<PAGE> File No. 70-8611
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
AMENDMENT NO. 1
TO
FORM U-1
_______________________________
APPLICATION OR DECLARATION
under the
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
* * *
SOUTHERN OHIO COAL COMPANY
CENTRAL OHIO COAL COMPANY
WINDSOR COAL COMPANY
1 Riverside Plaza, Columbus, Ohio 43215
(Name of company or companies filing this statement
and address of principal executive office)
* * *
AMERICAN ELECTRIC POWER COMPANY, INC.
1 Riverside Plaza, Columbus, Ohio 43215
(Name of top registered holding company
parent of each applicant or declarant)
* * *
G. P. Maloney, Executive Vice President
American Electric Power Service Corporation
1 Riverside Plaza, Columbus, Ohio 43215
Jeffrey D. Cross, Assistant General Counsel
American Electric Power Service Corporation
1 Riverside Plaza, Columbus, Ohio 43215
(Names and addresses of agents for service)
Southern Ohio Coal Company ("SOCCo"), a West Virginia
corporation, Windsor Coal Company ("Windsor"), a West Virginia
corporation, and Central Ohio Coal Company ("COCCo"), an Ohio
corporation (collectively, the "Companies"), subsidiaries of Ohio
Power Company ("Ohio Power"), an electric utility subsidiary of
American Electric Power Company, Inc. ("AEP"), a registered
holding company under the Public Utility Holding Company Act of
1935, as amended (the "1935 Act") hereby amend their Application
or Declaration on Form U-1 in File No. 70-8611 by filing the
following exhibit:
Exhibit D OPCo Settlement Agreement, dated February 28,
1995 (filed with The Public Utilities
Commission of Ohio)
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies have duly caused
this statement to be signed on its behalf by their duly
authorized officer.
SOUTHERN OHIO COAL COMPANY
WINDSOR COAL COMPANY
CENTRAL OHIO COAL COMPANY
By: /s/ G. P. Maloney
Vice President
April 27, 1995
70-8611.#1
<PAGE> Exhibit D
BEFORE
THE PUBLIC UTILITIES COMMISSION OF OHIO
In the Matter of the Application of )
Ohio Power Company for )
Authority to Amend and Increase ) Case No. 94-996-EL-AIR
Certain of Its Rates and Charges )
for Electric Service. )
In the Matter of the Application )
of Ohio Power Company for Authority ) Case No. 94-803-EL-AAM
to Change Accrual Rates )
In the Matter of the Application )
of Ohio Power Company for Authority )
to Modify Current Accounting )
Procedures for a Major Construction )
Project, the Flue Gas Desulfurization ) Case No. 94-1198-EL-AAM
Retrofit to the James M. Gavin )
Generating Station, until )
Revenues are Collected that Include )
the Associated Costs. )
In the Matter of the Application )
of Ohio Power Company for an )
Accounting Order to Defer Demand- )
Side Management Program Expenditures ) Case No. 94-1810-EL-AAM
and Net Lost Revenues: High )
Efficiency Heat Pumps - Retrofit. )
In the Matter of the Application )
of the Ohio Power Company for an )
Accounting Order to Defer Demand- )
Side Management Program Expenditures ) Case No. 94-1811-EL-AAM
and Net Lost Revenues: )
Mobile Home High Efficiency Heat )
Pumps - Retrofit. )
In the Matter of the Application )
of Ohio Power Company for an )
Accounting Order to Defer Demand- )
Side management Program Expenditures: ) Case No. 94-2031-EL-AAM
Customer Education - C&I - )
Metering Analysis. )
In the Matter of the Application )
of Ohio Power company for an )
Accounting Order to Defer Demand- )
Side Management Program Expenditures: ) Case No. 94-2032-EL-AAM
Customer Education - C&I - )
SMART Audits. )
In the Matter of the Application )
of Ohio Power Company for an )
Accounting Order to Defer Demand- )
Side Management Program Expenditures ) Case No. 94-2033-EL-AAM
and Net Lost Revenues: )
Project Good Turn - Freezer )
Recycling. )
In the Matter of the Regulation of )
the Electric Fuel Component )
Contained With the Rate Schedules ) Case No. 94-101-EL-EFC
of Ohio Power Company and )
Related Matters. )
In the Matter of the Two-Year Review )
of Ohio Power Company's Environmental )
Compliance Plan Pursuant ) Case No. 94-1181-EL-ECP
to Section 4913.05, Revised Code. )
SETTLEMENT AGREEMENT
Submitted February 28, 1995
I. INTRODUCTION
Rule 4901-1-30, Ohio Administrative Code ("OAC"), provides
that any two or more parties to a proceeding may enter into
a written or oral stipulation covering the issues presented
in such proceeding. Pursuant to Rule 4901-1-10(C), OAC, the
Staff of the Public Utilities Commission ("Staff") is
considered a party for the purpose of entering into a
stipulation. The purpose of this document is to set forth
the understanding of the parties who have signed below (the
"Signatory Parties") and to recommend that the Public
Utilities Commission of Ohio (the "Commission") approve and
adopt, as part of its Opinion and Order in these
proceedings, this Settlement Agreement resolving all of the
issues in the above-captioned proceedings. This Settlement
Agreement is the product of lengthy, serious bargaining
among knowledgeable and capable parties in a cooperative
process, encouraged by this Commission and undertaken by the
Signatory Parties to settle these cases. For the purpose of
resolving all issues raised by these proceedings, the
Signatory Parties stipulate, agree and recommend as set
forth below.
