Notice of Capacity Self-Supply Alternative for Qualifying Competitive Service Providers

Notice of Capacity Self-Supply Alternative for Qualifying Competitive Service Providers

NOTICE OF CAPACITY SELF-SUPPLY ALTERNATIVE FOR QUALIFYING COMPETITIVE SERVICE PROVIDERS On October 1, 2013, Appalachian Power Company ( APCo ) filed with the Federal Energy Regulatory Commission ( FERC ) a Settlement that includes a proposal to enable qualifying Competitive Service Providers ( CSP ) to self-supply a certain amount of renewable capacity prior to the 2016/2017 Delivery Year established by PJM Interconnection, L.L.C. ( PJM ). The Renewable Self-Supply Program, which is outlined below, will become effective once the FERC Settlement becomes effective in accordance with its terms. 1. For the period prior to the 2016/2017 PJM Delivery Year, subject to the limitations specified below, the Renewable Self-Supply Program will be available to any CSP that is licensed and registered in APCo s Virginia service territory and that will serve retail load using renewable energy pursuant to VA Code 56-577 A.5. Such CSP shall be referred to herein as a Qualifying CSP. 2. APCo will establish an Open Season during which Qualifying CSPs may request the right to participate in the Renewable Self-Supply Program with respect to the 2013/2014, 2014/2015 and 2015/2016 PJM Delivery Years. The Open Season will be conducted on APCo s CSP web site (www.appalachianpower.com/service/choice), and interested Qualifying CSPs should monitor this web site for information relating to the Renewable Self-Supply Program and the implementation details of the Open Season. 3. The Open Season (for the unexpired portions of the 2013/2014, 2014/2015 and 2015/2016 PJM Delivery Years) will commence five (5) business days immediately after the FERC Settlement becomes effective and will remain open for five (5) business days. APCo will post notice of such effectiveness and confirm the date upon which the Open Season will take place. In the event that FERC does not approve the Settlement, APCo will post notice that the Renewable Self-Supply Program will not be implemented. 4. The Renewable Self-Supply Program is subject to limitations that apply to each individual Qualifying CSP ( Single CSP Limit ) and to the aggregate of the Qualifying CSPs ( Aggregate Limit ). Each Qualifying CSP shall have the right to request, during the Open Season, authorization to self-supply an amount of capacity that does not exceed the Single CSP Limit, and APCo has the right to reject any such request that exceeds the Single CSP Limit. The Single CSP Limit is set forth in Table A the Capacity Limitations table:

Table A Self-Supply Capacity Limitations PJM Delivery Year Single CSP Limit Aggregate Limit 2013/14 10.0 MW 15.0 MW 2014/15 12.5 MW 17.5 MW 2015/16 15.0 MW 20.0 MW Requests for authorization to self-supply capacity under the Renewable Self-Supply Program shall be in a form consistent with the following Table B: PJM Delivery Year Renewable Self-Supply Request Single CSP Limit 2013/14 X.X MW 10.0 MW 2014/15 X.X MW 12.5 MW 2015/16 X.X MW 15.0 MW 5. APCo will post the results of the Open Season on this web site no later than five (5) business days after the close of such Open Season. Any self-supply capacity awarded and confirmed as a result of the Open Season shall be deemed a Capacity Reservation. 6. For the unexpired portion of each Delivery Year set forth in Table A, APCO shall award and confirm as Capacity Reservations all requests to self-supply by a Qualifying CSP up to the Single CSP Limit set forth in Table A. However, in the event that, as a result of the Open Season, APCo receives, as to a Delivery Year, requests from Qualifying CSPs to selfsupply capacity that, in the aggregate, exceed the Aggregate Limit set forth in Table A, APCo will make the entire self-supply capacity available on a pro rata basis based on the amount of self-supply capacity requested by each such Qualifying CSP. By way of example, if during the Open Season, APCo receives requests from two Qualifying CSPs that each seek to self-supply 10 MW, based on the Aggregate Limit of 15 MW for the 2013/2014 PJM Delivery Year, APCo will award and confirm, and each CSP shall have, a Capacity Reservation of 7.5 MW. 7. In the event that, after the Open Season, Qualifying CSPs have not submitted requests that exceed the applicable Aggregate Limit, APCo s posting will state the amount of self- 2

supply capacity that remains available, and APCo will make available, on a first-come, first-served basis, any such remaining self-supply capacity to Qualified CSPs (including CSPs that are self-supplying renewable capacity during the Open Season). In such event, the Single CSP Limit shown on Table A shall not apply, and the prior Capacity Reservation shall be amended to reflect the additional self-supply capacity awarded pursuant to this paragraph 7. 8. Unless a Qualifying CSP indicates otherwise, each Capacity Reservation will continue through the 2015/2016 delivery year. For example, if a Qualifying CSP has a 10 MW Reservation of capacity for the 2013/2014 delivery year, the 10 MW of capacity will be counted toward the aggregate limit of 17.5 MW for the 2014/2015 delivery year, such that 7.5 MW of capacity reservations will remain available to other CSPs for the 2014/2015 delivery year. 9. The renewable capacity resources that will support a Qualifying CSP s Capacity Reservation will be deemed Qualified Capacity Resources. For each PJM Delivery Year in which a Qualifying CSP has been awarded a Capacity Reservation, such Qualifying CSP s Qualified Capacity Resources must be placed in APCo s Fixed Resource Requirement ( FRR ) plan before such Qualifying CSP may begin serving retail load located in APCo s Virginia service territory. For Capacity Reservations for the 2013/2014 PJM Delivery Year, such Qualified Capacity Resources must be placed in APCo s FRR plan within thirty (30) calendar days of the closure of the Open Season. Capacity Reservations for each subsequent PJM Delivery Year through the 2015/2016 Delivery Year must be supported by Qualified Capacity Resources not later than the first day of such PJM Delivery Year. 10. Any Capacity Reservation awarded in the Open Season that is not supported by Qualified Capacity Resources in accordance with Paragraph 9 will be re-allocated on a pro-rata basis to any other Qualifying CSP(s) that participated in the Open Season and that was awarded a Capacity Reservation less than the amount of self-supply capacity that was requested in the Open Season, subject to the Aggregate Limit. Any CSP receiving such Reallocated Capacity must place its Qualified Capacity Resources in APCo s FRR plan within thirty (30) calendar days of such reallocation in order to serve APCo retail load in the 2013/2014 PJM Delivery Year, and for the 2014/2015 and 2015/2016 Delivery Years, not later than the later of (a) the first day of each subsequent PJM Delivery Year for which such Qualifying CSP has been awarded a Capacity Reservation, and (b) the day that is thirty (30) calendar days after the reallocation. After the Open Season, a Qualifying CSP shall have the right to request any Reallocated Capacity that is not supported by Qualified Capacity Resources in accordance with the 3

