The Public Utilities Commission of Ohio (PUCO) has granted AEP the authority to recover in rates construction costs up to $23.7 million related to its proposed integrated gasification clean coal (IGCC) plant. Critics argued that the PUCO should not allow AEP to recover its costs through rates in a deregulated electric power market such as Ohio's. In response, AEP countered that it needed the generation to serve as provider of last resort to consumers in its Ohio service territory; thus granting it the ability to recover the IGCC costs in rates was justified. The PUCO agreed.
AEP next will need to respond to PUCO inquiries about the plant's rate structure, the benefits to consumers, the amount of local coal, the production and sale of byproducts of the combustion process, and the extent to which AEP can take advantage of federal and state IGCC incentives. AEP plans to submit the requested information in October 2006, but harbors concerns that another long round of evidentiary proceedings on these issues could cause it to miss the 2010 in-service deadline imposed by its provider of last resort obligations.
Only two other IGCC plants are currently in operation within the U.S., and those were built as demonstration projects with hefty federal subsidies. Realizing the full potential of IGCC technology may require more state authorities to follow the PUCO's lead in facilitating rate recovery of project costs.