II. PARTIES
This Settlement Agreement is entered into by and among Ohio
Power Company ("OPCO" or "the Company"); the Staff; the
Office of the Consumers' Counsel ("OCC"); Larry Ward and
Local Union Numbers 1604 and 6362, United Mine Workers of
America ("UMW"); AGA Gas, Inc., Aristech Chemical
Corporation, Armco Inc., Ashland Petroleum Company, BP Oil
Company, Central Soya Company, Inc., Phillips Display
Components Co., Consolidated Biscuit Company, Owens-Corning
Fiberglas Corporation, Owens-Illinois, Republic Engineered
Steels, Inc., Stone Container and The Timken Company
(collectively, the "Industrial Energy Users-Ohio" or "IEU-
OH); Ford Motor Company and The Procter & Gamble Company
(collectively, the "Industrial Energy Consumers" or "IEC");
Globe Metallurgical, Inc. ("Globe"); the United States
Department of Defense and All Other Federal Executive
Agencies; the Sierra Club; the Non-Utility Generators'
Alliance ("NUGA"), and the Ohio Cable Television Association
("OCTVA"), all of whom have signed this Settlement Agreement
or filed letters with the Commission either endorsing or
agreeing not to oppose this Settlement Agreement.
Not all of the Signatory Parties are parties to all of these
proceedings. Nonetheless, all the Signatory Parties fully
support this Settlement Agreement, except as otherwise noted
by filed letters, and except OCC, who agrees to the
resolution of Case Nos. 94-101-EL-EFC and 94-1181-EL-ECP, as
set forth in Section V and Section VI.5, Scope, to the
extent of these two cases, but opposes the resolution of
Case Nos. 94-996-EL-AIR, 94-803-EL-AAM and 94-1198-EL-AAM
for the reasons set forth by OCC in its pleadings in those
cases.
III. RECITALS
1. Whereas, OPCO, on July 6, 1994 filed an application to
increase base rate revenues for electric service and
related matters by $152,384,000, which application was
docketed as Case No. 94-996-EL-AIR;
2. Whereas, OPCO alleged in that application that:
"The major factor causing the Company to seek an
increase in its rates is the cost associated with the
requirements imposed upon the Company, and its
customers,by the Clean Air Act Amendments (CAAA) which
were passed by Congress in November 1990. The most
significant of these costs is the cost associated with
retrofitting the Company's two 1300 megawatt General
James M. Gavin generating units with flue-gas
desulfurization systems (scrubbers). These scrubbers,
which are the cornerstone of the Company's strategy for
complying with the CAAA, have been found by the
Commission to be part of the Company's least-cost
compliance plan.... Moreover, the scrubbers will enable
the Company's Gavin Plant to continue burning coal
mined in Ohio by Ohio miners, while still meeting all
applicable clean air environmental requirements.
* * *
3. Whereas, the Staff has entered into the record in Case
No. 94-996-EL-AIR, Staff Ex. No. 1 (Exhibit 1 to the
Settlement Agreement) which reflects a Staff range of
increase in base rate revenues of between $48,775,000
and $62,327,000;
4. Whereas, OPCO and certain of the intervenors in Case
No. 94-996-EL-AIR have submitted testimony concerning
the level of increase in OPCO's base rates and the
distribution of revenue responsibility among OPCO's
various classes of customers;
5. Whereas, OPCO, on May 9, 1994, filed an application to
change its current depreciation rates, which
application was docketed as Case No. 94-803-EL-AAM;
6. Whereas, in its application in Case No. 94-803-EL-AAM
OPCO requested that the Commission order that new
depreciation rates not be implemented until OPCO is
authorized to increase its rates for service in its
next base rate case (which is Case No. 94-996-EL-AIR);
7. Whereas, OCC and IEU-OH were granted intervention in
Case No. 94-803-EL-AAM;
8. Whereas, by Entry dated July 14, 1994, Case No. 94-803-
EL-AAM was consolidated with Case No. 94-996-EL-AIR;
9. Whereas, the Staff conducted its analysis of what
changes, if any, to OPCO's current depreciation rates
are warranted and the resulting revenue requirement
impact of that analysis is embedded in the Staff range
of increase noted above;
10. Whereas, OPCO, on July 13, 1994, filed an application
seeking authority to defer for amortization and
recovery the operating and maintenance expenses,
including lease expense, related to the Gavin scrubbers
until the day prior to the date that new base rates
reflecting these costs become effective, which
application was docketed as Case No. 94-1198-EL-AAM;
11. Whereas, by Entry dated January 6, 1995, Case No. 94-
1198-EL-AAM was consolidated with Case No. 94-996-EL-
AIR;
12. Whereas, OPCO, on November 9, 1994, in Case Nos. 94-
1810-EL-AAM and 94-1811-EL-AAM, and on December 29,
1994 in Case Nos. 94-2031-EL-AAM, 94-2032-EL-AAM and
94-2033-EL-AAM, filed applications to defer demand-side
management program expenditures and, in certain
instances, net lost revenues, for recovery in the rates
to be set in Case No. 94-996-EL-AIR;
13. Whereas, all of the above-referenced demand-side
management deferral applications were consolidated with
Case No. 94-996-EL-AIR (Tr. Vol. I, pp. 14, 15 in Case
No. 94-996-EL-AIR);
14. Whereas, the Staff conducted its analysis of OPCO's
application in Case No. 94-996-EL-AIR, Case No. 94-
1198-EL-AAM, Case No. 94-1810-EL-AAM, Case No. 94-1811-
EL-AAM, Case No. 94-2031-EL-AAM, Case No. 94-2032-EL-
AAM and Case No. 94-2033-EL-AAM. The base rates
established by this Settlement Agreement resolve all of
the matters contained in those filings and allow for an
amortization of certain costs discussed later in this
Settlement Agreement.
