Southwest Ohio Manufacturing: AES and Duke Energy Capacity Impacts
While much of Ohio's energy discussion centers around AEP Ohio and FirstEnergy, the massive industrial and manufacturing corridor stretching across Southwest Ohio—from Dayton down through Cincinnati—is facing its own unique cost hurdles in 2026. Industrial facilities operating within the AES Ohio (formerly DP&L) and Duke Energy Ohio distribution territories must combat compounding margin erosion. Specifically, grid modernization rate riders approved by the PUCO are inflating the fixed base delivery tariffs, while the underlying PJM wholesale market is pricing capacity and transmission congestion at record highs due to regional generation shortfalls.
Executive Impact
- →The PJM Capacity Squeeze: The recent PJM Base Residual Auctions (BRA) cleared at multiples of historic norms. For flat-load manufacturing plants on fixed retail contracts, these elevated capacity costs will be violently priced into all supply renewals negotiated through 2026 and 2027.
- →Utility Base Rate Riders: Both AES Ohio and Duke Energy rely on complex, non-bypassable rider structures (such as Distribution Decoupling or Smart Grid enhancements) to recover capital expenditures. These fixed delivery fees hit manufacturing particularly hard based on their massive monthly Peak Demand (kW) ratchets.
- →The Standard Service Offer (SSO) Trap: Allowing a commercial account to fall onto the respective utility's default SSO exposes the facility directly to PJM real-time and day-ahead market volatility, making budget forecasting functionally impossible for large industrials.
Strategic Mitigation for Southwest Ohio Manufacturing
With automotive, aerospace, and advanced manufacturing dominating the Dayton-Cincinnati corridor, treating energy solely as an unavoidable overhead expense is dangerous. Active load management and procurement are required to survive the current PJM rate cycle.
- Targeting the PLC Capacity Tag: Like all PJM participants, your Peak Load Contribution (PLC) defines your capacity obligations based on your facility's usage during the grid's top 5 highest hours of the summer. Proactive "Coincident Peak (CP)" load shedding during these high-probability summer afternoons removes the largest single supply line item from your wholesale contract for the following year.
- Block-and-Index Procurement: For massive industrial load profiles, traditional fixed-rate supply requires the supplier to embed heavy risk premiums. Executing a Block-and-Index strategy—where base load is secured at fixed wholesale blocks while un-hedged volume rides the day-ahead index—removes supplier margin and delivers the lowest absolute commodity cost possible for sophisticated buyers.
- Monetizing Demand Response (DR): Southwest Ohio lies directly inside PJM's capacity-constrained footprint. Industrial facilities willing to cleanly curtail load during regional grid emergencies (such as extreme winter freezes or summer heatwaves) are paid lucrative, six-figure clearing prices simply for being enrolled in a DR aggregator program.
Combating AES & Duke Demand Ratchets
While competitive suppliers handle the generation side of the bill, the delivery side remains strictly regulated by the PUCO. Because AES and Duke charge based on peak 15-minute demand intervals, manufacturing facilities must prioritize motor soft-starts, Variable Frequency Drives (VFDs), and equipment staging to flatten their load profiles and avoid massive utility distribution penalties.