Ohio Power to Recover Emission Allowance Brokerage Fees

Fortnightly Magazine - September 1 1996
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While setting fuel-cost, adjustment-clause rates for Ohio Power Co., a subsidiary of American Electric Power Co., Inc. (AEP), the Ohio Public Utilities Commission (PUC) has ruled that the utility may include emissions-allowance-trading brokerage fees as an expense in determining its new electric fuel-component rate. The PUC found the brokerage fees "directly and justifiably related" to the sale of emission allowances, hence qualified for recovery under adjustment-clause regulations. It delayed, however, a decision on how to quantify the proceeds from the utility's allowance-trading activities, pending the Federal Energy Regulatory Commission's allocation of emissions-trading proceeds among the companies comprising the AEP system.

The PUC also noted several suggestions raised by auditors engaged to review the company's fuel-related practices: 1) further refine the bidding process to take emission-allowance trading into account, 2) evaluate the relative merits of developing an internal capability to administer trading versus using consultants, and 3) charge no more than the market rate for agents handling trading transactions. Re Ohio Power Co., Case No. 95-101-EL-EFC, May 30, 1996 (Ohio P.U.C.).

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