15. Whereas, the Commission, on March 16, 1994, commenced a
proceeding initiating a mid-year adjustment and annual
adjustment concerning OPCO's electric fuel component
(EFC), which proceeding was docketed as Case No. 94-
101-EL-EFC;
16. Whereas, the OCC, IEUOH and UMW were granted intervenor
status in that proceeding;
17. Whereas, in OPCO's 1992 EFC proceeding, Case No. 92-01-
EL-EFC, the Commission approved and accepted a
Stipulation and Recommendation which, among other
provisions, provided for good faith negotiations to
resolve any dispute concerning the cost of affiliate
coal burned at OPCO's Muskingum River Plant and
Cardinal Units 1 and 2 after November 30, 1994;
18. Whereas, certain terms of the Stipulation and
Recommendation in Case No. 92-01-EL-EFC remain in
effect;
19. Whereas, by Entry dated November 10, 1994, the
Commission set the EFC rate to be charged by OPCO
during the six-month period beginning with December
1994 billing, at 1.396909 cents/Kwh, which reflects a
fuel component of 1.486392 cents/Kwh, subject to a full
review in OPCO's annual EFC hearing in that docket;
20. Whereas, by Entry of July 11, 1994, the Commission
initiated a review, pursuant to Section 4913.05, Ohio
Revised Code, of the continued appropriateness and
progress in implementing the Company's environmental
compliance plan, which the Commission had approved in
November 1992, which review was docketed as Case No.
94-1181-EL-ECP;
21. Whereas, the OCC, IEU-OH and UMW sought and were
granted intervention in Case No. 94-1181-EL-ECP; and
22. Whereas, the Commission initiated open, informal
roundtable discussions of issues concerning competition
in the electric utility industry and promoting
increased competitive options for Ohio businesses that
do not unduly harm the interests of utility company
shareholders or ratepayers.
NOW THEREFORE, The Signatory Parties stipulate, agree and
recommend that the Commission make the following findings
and issue its Opinion and Order in these proceedings in
accordance with the following:
IV. BASE RATES
1. Revenue Increase
OPCO shall be granted an increase in annual electric
jurisdictional revenues in the amount of sixty-six
million dollars ($66,000,000). The revenue increase
shall commence on Wednesday, March 15, 1995, or as soon
thereafter as possible, on a service-rendered basis.
2. Deferrals and Amortizations
The parties agree that the Applicant should be allowed
to account, for financial reporting purposes, the Gavin
Scrubber expenses in accordance with the accounting
treatment proposed by the Applicant in Case Nos. 94-
996-EL-AIR and 94-1198-EL-AAM.
The parties agree that the Applicant should be allowed
to amortize, over a four year period, for financial
reporting purposes, the costs recorded by the Applicant
for deferred Gavin Scrubber expenses (both lease and
non-lease expenses), the deferred Other Post Retirement
Employee Benefits (OPEB) expense, the deferred demand-
side management expenses (including program
expenditures, carrying charges, net lost revenues and
shared savings), the actual rate case expense, the pre-
December 1, 1986 Tidd Pressurized Fluidized Bed
Combustion deferred balance, and the Dumont Test Center
deferred balance. The amortization period for those
deferrals should begin the day that the base rates from
Case No. 94-996-EL-AIR become effective. In the event
that the Company seeks to place new base rates into
effect prior to the conclusion of the four-year
amortization period, OPCO reserves the right to request
recovery in those new base rates of the unamortized
amounts associated with the deferred 1994 and 1995 (to
the extent the earnings test set out in the
Commission's March 25, 1993 Entry in Case No. 93-384-
EL-AAM is met) OPEB expense, the deferred demand-side
management expenses, the deferred Gavin Scrubber non-
lease expenses and the pre-December 1, 1986 Tidd
Pressurized Fluidized Bed Combustion expense and the
remaining Signatory Parties agree not to oppose such
recovery, but do reserve the right to verify the amount
of the unamortized balances and the right to litigate
the period of time over which those unamortized
balances should be amortized. In the event that the
Company seeks to place new base rates into effect prior
to the conclusion of the four-year amortization period
of the deferred Gavin Scrubber lease expenses, OPCO
reserves the right to seek recovery in those new base
rates of the unamortized amount and the remaining
Signatory Parties reserve the right to oppose such
recovery. In the event that the Company seeks to place
new base rates into effect prior to the conclusion of
the four-year amortization period, OPCO will not seek
recovery in those new base rates of any unamortized
amounts associated with the 1993 OPEB expense, the
deferred Dumont Test Center and the deferred rate case
expense.
The parties agree that the Applicant should be allowed
to amortize, for financial reporting purposes, the
amount of its December 1990 deferred contribution to
the Voluntary Employee Beneficiary Association,
including earnings thereon. The amortization period
should begin the day that the base rates from Case No.
94-996-EL-AIR become effective either for a period not
to exceed eighteen years, or a period which coincides
with the ending date of the Applicant's booking of its
amortization on its OPEB-related transition benefit
obligation (TBO). However, if the Company amortizes
the December 1990 VEBA contribution over a period of
less than eighteen years, the Signatory Parties will
not be bound by the higher annualized amortization
expense for ratemaking purposes in any future base rate
case. The Signatory Parties also reserve the right to
seek to exclude the earnings from the unamortized
balance in any future base rate case.
