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Q. Why does it cost AEP 20 times more to produce a megawatt day than other power companies?

by on June 5, 2012

A. Comparing the cost of AEP’s megawatt day to the auction-based market price for capacity is like comparing apples to oranges.

AEP’s price of $355 per megawatt day includes embedded costs for all of the generation units we have built. These embedded costs have been demonstrated and audited by the Public Utilities Commission of Ohio.

The price of $20 per megawatt day is not based on any power company’s cost. This price was set in 2009 during an auction that AEP didn’t participate in. At that point, there was more supply than there was demand for capacity (plants able to produce electricity). This drove prices down.

To make an analogy, it’s like building a house for $355,000. When the house is put up for auction, an offer comes in at $20,000 due to the market and the demand for houses. If the homeowner accepted the $20,000 offer, he would lose most of his investment.

Thanks Francesco C. for your question submitted by email.

  1. Duane Kiser permalink

    There is no fair transition to competition. I lived outside Dallas when Texas made this change. After more than 10 years electric prices have skyrocketed… The new electric vendors haven’t built a single new plant… Electric rates are based on your credit reference, the worst the reference the higher your bill… Electric is more than triple compared to what we pay AEP now… This whole plan needs to be stopped now…. Electric production should remain regulated…

  2. Illegal Monopolist permalink

    Nobody is going to feel sorry for you goons or accept your straw-man arguments if you CANT GET YOUR GENERATION UNITS BACK UP during the outages. You are a poorly managed company staffed by hillbillies, and a disservice to the people you claim to represent. You are an illegal monopoly and should be dismantled.

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