The City of Columbus’ green electricity aggregation contract with AEP Energy includes a rate modification tool that allows the company to defer a portion of customer bills into the future in a way that could make the initially more competitive program on the open market. .
But ultimately, customers must adapt to these adjustments through future rate changes over the next 13 years until the contract expires, which could lead to rapid and dramatic increases or decreases, depending on the market. how the “Comparison Price Compensation Fund” is managed.
The contract says the fund was created to allow the program “to remain competitive with the comparison price” charged by AEP’s regulated utility, which previously served aggregation customers. “Price to Compare” is the apples to apples chart created by the Ohio Utilities Commission to allow consumers to compare electricity (and natural gas) pricing plans and contract terms with suppliers who enroll new customers.
The Price to Compare accumulation compensation fund is already being used to reduce tariffs for the brand new “Clean Energy Columbus” program that started last month for nearly 198,000 electric customers in the city, allowing the inaugural variable rate of 0 , 05,499 cents per kilowatt hour (kWh) to be lowered slightly by about three-tenths of a percent or 0.00015 cents per kWh, according to the documents.
This brought the program a little closer to the current benchmark price of 0.0536 cents per kWh, keeping green power about 3% more expensive by saving the typical home about 13 cents per month on bills.
But that deferral may increase because there is no contractual limit on the amount of annual rate deferrals, even as AEP Energy launches a $ 1 billion construction wave for a new generation of solar and wind power from ” direct production ”based in Ohio to cover the entire Columbus charge.
“Who will receive this invoice?” “
Over the next 36 months, AEP Energy is contractually obligated to shift from purchasing “credits” for green electricity generated in the Midwest and the country to 100% newly built green generation in Ohio, while promising competitive prices.
If deferrals accumulate, “the question is: who will receive this invoice? asked Noah Dormady, associate professor at Ohio State University’s John Glenn College of Public Policy, who studies energy and environmental policy.
Columbus Aggregation customers can come and go at will, switching production vendors at no cost as part of the city’s program. On the flip side, the contract also allows for potentially increasing upstream tariffs to build up the fund, meaning that customers could prepay for future electricity that they will never use if they fall back. disengage.
The Price to Compare accumulation fund “was designed by AEP Energy to help achieve the goal of being competitive with PTC,” said Erin Beck, of the city’s utilities division, in a report. -mail. “AEP Energy has not used this in other municipal aggregates to date.”
Offsets in the fund will be “tracked, segregated and maintained … for the sole purpose of covering anticipated costs … for future supply conditions,” the contract says. They will not appear on monthly utility bills as an itemized charge or deduction, but instead are incorporated into the kWh billed rate for electricity, one of many ongoing charges hidden in this rate.
The compensation fund, a new green energy pricing tool
“The City of Columbus, Trebel (the city’s aggregation consultant) and AEP Energy are keenly aware of any cost to customers and manage the build-up of PTC on an annual basis to avoid dramatic rate fluctuations,” said Beck. “The build-up of PTC is a stable tool as the number of clients is expected to change drastically for any material impact on the fund – and this is highly unlikely.”
“I hope they’re right,” said Dormady, who said the feature looked like a “backdoor” that could skew comparison prices for consumers. “People sign up, then they forget about it.”
The fund is an interesting tool, which may not be necessary to lure Columbus customers into green electricity contracts because they are likely willing to pay a small premium, said Andrew R. Thomas, director of Energy Policy Center at Cleveland State University. He, too, had never heard of such a deferred generation rate policy and said someone was at risk of sudden price hikes.
According to the contract, whenever AEP, the city and Trebel fail to agree on the annual amount of compensation following a mandatory meeting each spring, AEP is empowered to clear the unpaid balances by 100%. over the next two years, or the full amount if this is the last contract year, 2034.
Such rate deferrals are not common in the regulated electricity market, at least “not for the price of power generation,” PUCO spokesman Matt Schilling said in an email. “This can happen for distribution related charges that are deferred to be collected later,” such as paying for large construction projects involving new transmission lines, he said.
But the aggregation rates, which are not regulated by the PUCO, are not intended for transmission, but only for production, Schilling said.
Worthington, which began allowing residents to choose a municipal power pool plan in 2018, has not incorporated such deferred billing into its schedule, a spokesperson said.
As of last week, 77% of AEP Columbus customers – about 198,000 – had not opted for the city’s new green energy aggregation program, which Beck called “high turnout.” As part of a plan approved by voters last November, Columbus customers were automatically switched to aggregation last month unless they notified officials of their withdrawal.
Trebel’s salary is also included in the rate. Hired by the city as its agent to advise and assist it in the choice of the production supplier and the management of the green energy program, the consultant is paid nothing from the city for his efforts. However, the company “is not precluded from obtaining compensation through alternative sources” related to the program, and so far it appears to be only AEP Energy.
Trebel will receive part of the kWh tariff charges for the next 13 years, even if the city finally lays off the company before 2034, says the DWS-city contract. Trebel’s rate share is now 0.00094 cents per kWh and will increase to 0.001 cents per kWh in June 2022. The US Energy Information Administration reports that an average American home uses 877 kWh per month, which means the house would pay about 88 cents per month. months in Trebel. Multiplied over the 198,000 clients, his salary could approach $ 2 million per year.
But from 2026, after which Trebel’s five-year contract with the city expires, the consultant continues to be paid somehow by AEP Energy. If the city renews the contract, Trebel receives 0.0008 cent per kWh; if he triggers Trebel, the consultant gets 0.0005 cent per kWh, until 2034.
When asked if this payment deal meant Trebel wasn’t working just for the city, Beck said the consultant is “contractually obligated to the city alone,” and the method encourages the company to help design a program. with as many clients as possible.
“This successful payment structure protects taxpayers and fosters a strong program,” Beck said. “The supplier only plays an accounting role, making a monthly payment to Trebel under the terms of this city contract.”
The kWh tariff also includes a “community grant” fee that goes to the city and would cost the average household about $ 10.50 per year starting next year, generating about $ 1.5 million per year for various city green energy initiatives.
AEP Energy’s contract specifies that $ 150,000 of the subsidy is paid annually to a “Workforce Development Fund”, which will be matched by the AEP and used to train union electrical workers in association. with the International Brotherhood of Electrical Workers to build and maintain the new green generation of DWS. facilities.
The Trebel serving the city team has two non-Trebel employees, both with past ties to the city’s Democrats.
According to the contract, Jen Lynch is part of the Trebel team serving the Columbus aggregation program. Lynch currently sits on the Columbus Civil Service Commission, a person appointed by Mayor Andrew J. Ginther, and is Director of the Remington Road Group, whose services include lobbying. Lynch served as an advisor to former Ohio Governor Ted Strickland and was legislative director to US Congressman Tim Ryan, both Democrats. She is currently an elected member of the Franklin County Democratic Ward Committee.
The Remington Road website boasts that the company “has connections across the Midwest and at all levels of business and government” to push projects for approval.
Also on Team Trebel, apparently also via Remington Road, is Amanda Wurst, formerly a spokesperson for Strickland, who is vice president of communications.
Trebel founder Scott Belcastro did not return an email asking how his company partnered with Wurst and Lynch on the town project, believed to be the third largest municipal electricity aggregation deal from the country.
@ReporterBush