3. Demand-Side Management
The parties agree that the Applicant should be allowed
to defer, for financial reporting purposes, demand-side
management expenses in accordance with the accounting
treatment proposed by the Applicant in Case Nos. 94-
1810-EL-AAM, 94-1811-EL-AAM, 94-2031-EL-AAM, 94-2032-
EL-AAM and 94-2033-EL-AAM. All demand-side management
deferrals and carrying costs should cease as of the day
prior to the day that rates from Case No. 94-996-EL-AIR
are placed into effect.
The revenue increase of $66,000,000 includes funding
for an annualized demand-side management activity level
of $2,961,148 consisting of program expenditures. This
amount should be amortized equally over each twelve
month period that it is collected. If the Company
engages in a higher level of demand-side management
activity for the programs that are included in the
$2,961,148 or engages in new programs that have not
been reviewed and approved by the Commission, it must
seek authority pursuant to guidelines established in
Case No. 90-723-EL-COI, or other guidelines established
by the Commission, to defer such demand-side management
program expenditures, carrying charges, net lost
revenues and shared savings for potential recovery in
the Company's next base rate case.
4. Coal Tax Credit
The revenue increase reflects the effect of the tax
credits granted to OPCO under Section 5727.391, Ohio
Revised Code.
5. Depreciation Accrual Rates
The depreciation accrual rates to be used by the
Company to determine depreciation expense shall be as
set forth on the attached Exhibit 2, "Depreciation
Accrual Rate By Plant Account," which are the Staff's
recommended depreciation accrual rates. These
depreciation accrual rates shall be implemented
concurrent with the new rates being placed in effect in
Case No. 94-996-EL-AIR. The adoption of these
depreciation accrual rates resolves the issues raised
in the Company's application to change depreciation
accrual rates in Case No. 94-803-EL-AAM.
6. Revenue Distribution
The revenue increase shall be distributed to the
customer classes, and to the rate schedules within said
customer classes, as shown on the attached Exhibit 3
titled "Distribution of Settlement Revenue Increase."
That exhibit specifies the revenue distribution agreed
to by the Signatory Parties, and that revenue
distribution represents a reasonable resolution of the
positions taken by all of the parties in Case No. 94-
996-EL-AIR.
7. Rate Schedules
The demand, energy and customer charges resulting from
the distribution of the revenue increase to the rate
schedules are shown on the attached Exhibit 4 titled
"Rate Schedules Reflecting Revenue Distribution of
$66,000,000." The Signatory Parties submit that those
rate schedules represent a reasonable resolution of the
positions taken by all of the parties in Case No. 94-
996-EL-AIR, and that the rate schedules produce a
revenue increase of no more than $66,000,0000.
8. Staff Report Recommendations
The Company agrees to implement recommendations found
in the "Management and Operations Review" and "Consumer
Services Department" sections of the Staff Report of
Investigation as set forth in Exhibit 5 hereto.
9. Construction Work In Progress Surcredit Rider
The Company agrees to implement a Construction Work in
Progress (CWIP) surcredit rider of 0.024172%
concurrently with base rates resulting from Case No.
94-996-EL-AIR and, which will remain in effect until
the amount of revenues determined by the Commission to
have been collected, as a result of the CWIP allowance
in Case No. 85-756-EL-AIR, are returned to ratepayers.
During the mirroring period, the Company will accrue
carrying charges on the dollar value of the projects
previously included as CWIP and will maintain the
proper and necessary subsidiary records for all amounts
collected and all amounts returned to customers through
the surcredit rider.
10. Increased Competitive Options
The Company supports the concept of electric utility
retail customers being able to select electricity
suppliers on the basis of price and service quality.
The Company agrees, on behalf of itself and on behalf
of any agent, not to use any restrictions on the
provisions of transmission services to ultimate
consumers contained in a tariff or rate schedule
approved by the Federal Energy Regulatory Commission,
as a defense to any action by a retail customer to
obtain retail wheeling or as a reason to resist a
requested retail wheeling transaction. Nothing in this
section shall be construed as taking a position on the
question of whether state or federal regulatory
authorities have the jurisdiction to authorize
transmission services for retail customers.
Ohio Power will continue to evaluate the feasibility of
increasing the availability of interruptible service to
current firm customers as the system approaches the
time when additional generating capacity is needed.
V. EFC RATE
1. Definitions:
a. "Gavin Cap" means the Gavin Station Cap
established in paragraph 2 of the Stipulation and
Recommendation approved by the Commission in Case
No. 92-01-EL-EFC.
b. "Operating Losses" means, for the period June 1,
1995 through November 30, 1998, affiliate coal
costs and/or non-affiliate coal costs, on an "as
burned" basis, that would be included in "Actual
Net Fuel Costs Incurred" on PUCO Form ER-15-S, but
would not be recoverable under the fixed EFC rate
of 1.465 cents/Kwh established in Section V.2
below. For the two-year period after November 30,
1998, "Operating Losses" means the actual cost of
coal from the Muskingum and/or Windsor Mines, on
an "as burned" basis, that would be included in
"Actual Net Fuel Costs Incurred" on PUCO Form ER-
15-S but, pursuant to Section V.5 below, would not
be recovered under the EFC rates in effect during
that period.
c. "Ohio Proportional Jurisdictional Share" for the
Windsor Mine and Muskingum Mine shall each be 43%
which approximates the Ohio jurisdictional share
of each of the Cardinal (Units 1 & 2 combined) and
Muskingum Plants at the end of November 1994.
