Office of the Ohio Consumers' Counsel

Home Skip Navigation Go to Section Menu

Electric

In the fall, Ohio began to plan a course for how electric generation service will be priced beginning in 2009 – either through a hybrid regulatory scheme or through the competitive market. Governor Ted Strickland proposed legislation that became Senate Bill 221. The legislation was amended and passed by the Ohio Senate and moved to the Ohio House of Representatives for consideration. Senate Bill 221 may set the foundation for much of the Office of the Ohio Consumers’ Counsel’s (OCC) future advocacy on behalf of Ohio’s electricity consumers. Through our testimony on the bill, the OCC sought consumer safeguards and protections to help achieve the lowest cost electricity option for residential consumers whether that is through regulated or market-based generation rates in each utility’s service territory.

(For additional information about S.B. 221 please see “Government Relations” section of this Annual Report).

Another statewide issue was the continuation of a review of regulatory barriers that have prevented residential and business consumers from producing their own electricity, known as distributed generation. Based on technical conferences held in 2006, four subjects were further examined through separate cases at the Public Utilities Commission of Ohio (PUCO): smart meters, standby rates, fuel diversity and the concept of an advanced energy portfolio. The OCC provided extensive comments and expert analysis in these proceedings. (These topics are further discussed in the “Managing Ohio’s Energy Future” section of this annual report.)

Finally, OCC advocated for consumers in the many rate stabilization proceedings to minimize rate increases under these plans. OCC’s concerns included the amount of the increases and the process used to develop the rates.

Pertaining to customers’ electric generation rates, Rate Stabilization Plans established in 2006 by the PUCO continued to raise many Ohioans’ monthly bills. By the end of 2007, the Supreme Court of Ohio issued decisions in the OCC’s appeals of the rate plans. In some of the decisions, the Court sent the cases back to the PUCO to correct errors, while another was vacated.

The second year of automatic generation rate increases began for customers of American Electric Power (AEP) in 2007. In January 2007, AEP’s Ohio Power customers saw an automatic 7 percent increase in the generation portion of their bill, while its Columbus Southern Power customers experienced an automatic 3 percent generation increase.

Beyond the automatic increases, several cases during the year were litigated at the PUCO based on allowances for additional rate increases in the utilities’ rate plans. For example, under its PUCO-approved rate plan, AEP was permitted during 2007 to impose additional increases to generation based on increased costs for areas such as environmental, regulatory requirements, taxes and security. Duke Energy had cases in 2007 involving several different surcharges established under its rate plan that allowed Duke to seek recovery of generation costs, including the Fuel and Purchased Power charge, the Annually Adjusted Component and the System Reliability Tracker.

electric distribution rate case since the 1990s for three FirstEnergy companies. Distribution rates – which generally recover a utility’s costs for local facilities and equipment such as poles and wires also allow for a reasonable profit for shareholders. These rates can account for 30 to 40 percent of a typical residential customer’s monthly electric bill. Rate cases involve a review of utility filings, requests for additional information and evidentiary hearings to allow parties to the case to question utility representatives. From the filing of an application to a final PUCO decision, the entire process typically lasts nine months.

In June 2007, FirstEnergy, serving 1.9 million residential customers through three northern Ohio utilities, requested to increase its distribution rates during 2009 by a total of $340 million per year – $162 million for Ohio Edison customers, $107 million for Cleveland Electric Illuminating customers and $71 million for Toledo Edison customers. FirstEnergy stated that because of the concurrent elimination of a regulatory transition charge, the net result will be lower rates for FirstEnergy customers.* However, the reduced charges were not connected with the case concerning FirstEnergy’s distribution rates. If a review of FirstEnergy’s rate increase request shows that distribution rates should increase by less than the $340 million requested by FirstEnergy, then customers would see a larger decrease on their bills.

As a participant in this and other utility rate cases on behalf of residential consumers, the OCC has several busy months ahead in 2008 to advocate before the PUCO that the rates charged to residential customers should be fair and reasonable.

AEP Rate Increase Avoided

In May 2007 the PUCO approved an agreement reached between AEP, the OCC, the staff of the PUCO and other parties that resulted in the withdrawal of the company’s 2006 proposal to raise customers’ distribution rates. AEP had proposed a rate increase in connection with a plan to address concerns about the reliability of AEP’s two Ohio electric utilities’ distribution service. Distribution service rates cover the poles and wires used to deliver electricity to customers’ homes. Under AEP’s 2006 proposal, the company would have raised customers’ rates by approximately $71 million over just the first 18 months of a five-year period. The OCC opposed AEP’s initial proposal since it would raise distribution rates at a time when they should have been frozen, and the utility had not demonstrated that reliability would be improved. State law requires that all Ohio electric utilities provide adequate service.

By withdrawing the proposal, a rate increase to consumers was avoided. The agreement also required AEP to spend $10 million for cycle-based tree trimming efforts. The $10 million was ordered by the PUCO in July 2006 as part of a related case involving AEP’s service reliability. At the time, the PUCO reserved oversight as to how the money would be spent and indicated that the company cannot recover this money from consumers.

