Office of the Ohio Consumers' Counsel

Electric

Continued

Remand of Duke Energy Ohio Rate Plan Decision

In November 2006, the Supreme Court of Ohio sent Duke’s rate plan back to the PUCO based on an appeal by the OCC. The Court found that the PUCO failed to support its approval of a final rate plan with adequate evidence in the record justifying new charges proposed by Duke. The new charges were introduced by Duke for the PUCO to reconsider an initial decision, and no hearing was held on Duke’s proposed new charges. In addition, the Court found the PUCO should have allowed the OCC access to any concessions or inducements, other than those publicly revealed, that were offered to gain support for Duke’s proposals.

In proceedings held during 2007 at the PUCO to correct the errors, the OCC argued for lower electric rates for Duke’s residential consumers. The OCC requested that the PUCO reject its prior decision in the case and called for side agreements to be made public, arguing for broader disclosure of non-confidential materials.

An OCC expert in the 2007 proceeding found no basis for the Infrastructure Maintenance Fund charge, a matter that the Court had commented and was one of the new charges added to customers’ bills through the PUCO’s final order in the case. In addition, the OCC argued that all portions of Duke’s generation rates should be avoidable by customers who choose an alternative supplier.

Following the Court’s November 2006 ruling, the PUCO directed Duke to disclose side agreements to the OCC and ordered a hearing to obtain evidence required by the Court.

In October 2007, the PUCO issued its Order on Remand in this proceeding. The PUCO rejected a stipulation previously approved in the original case and determined in this case to modify certain parts of Duke’s rate plan. There were, however, no significant changes made to the generation rates that customers pay under the PUCO’s past decisions. Adjustments were made to the avoidability of portions of Duke’s generation rates for customers choosing an alternative generation supplier.

According to the PUCO, the previous stipulation was rejected because there was insufficient evidence to find that it resulted from serious bargaining among parties due to side agreement provisions that required parties’ support for that stipulation. The PUCO’s Order on Remand, however, rejected the OCC’s argument that important portions of documents related to side agreements should be made public. — Case Nos. 03-93-EL-ATA, 03-2079-ELAAM, 03-2081-EL-AAM, 03-2080-EL-ATA

OCC Argues Against DP&L Rate Increase

The OCC presented oral arguments in April 2007 to the Supreme Court of Ohio in an appeal of a 2005 decision by the PUCO involving rates charged to customers of Dayton Power & Light (DP&L). Through the 2005 decision, the PUCO changed the terms of a five-year rate plan previously approved in 2003 that set electric rates for the years 2004 through 2008. The OCC argued that the changes included unlawful rate increases and should be overturned.

The original rate plan was adopted by the PUCO in 2003 after negotiations among DP&L, the OCC and several other parties. Based on this rate plan, the electric utility could, during 2006 through 2008, request a maximum one-time 11 percent increase in generation rates. However, the 2005 case in which DP&L requested this one-time increase resulted in a new settlement which was opposed by the OCC because it changed the terms of the previously adopted rate plan. The new settlement imposed an extra 5.4 percent generation rate increase each year from 2007 through 2010 through a new surcharge. In addition, the rate plan was extended an additional two years – through 2010 – under even higher rates. An OCC witness testified in the case that customers will pay over $20 million more under the new agreement than under the terms of the original 2003 DP&L rate plan. This calculation was made based on DP&L’s own forecast of market prices for generation for 2009 and 2010.

The OCC has asserted that the terms of a PUCO-approved stipulation, which is the product of considerable bargaining and concessions on all sides, should not be changed or amended without the approval of all parties to the settlement, and that consumers should be able to rely on the terms of a settlement being enforced once the PUCO has approved it.

In September 2007 the Supreme Court of Ohio partially reversed the PUCO’s decision. While the changes to the original plan were not deemed to be unlawful, the Court found the PUCO violated the law when it approved generation-related charges to be added to the distribution portion of customers’ bills. The generation and distribution charges represent separate and distinct services – the generation charge covers the electricity produced at power plants, while distribution charges pay for the local poles and wires used to deliver the electricity to customers. The Court’s decision sent the DP&L rate plan back to the PUCO to correct the error.
— Supreme Court of Ohio Case No. 06-788

AEP Power Plant Charges

The Office of the Ohio Consumers’ Counsel (OCC) and others presented oral arguments in October 2007 to the Supreme Court of Ohio in the appeals of the PUCO’s approval of a request by American Electric Power (AEP) to increase customers’ rates for costs related to the building of an experimental coal power plant. Other groups that appealed the PUCO’s decision were the Industrial Energy Users – Ohio, the Ohio Energy Group (both industrial customer groups) and FirstEnergy Solutions (a competitive electric generation supplier). The appeals were filed in late 2006 after the PUCO authorized AEP’s two Ohio electric utilities to charge customers approximately $23.7 million of research and pre-construction costs. Consumers were charged for these costs over 12 months, ending July 2007.

The research and pre-construction costs represented the first of three phases proposed by AEP’s distribution utilities, Columbus Southern Power and Ohio Power. The price of a similar Integrated Gasification Combined Cycle (IGCC) generating plant proposed by AEP in West Virginia is currently estimated at $2.2 billion. This amount is approximately double the initial estimates for each of the Ohio and West Virginia plants.

The OCC supports the environmentally friendly technology that would be used by the plant and the economic benefits for southeast Ohio, where the plant would be located. However, the OCC opposed the manner in which AEP proposed paying for the plant, including a proposal for the PUCO to guarantee that consumers would pay for the plant – whatever the eventual cost. The AEP proposal would have shifted the construction risk from the shareholders to customers with no cap on the rates.

Arguing the PUCO decision was unlawful, the OCC requested that the Court protect customers by overturning the approval of the rate increase.

A decision in this case is pending at the Supreme Court of Ohio. — Supreme Court of Ohio Case No. 06-1594

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