That share will be used to determine the
limitation on recovery of such mine's
Investment/Shutdown Costs from the EFC-
jurisdictional ratepayers.
d. "Ohio Proportional Jurisdictional Share" for the
Meigs Mines retains the meaning as set forth in
3 of the Stipulation and Recommendation in Case
No. 92-01-EL-EFC.
e. "Investment/Shutdown Costs" regarding the Meigs,
Muskingum or Windsor mining operations means
OPCO's respective investment in each of those
affiliate mining operation's assets plus all
related liabilities, including but not limited to
workers' compensation claims, black lung claims,
post-employment benefits, reclamation costs,
layoff benefits, UMWA funds withdrawal
obligations, leased asset buyouts and any direct
closure-related costs.
f. "Deferred Fuel" means the sum of: 1) the
difference between "Actual Net Fuel Costs
Incurred" and the "Actual Net Fuel Revenues
Billed" as used on PUCO Form ER-15-S; 2) the
"Incremental System Loss Cost to be Recovered by
Utility when positive, or (Credited) to Consumers
when negative" as used on PUCO Form ER-16-S; 3)
the remaining balance to be recovered or refunded
through the Reconciliation Adjustment associated
with the 164 cents/MMBTU Cap computed through
November 30, 1994; and 4) the amount to be
recovered or refunded through the Reconciliation
Adjustment associated with the Gavin Cap computed
for the six-month period December 1, 1994 through
May 31, 1995. The deferred amounts associated
with the 164 cents/MMBTU Cap and the Gavin Cap
will be calculated pursuant to the Stipulation and
Recommendation in Case No. 92-01-EL-EFC. The
Deferred Fuel amounts, as recorded on the books of
the Company at May 31, 1995, represent the
jurisdictional balances which would be subject to
inclusion in the calculation of the Reconciliation
and System Loss adjustments which would have
become effective with EFC rates implemented in
June and December 1995, absent this Settlement
Agreement.
2. Fixed EFC Rate
Effective with the June 1995 billing cycle and
continuing through the November 1998 billing cycle,
OPCO's EFC rate will be fixed at 1.465 cents/Kwh. The
.22 mills/Kwh credit established by the Stipulation and
Recommendation in Case No. 92-01-EL-EFC terminates as
of the date the fixed EFC rate becomes effective.
OPCO's actual balance of Deferred Fuel as of May 31,
1995, which balance will be verified by the Financial
Auditor in Case No. 95-101-EL-EFC, will be recovered
from or flowed back to OPCO's EFC customers over the
twelve-month period beginning with the June 1995
billing cycle pursuant to a tariff rider as shown in
Exhibit 4 hereto.
3. New Programs or Taxes
Notwithstanding the "EFC Rate" portion of this
Settlement Agreement, the Signatory Parties reserve the
right to seek changes, up or down, to the fixed EFC
rate for any changes in costs resulting from new
programs imposed by Federal or State government or
changes in tax laws imposed by Federal or State
government, which costs cannot be recovered other than
through EFC rates pursuant to Ohio statutes and
Commission regulations.
4. SO2 Allowance Credits
For the four-year period of January 1, 1995 to December
31, 1998, OPCO shall retain the jurisdictional share of
SO2 allowance credits, on a ten-year levelized basis,
arising from the sale of allowances to OPCO's
affiliated companies. Such allowance credits, on a
ten-year levelized basis, shall be adjusted as actual
information becomes known. The Signatory Parties
reserve for future resolution the issue of the
appropriate ratemaking treatment of SO2 allowance
credits or charges arising from the sale and/or
purchase of allowances to/from any OPCO non-affiliate
company, including EPA auctions.
5. Operating Losses After 1998
Commencing with the December 1998 billing cycle, if
OPCO's Muskingum Mine or Windsor Mine are still
operating as affiliates of OPCO, OPCO shall be
permitted to accumulate deferrals, during that period
of operation, for a period of two years from the
beginning of that billing cycle, for recovery under the
Gavin Cap established in the Stipulation and
Recommendation in Case No. 92-01-EL-EFC, any Operating
Losses resulting from application of the Commission-
approved EFC rates for that period, which EFC rates
shall be based, as it relates to the Muskingum and
Windsor Mines, on the applicable statutes and
Commission regulations then in effect, for comparable
quality coal at market prices. Subsequent to November
30, 1998, OPCO agrees to waive any claim of preemption
or lack of Commission jurisdiction to determine an EFC
rate as if the cost of coal from the Muskingum and
Windsor Mines were at market prices for comparable
quality coal.
6. Use of Generally Accepted Accounting Principles
OPCO agrees not to defer operating expenses or
depreciation and amortization expense on the books of
Southern Ohio Coal Company relating to its Meigs Mines,
which would not be deferred under generally accepted
accounting principles, for the purpose of facilitating
OPCO's recovery of the Ohio Proportional Jurisdictional
Share of its Windsor Mine or Muskingum Mine
Investment/Shutdown Costs. This provision does not
preclude the Company from practicing the procedure of
monthly sales price normalization.
7. Gavin Cap Application
The EFC rate which will be in effect after the
expiration of the 1.465 cents/Kwh EFC rate established
in Section V.2. will reflect the Gavin Cap, including
the effect of any price adjustments to that Cap which
are calculated pursuant to Appendix A of the
Stipulation and Recommendation in Case No. 92-01-EL-
EFC.
8. Recovery of Operating Losses
The Gavin Cap will be available to OPCO to recover
first any Operating Losses deferred hereunder, then
unrecovered fuel costs as provided for in paragraph 3
of the Stipulation and Recommendation approved by the
Commission in Case No. 92-01-EL-EFC, and then the Ohio
Proportional Jurisdictional Share of OPCO's
Investment/Shutdown Costs associated with the
Muskingum, Windsor and Meigs Mines in that order.