Service reliability refers to the ability of AEP to keep consumers’ electricity on without interruption or the degradation of service quality. The OCC believed the $10 million should be targeted to tree trimming which should provide an improvement to customers’ service. A proactive, cycle-based program is an effort to ensure that trees are trimmed before they obstruct power lines and affect service. The OCC had been concerned that many current AEP efforts were reactive and based on electricity disruptions that had already occurred.

The OCC encouraged consumers to provide testimony at seven PUCO local public hearings on the AEP proposal that were held in January and February 2007. Consumers spoke about problems with AEP’s service reliability and the affordability of their electric service. — Case Nos. 03-2570-ELUNC, 06-222-EL-SLF

Green Power Programs Provide New Options for Electric Customers

When it comes to energy bills, the OCC believes all customers should have more options. Therefore, the OCC approached American Electric Power (AEP), Duke Energy and FirstEnergy to establish programs so that consumers can obtain renewable energy certificates.

As a result of the collaborative efforts among the OCC, the staff of the PUCO, the utilities and other stakeholder groups, customers of these utilities now have the option to support the use of electricity from renewable power sources.

The AEP and FirstEnergy green pricing programs resolved PUCO cases relating to the OCC’s appeal of both utilities’ rate plans to the Supreme Court of Ohio. The OCC had argued that Ohio law required the electric utilities to provide customers with an alternative pricing option to the companies’ Standard Service Offer. The Court agreed with the OCC and remanded the cases to the PUCO for corrections.

In the case of Duke Energy, the OCC agreed to withdraw its Supreme Court appeal relating to the merger between Duke Energy and Cincinnati Gas & Electric if Duke Energy would file an application at the PUCO to provide its customers a green pricing option, among other benefits.

AEP, Duke and FirstEnergy all submitted green pricing proposals to the PUCO. The PUCO approved all three green pricing programs in 2007.

Under each green pricing program, customers have the opportunity to pay a small premium and purchase a minimum of 200 kilowatt hours of renewable energy certificates each month. Renewable energy certificates are sold by producers of green power and represent the positive environmental and social attributes associated with renewable energy resources. Renewable energy certificates support the development of new renewable facilities and reflect renewable power generated in Ohio and other states.

AEP and FirstEnergy obtain their renewable energy certificates through a regional bidding process, while Duke purchases them directly from power producers and renewable energy certificate brokers within the region in and around Ohio.

The OCC supports maintaining a portfolio of diverse renewable products, which helps advance the competitiveness of electricity from these sources. Additionally, the benefits of renewable power could provide greater energy independence and a cleaner environment. — Case Nos. 06-1153-EL-UNC (AEP), 06-1398-EL-UNC (Duke) and 06-1112-EL-UNC (FirstEnergy)

Review of Electric Service and Safety Standards

In 2007 the PUCO began review of Ohio’s Electric Service and Safety Standards under which electric utilities must provide service to customers. The staff of the PUCO issued proposed modifications that the OCC carefully reviewed. The OCC also researched best practices used in several other states and believes, that by using some of these methods, electric service reliability in Ohio could be improved and outages limited. The OCC filed its comments jointly with several consumer groups in June 2007, recommending improvements to service reliability, stronger enforcement of rules, better consumer protections and mandated public reporting processes. The OCC sought to ensure that all electric utilities make service reliability a priority. By implementing a consistent method of specifying performance standards in these rules, utilities would be held accountable. The OCC also proposed additional standards for vegetation management, including a four-year tree trimming cycle, which also will improve reliability.

The OCC proposed that the public should have access to the data that shows the utilities’ performance under the standards, believing that customers have the right to know about and receive the adequate and reliable service they are paying for in their electric rates.

In addition to addressing performance standards for reliability, the OCC recommended several other modifications to improve consumer protections which included:

• Better customer service standards, including initiation of new service on the next business day, the option to speak with a utility representative by telephone without delay, and easy access to bilingual customer service representatives;

• Better protection of sensitive customer information like social security numbers and account-specific information;

• Bill credits to customers who experience delays in starting service, sustained outages due to lack of maintenance by the utility, or who experience more than three momentary outages in any month due to a utility’s inadequate trimming of trees and vegetation management;

• An annual customer satisfaction survey to identify customer perceptions about service and to identify appropriate improvements;

• Reduction in charges customers pay to make bill payments at an authorized agent in their community;

• More protection for customers on a medical or life-support system in the event of an outage, including the notification of family members or others and prioritized electric service restoration;

• Offering advanced metering for residential customers who want to better manage their electric use and potentially save money; and

• Providing consistency and clarity in, and disclosure of, charges that customers pay to extend an electric distribution line.

The OCC also recommended that the standards should have stronger enforcement in order to have the best benefit for consumers. These changes to the electric service and safety standards would give the PUCO the ability to propose corrective action or penalties should a violation be discovered.

At the close of 2007, a PUCO decision on these electric rules was pending. — Case No. 06-653-EL-ORD

 

 

Home Managing Ohio's Energy Future Electric (Continued)