February 28, 2023 – Wednesday, March 1, 2023

The Columbus Renaissance Hotel

50 North Third Street

Columbus, Ohio 43215

The Manufacturers’ Education Council energy conference is Ohio’s premier conference on energy rates, regulations, and efficiency. Make plans to attend this conference and receive priceless insights into energy prices, trends, savings opportunities, and the forces that influence the price and quality of energy in Ohio.

This year, we are excited to announce that Brakey Energy clients can receive complimentary registration to the conference. Please contact Catherine Nickoson if you are interested in attending one or both days.

Brakey Energy will be participating in several workshops at this year’s conference.

  • On Tuesday at 10:45 A.M., Matt Brakey, President of Brakey Energy, and Katie Emling, Engineer at Brakey Energy, will join Jim Lamson, Operations Service Manager at ASHTA Chemicals, and David Proano, Regulatory Counsel of the Industrial Energy Users of Ohio and Partner at BakerHostetler, to discuss significant developments impacting FE electric rates.
  • On Tuesday at 1:30 P.M., Matt Brakey will join David Zadeh, Chief Operating Officer of Toshi CMC, to discuss the innovative ways that an upstart Ohio bitcoin mine is managing energy costs in a highly volatile energy and cryptocurrency marketplace.
  • On Tuesday at 2:45 P.M., Katie Emling will join David Proano to discuss significant developments impacting AES Ohio electric rates.
  • On Wednesday at 10:45 A.M., Katie Emling will join David Proano and Jim Loder, Director of Energy Management at Pixelle Specialty Solutions, to discuss significant developments impacting AEP electric rates.

A complete agenda with a list of presentation topics, speakers, and times is available on the event website.