Unrecovered fuel costs and operating losses (if any)
resulting from nonjurisdictional, off-system, wholesale
sales and untariffed non-EFC retail sales shall not be
recovered from jurisdictional EFC customers. OPCO
shall make a good faith effort at maximizing its
recovery of its Investment/Shutdown Costs during the
period of the fixed EFC rate.
9. Fuel Acquisition During Fixed EFC
The Signatory Parties believe that the fixed EFC rate
represents, for settlement purposes, a reasonable level
of recovery for fuel costs to be incurred by the
Company during the period June 1, 1995 through November
30, 1998, and provides the Company with incentives and
the flexibility to cost-effectively manage its fuel
supply. Therefore, all fuel costs incurred during this
period and from December 1, 1994 through May 31, 1995
shall be deemed prudent and not be subject to
disallowance, and Operating Losses accumulated pursuant
to this Settlement Agreement are deemed recoverable.
To the extent that the fuel-related activities
undertaken during this period are found to affect fuel
costs or activities after November 30, 1998, the
resulting effects on fuel costs or activities shall be
evaluated on an ongoing basis from and after November
30, 1998 and considered in the Commission's decisions
regarding the establishment of future EFC rates.
Provided, however, if the Windsor and/or Muskingum
Mines continue to operate as affiliates of OPCO after
November 30, 1998, to the extent that the fuel-related
activities undertaken during the period December 1,
1994 through November 30, 2000 relative to those mines
are found to affect fuel costs or activities after
November 30, 2000 the resulting effects on fuel costs
or activities shall be evaluated on an ongoing basis
from and after November 30, 2000, and considered in the
Commission's decisions regarding the establishment of
future EFC rates.
10. Target Inventory Levels
OPCO shall be deemed to have met its target inventory
levels pursuant to 5 of the Stipulation and
Recommendation in Case No. 92-01-EL-EFC.
11. Fuel Acquisition Prudency
All delivered fuel costs incurred by OPCO during the 3-
year period established in paragraph 1 of the
Stipulation and Recommendation in Case No. 92-01-EL-EFC
shall be deemed to be prudent and not subject to
disallowance.
12. Treatment of Prior EFC Surplus
Any surplus realized by OPCO during the 3-year period
established in paragraph 1 of the Stipulation and
Recommendation in Case No. 92-01-EL-EFC will be used to
offset any Operating Losses accrued under this
Settlement Agreement.
13. Fuel Procurement Activities and Practices
The Company has the discretion and flexibility to
manage its affiliate mining operations and to manage
its other fuel procurement policies and practices.
During the period December 1, 1994 through November 30,
1998, the Signatory Parties agree that they will not
challenge OPCO's exercise of such management discretion
and flexibility. Such discretion and flexibility shall
be exercised in a manner reasonably responsive to
economic conditions prevailing at that time and in
accordance with a "just and reasonable" standard.
Except as stated herein, statutorily required or
authorized regulatory review of the Company's fuel
procurement practices and procedures remains unchanged
by this Settlement Agreement. However, consistent with
paragraph V.9 above, the Signatory Parties agree and
recommend that any challenge to the reasonableness of
OPCO's performance under the provisions of this
Settlement Agreement will not occur prior to November
30, 1998 or November 30, 2000, as applicable. The
Signatory Parties acknowledge that the exercise by OPCO
of its management discretion and flexibility during
this period may require OPCO to seek approval of the
Securities and Exchange Commission or the Federal
Energy Regulatory Commission (or any successor
agencies). The Signatory Parties agree not to contest
filings seeking approvals of such activities from the
SEC or the FERC (or any successor agencies) in any
proceeding related to approvals sought by OPCO with
respect to such actions. While the Signatory Parties
may intervene in any such proceeding which either of
those Federal agencies might initiate with regard to
the discretion and flexibility discussed above, they
agree not to file any pleadings in such proceeding
unless a non-Signatory Party has intervened. The
Signatory Parties do not intend to bind the Commission
by the preceding two sentences.
14. OPCO's Environmental Compliance Plan
The Signatory Parties agree and submit that OPCO's ECP
complies with the requirements of Section 4913.04(A),
Revised Code and the Signatory Parties recommend that
the Commission reaffirm its approval of the proposed
ECP Plan, which among other items, does not seek to
fuel switch Cardinal 1 or Muskingum River Units 1-4 to
low-sulfur coal at the beginning of the Phase I period
established under the Clean Air Act Amendments. With
respect to the requirement of Section 4913.04(A)(5)(c),
which requires the Commission to consider whether the
Company has evaluated "means of reducing compliance
costs through the acquisition, sale, transfer, and
utilization of allowances," the Signatory Parties
reserve, and recommend that the Commission should
reserve, judgment on the reasonableness of OPCO's
emission allowance trading strategy. The Company
agrees to undertake an analysis of the full spectrum of
available emission allowance trading opportunities
(beyond the EPA auction position) to develop a strategy
for trading emission allowances, and to report fully
its findings in Case No. 95-101-EL-EFC. As a related
matter, if during the term of the fixed EFC rate
established by this agreement, the parties agree and/or
the Commission orders the Company to flow back to
ratepayers emission allowance proceeds resulting from
the Company's emission allowance strategy and
activities relative to non-affiliate allowance
transactions, including EPA auctions, the fixed EFC
rate may be subject to reduction by a flow back of such
proceeds.
15. Ohio Proportional Jurisdictional Share Status Report
OPCO will annually submit to the Commission and the
intervenors in Case No. 94-101-EL-EFC as part of its
future EFC filings an accounting of the then current
status of its levels of the Ohio Proportional
Jurisdictional Share, and levels of Investment/Shutdown
Cost remaining and recovered for the Windsor, Meigs and
Muskingum Mines and levels of Operating Losses incurred
and recovered.