prior sentence. APCO shall award such Reallocated Capacity to such Qualifying CSPs in the order that such Qualifying CSP(s) had requested such capacity. The reallocation process will continue until all the Reallocated Capacity has been assigned for the unexpired portion of the applicable PJM Delivery Year. 11. In the event that a Qualifying CSP includes in APCo s FRR plan an amount of Qualified Capacity Resources that exceeds the capacity needed to serve such Qualifying CSP s retail load, APCo will purchase such excess capacity, up to the greater of 5 MW or 10% of such Qualifying CSP s Qualified Capacity Resources. APCo will purchase such excess capacity at the prevailing clearing price established in the PJM Reliability Planning Model ( RPM ) capacity auction for the applicable PJM Delivery Year, less 10%. Notwithstanding the foregoing, however, in the event that the applicable RPM capacity price less 10% exceeds the price determined under the APCo wholesale capacity formula rate, which price is posted on APCo s web site, APCo will purchase such excess capacity at the APCo wholesale capacity formula rate price. For purposes of this paragraph and paragraph 12, the term retail load shall be defined as the average of the Qualifying CSP s total Peak Load Contribution ( PLC ) retail demand at the time of the PJM daily peaks during June, July, August, and September of the previous PJM Delivery Year, determined in accordance with PJM s 5CP PLC method defined by section 4.4 of PJM Manual 19. 12. The following additional conditions apply to each Qualifying CSP participating in this Renewable Self-Supply Program: a) A Qualifying CSP shall make reasonable efforts to ensure that the quantity of capacity that it self-supplies does not exceed the retail load that it expects to serve in each PJM Delivery Year. b) A Qualifying CSP shall be responsible for any charges or penalties imposed by PJM in connection with such Qualifying CSP s Qualified Capacity Resources. c) Notwithstanding paragraph 12.b, if APCo is assessed an FRR Capacity Deficiency Charge pursuant to Section F.2 of Schedule 8.1 of the PJM Reliability Assurance Agreement ( RAA ) for a given day, such charge will be ratably allocated between APCo and each Qualifying CSP in proportion to APCo s and the Qualifying CSPs respective contributions to the FRR Capacity Deficiency Charge for such day. The contribution of a Qualifying CSP s daily FRR Capacity Deficiency Charge will be determined by computing the positive difference, if any, between the average of the Qualifying CSP s total PLC retail demand (determined in accordance with PJM s 5-CP Peak Load Contribution method as described in 4

Section 4.4 of PJM Manual 19) and the Qualifying CSP s Qualified Capacity Resources that were on-line or available to be on-line on each day for which APCo was assessed an FRR Capacity Deficiency Charge. A Qualifying CSP will not be subject to an allocation of an FRR Capacity Deficiency Charge to the extent that, on the day for which such charge was assessed, one or more of the Qualifying CSP s Qualified Capacity Resources was not on-line or available to be on-line because such resources were (i) out of service for planned maintenance pursuant to a schedule that previously had been approved by PJM, or (ii) unable to deliver energy to the grid because of an outage of distribution and/or transmission facilities owned by parties other than the Qualifying CSP or any affiliate thereof. d) The amount of capacity associated with any APCo retail load served by a Qualifying CSP that exceeds the Capacity Reservation awarded to such Qualifying CSP shall be billed to such Qualifying CSP at the APCo wholesale capacity formula rate price, subject to any applicable refunds ordered by FERC. 13. During the period that this Renewable Self-Supply Program is in place, and upon reasonable notice, APCo agrees to make reasonable efforts to assist a Qualifying CSP seeking to remove and/or replace Qualified Capacity Resources in APCO s FRR plan (i) to facilitate an increase in such Qualifying CSP s Capacity Reservations, and (ii) for any other purpose, provided that the total amount of the Qualified Capacity Resources committed to APCo s FRR plan does not materially decrease. 14. For PJM Delivery Years beyond the period covered by this Renewable Self-Supply Program, CSPs desiring to self-supply capacity associated with their retail load will be subject fully to the FRR terms and conditions specified in the RAA, as such agreement may be amended from time to time. 15. Any questions concerning this Renewable Self-Supply Program should be addressed to: Mr. William A. Allen American Electric Power Service Corporation 1 Riverside Plaza Columbus, OH 43215 waallen@aep.com (614) 716-2303 5