The Public Utilities Commission of Ohio ruled that such agreements are legal but AEP's specific proposal was not beneficial for ratepayers. That leaves the door open for future plans, but such proposals would have to show a better benefit for customers.

AEP Ohio said it is evaluating the decision "and considering how to address those newly disclosed factors," spokeswoman Terri Flora said in an email.

"We have not made a decision about the future of our competitive generation assets," AEP spokeswoman Melissa McHenry said. "We are still evaluating strategic options and aren't going to speculate."

An equity analyst with UBS Investment Bank said in a post that the PUCO decision "likely seals" the fate of a sale or spinoff of AEP plants, mostly in Ohio. AEP has already hired investment bank Goldman Sachs Group Inc. (NYSE:GS) to explore the option, although the company said in January there is no timeline on a decision.

"We expect AEP to more seriously entertain any offers to divest its merchant fleet that arise out of its strategic review," the note said.

A potential buyer is Dynegy Inc., one of the foremost opponents of the AEP (NYSE:AEP) plan.

"Dynegy would be very interested," said Dean Ellis, managing director of regulatory affairs at the Houston-based company.

Dynegy CEO Bob Flexon previously told me the company has lobbied against AEP's plan at the Statehouse and in front of regulators. Dynegy is a merchant generator, not a utility. It can build or operate power plants as it chooses in different unregulated markets. Its first expansion into Ohio, a multi-billion dollar acquisition of Duke Energy (NYSE:DUK) plants, is expected to close next month. That will give the company more than 5,000 megawatts of power in Ohio.

Dynegy is especially interested in the plants in which it would already share a stake with AEP once the Duke deal goes through. AEP's share of power in the plants it jointly owns with Duke totals more than 2,100 megawatts of power. The Conesville, J.M. Stuart and W.H. Zimmer Ohio coal plants are part of AEP's expanded power purchase agreement proposal.

Dynegy would take a hard look at the plants if AEP does go forward with a sale or spinoff, Ellis told me.

"It makes more sense for us to take a look at the plants that we will have joint ownership in," he said.

There would likely be collaborative benefits for both companies in such a deal instead of bringing in a new, unfamiliar buyer, he said.

Would it be odd to do business with a company you've lobbied against? Not really, Ellis said – business is business.

"At the end of the day, if it's in the interest of AEP and Dynegy, it makes sense for both," he said.

Any transaction – and that's still a big if – would undergo a federal review.