16. Audit
For purposes of this Agreement, the books, accounts and
records of any affiliate mining operation affected by
this agreement shall be made available to the
Commission and the Signatory Parties by Ohio Power in
the same manner as the books, accounts and records are
available to the Commission under Sections 4905.05,
4905.06 and 4901.16 of the Ohio Revised Code.
17. Shutdown Cost Recovery
There will be no recovery by OPCO from EFC
jurisdictional ratepayers of Operating Losses or
Investment/Shutdown Costs associated with the Meigs,
Muskingum and Windsor Mines other than through this
Settlement Agreement and the Stipulation and
Recommendation in Case 92-01-EL-EFC.
18. Effect of Prior Fuel Settlement
The terms and conditions as set forth in the
Stipulation and Recommendation in Case 92-01-EL-EFC
will continue to apply except as changed by this
Settlement Agreement.
19. Audit Report Recommendations
The Company agrees to accept the following
recommendations from the Report of the
Management/Performance Audit in Case No. 94-101-El-EFC:
AEPSC should revise the Request for Quotation
forms to provide suppliers the opportunity
for bundling emission allowances with their
coal bids.
AEPSC should update the Coal Procurement
Manual and the Coal Procurement Procedures
Manual to incorporate emission allowances and
the Ohio coal credit.
The next management/performance auditor
should determine whether the quality of
shipments under the Arch agreement has
improved and whether additional AEPSC actions
are appropriate.
AEPSC should include barge rates for OPCO
plants in its 1995 comparison of third party
and affiliate barging costs.
The Controller, or his designee, should be
responsible for the development of a single
emission allowance forecast for use
throughout the entire company.
In addition, OPCO agrees to comply with the
Commission's order in Case No. 93-101-EL-EFC to
evaluate the economics of developing internal
capability for administering emission allowance trading
versus utilizing consultants and present its
conclusions for review by the Management/Performance
Auditor in Case No. 95-101-EL-EFC.
The Company further agrees to adopt the following
recommendations from the financial performance Report
on the Electric Fuel Component in Case No. 94-101-EL-
EFC:
We recommend that the next financial auditor
examine the results of the Company's review
of the Gavin plant coal pile base and
determine the propriety of any adjustments
made.
We recommend the net amount available for
acceleration (see page 17 [of that Report])
be increased by the PUCO jurisdictional
amount related to Company Owned Life
Insurance death benefits as discussed at page
19 [of that Report].
20. Pending Fuel Case
The provisions in this portion of the Settlement
Agreement reflect a full resolution of any issues which
otherwise might have been litigated in Case No. 94-101-
EL-EFC. It is understood that the
Management/Performance Audit and Financial Audit
Reports filed in that docket have not been subject to
cross-examination; nor have any of the parties in that
docket presented any testimony in rebuttal to any
conclusions or recommendations contained in either
report. Therefore, the Signatory Parties agree not to
be bound by nor to rely on either of those Reports, or
any portion thereof including the recommendations, in
any future proceeding before the Commission or in any
other forum; provided, however, OPCO agrees to the
recommendations noted in paragraph V.19, above. The
Signatory Parties reserve the right to raise in any
OPCO EFC proceeding reviewing the period after the
fixed EFC rate any recommendation contained in the
audit report in Case No. 94-101-EL-EFC, for prospective
application. However, in such future EFC proceedings,
no reliance will be placed on the audit reports filed
in Case No. 94-101-EL-EFC.
21. Availability of Records
If OPCO enters into a transaction in which it sells
either the Windsor or Muskingum Mines and takes back
from the purchaser of the mine a coal contract, OPCO
will make available to the Signatory Parties all
records relevant to OPCO's recovery of unrecovered
Operating Losses and Investment/Shutdown Costs and all
records related to operating losses and
investment/shutdown costs relied upon by OPCO to
ascertain the reasonableness of said costs charged to
it by the buyer.
22. Shutdown of Affiliate Mines Not Required
Nothing in this Settlement Agreement requires OPCO to
shut down any of its affiliate mines.
VI. GENERAL PROVISIONS
1. Cost of Compliance With Acid Rain Control Requirements
Pursuant to Section 4933.34, Ohio Revised Code, each
electric light company is required to separately and
conspicuously indicate on each customer bill the total
monthly charge attributable to compliance with acid
rain control requirements. Pending the adoption of
rules by the Commission establishing the method for
calculating the costs of compliance, the Commission
should find that $0.00325/kilowatthour in base rates is
attributable to Phase I acid rain control requirements,
which is the result of federal, not state, action.
Exhibit 6 to this Settlement Agreement is the
Residential Bill Form containing the required message,
Commission approval of which is required by Section
4901:1-1-03(B)(1), Ohio Administrative Code.
2. Customer Notices
The Commission should approve the text and form of the
proposed bill insert notices to customers affected by
the change in rates and charges as set forth in the
Exhibit 7 titled "Proposed Customer Notice." Further,
the Company should be authorized to immediately
commence notification to its affected customers, to be
accomplished as soon as possible under the Company's
billing schedule. The proposed customer notices
attached hereto comply with the requirements of Rule
4901:1-1-03, OAC, Duty to Disclose Tariffs.
3. Waiver of Cross-Examination and Admission of Exhibits
Each of the Signatory Parties, subject to the
provisions of the paragraph titled "Scope", waives
cross-examination of all of the witnesses of the other
Signatory Parties. The Signatory Parties agree that
all of the pre-filed testimony and exhibits of the
Signatory Parties be admitted into the respective
records of the proceedings in which they are submitted.
4. Affidavits of Publication
Subject to subsequent review and acceptance by the
Signatory Parties, the affidavits of publication for
the local public hearings are to be filed as late-filed
exhibits in Case No. 94-996-EL-AIR, to demonstrate that
proper notice of such hearings was published in
substantial compliance with the Commission's rules.
Affidavits of publication in Case Nos. 94-101-EL-EFC
and 94-1181-EL-ECP will be filed in those dockets.
5. Scope
This Settlement Agreement is submitted for purposes of
resolving all of the issues in Case Nos. 94-996-EL-AIR,
94-803-EL-AAM, 94-1198-EL-AAM, 94-1810-EL-AAM, 94-1811-
EL-AAM, 94-2031-EL-AAM, 94-2032-EL-AAM, 94-2033-EL-AAM,
94-101-EL-EFC, 94-1181-EL-ECP, and issues related to
this Settlement Agreement in future Ohio Power EFC
cases. The agreement of the Signatory Parties
reflected in this document is expressly conditioned
upon its acceptance in its entirety and without
alteration by the Commission. In the event the
Commission or any appellate court should modify or
reject all or any part of this Settlement Agreement,
the assent of the Signatory Parties may be withdrawn,
in which case this Settlement Agreement shall be null
and void. Any such withdrawal of assent must be
preceded by the withdrawing party filing an application
for rehearing of the Commission's order and must be
made no later than ten days after the issuance of any
Entry on Rehearing or denial of rehearing by operation
of law. In that event, it is further agreed that any
Signatory Parties may reopen any of these proceedings,
and present such testimony to pursue its rights as
fully as if this Settlement Agreement had not been
executed. The Signatory Parties agree with and intend
to support the reasonableness of this Settlement
Agreement before the Commission and in any appeal from
the Commission's adoption or enforcement of this
Settlement Agreement. If not finally adopted without
modification by the Commission, or if modified or
rejected by the Supreme Court of Ohio, this Settlement
Agreement shall not prejudice any of the positions
taken by any Signatory Party on any issue before the
Commission in these or any other proceedings, and shall
not constitute an admission of any fact by any of the
Signatory Parties, and shall not be admissible evidence
in these or any other proceedings.
This Settlement Agreement represents a reasonable
compromise and should not be understood to reflect the
positions which the Signatory Parties would have taken
if all the issues in the proceedings had been
litigated. As with most settlements reviewed by the
Commission, the willingness of the Signatory Parties to
sponsor this document jointly is predicated on the
reasonableness of the Settlement Agreement taken as a
whole. No provision of the Settlement Agreement is to
be relied upon in any manner in any proceeding before
the Commission or any other forum except to enforce the
terms of this Settlement Agreement.
This Settlement Agreement, along with any other
agreement(s) docketed in these proceedings or expressly
referenced in this document, represent the entire
agreement of and between the Signatory Parties with
respect to all of the issues resolved herein; the
Signatory Parties further represent that no agreements
or understandings, whether oral or written, have been
reached or exchanged in order to gain the assent of any
of the Signatory Parties to sign or not oppose this
agreement.
To the extent any questions about the meaning of this
Settlement Agreement arise, the Signatory Parties will
attempt in good faith to resolve the question to their
mutual satisfaction. The Signatory Parties shall be
given a reasonable opportunity to address any questions
about the meaning of the Settlement Agreement prior to
the submission of any question to the Commission.
VII. CONCLUSION AND RECOMMENDATION
The parties agree that the foregoing Settlement Agreement is
in the best interests of all parties, and urge the
Commission to adopt the same.
The undersigned respectfully join in requesting the
Commission to issue its Opinion and Order in these
proceedings approving and adopting this Settlement
Agreement, in accordance with the terms set forth above.
AGREED, THIS 28th DAY OF FEBRUARY, 1995
__/s/ Marvin I. Resnik_______
Edward J. Brady
Marvin I. Resnik
Kevin F. Duffy
F. Mitchell Dutton
American Electric Power Service Corporation
1 Riverside Plaza
Columbus, Ohio 43215
(614) 223-1608
Attorneys for Ohio Power Company
_/s/ Langdon D. Bell_________
Langdon D. Bell, Esq.
Bell, Royer & Sanders Co., LPA
33 South Grant Avenue
Columbus, Ohio 43215-3927
Attorney for IEC
_/s/ Colleen L. Mooney_______
Colleen L. Mooney, Esq.
Office of Consumers' Counsel
77 South High Street
Columbus, Ohio 43266-0550
Attorney for OCC
_/s/ Richard P. Rosenberry___
Richard P. Rosenberry, Esq.
Emens, Kegler, Brown, Hill & Ritter
65 East State Street
Columbus, Ohio 43215
Attorney for IEU-OH
_/s/ Steven Nourse___________
Steven Nourse, Esq.
Public Utilities Commission of Ohio
180 East Broad Street
Columbus, Ohio 43215
Attorney for Staff
_/s/ F. Bruce Abel___________
F. Bruce Abel, Esq.
885 Greenville Avenue
Cincinnati, OH 45246
Attorney for Globe
_/s/ Robert A. Ganton________
Robert A. Ganton, Esq.
Office of the Judge Advocate General
Department of the Army
901 North Stuart Street
Arlington, VA 22203-1837
Attorney for Dept. of Defense, et al.
_/s/ Eugene Trisko___________
Eugene Trisko, Esq.
Thomas M. Myers
United Mine Workers
P. O. Box 596
Berkeley Springs, WV 25411
Attorney for UMW
