Office of the Ohio Consumers' Counsel

Electric

The development and signing into law of Amended Senate Bill 221 (Am. SB 221), Ohio’s new electric energy policy, was a major issue for consumers and the Office of the Ohio Consumers’ Counsel (OCC) during the first half of 2008. The contents of this legislation are discussed at length in the “Governmental Relations” section of this report.

During the consideration of Am. SB 221 by the General Assembly, the OCC advocated for the interests of residential customers to ensure they would receive the lowest cost option in utility rate setting proceedings and supported a statewide sustainable energy policy that would provide consumers with opportunities to reduce their electric bills.

These efforts included active participation in legislative discussions and comments on the proposed Public Utilities Commission of Ohio (PUCO) rules regarding proceedings to determine standard service offers (i.e. rates for generation service) for Ohio’s electric utilities. The standard service offers could be market-based or set through a regulated process to establish an Electric Security Plan.

The OCC and its partner stakeholders successfully completed a two-year effort to have renewable and energy efficiency standards included in the language of Am. SB 221. The OCC also succeeded in obtaining important consumer protections, including a comparison of a regulated rate against a market rate to ensure the lowest-cost option is adopted; a prudence standard of review for utility costs; and a requirement that regulatory transition charges expire as scheduled.

As a result of Am. SB 221, the PUCO drafted rules setting guidelines for implementing the new policy, including the filing of Electric Security Plans by each utility and the meeting of energy efficiency and renewable energy requirements.

The OCC initiated the formation of Ohio Consumer and Environmental Advocates (OCEA), consisting of more than 15 organizations from across the state. Spearheaded by the OCC, OCEA provided comments on draft rules written by the PUCO staff. As part of the rulemaking, the PUCO also included a review of the Electric Service and Safety Standards. OCEA sought to strengthen the reliability rules and hold electric utilities accountable for properly maintained distribution systems. Unfortunately, the PUCO failed to adopt the majority of OCEA’s recommendations.

As each electric utility filed its Electric Security Plan, the OCC reviewed thousands of pages of filings and work papers and provided opinions to the PUCO in expert testimony. The OCC consistently expressed concerns over the amounts of proposed rate increases during a period when households were struggling in a weak economy. The timeline for completing this work was compressed into less than five months as the result of a provision in the new law reducing the time allotted for the PUCO to decide on rate proposals from the utilities.

While the impact of Am. SB 221 dominated the OCC’s electric industry work, other significant activities also took place during 2008. In mid-2007, FirstEnergy filed with the PUCO to collect $340 million more in annual distribution revenue from all customers beginning in 2009. The case was heard and briefed and a decision from the PUCO was still pending at the end of 2008.

The OCC, with others, won a victory at the Supreme Court of Ohio, which reversed a PUCO order authorizing American Electric Power (AEP) to start collecting for the development of an Integrated Gasification Combined Cycle (IGCC) plant in Meigs County. In addition, the OCC filed and argued a case at the Court involving Duke Energy’s rate stabilization plan.

The reliability of Ohio’s electric utilities continued to concern the OCC in the wake of widespread statewide outages caused by Hurricane Ike in September 2008. The OCC questioned whether their breadth and depth could have been limited through better year-round efforts by the utilities to trim trees, replace poles and maintain all the elements of their distribution systems.

AEP additional generation rate increases

(Case Nos. 07-1132-EL-UNC, 07-1191-EL-UNC, 07-1278-EL-UNC, 07-1156-EL-UNC)

Ratepayers avoided paying $10 million in generation costs through the end of 2008 as a result of an agreement among the Office of the Ohio Consumers’ Counsel (OCC), American Electric Power (AEP), Public Utilities Commission of Ohio (PUCO) staff and others. The agreement also provided customers $18 million in credits associated with net congestion costs.

In addition, AEP agreed not to file for any additional cost recovery associated with major federal environmental rules, such as the Clean Air Interstate Rule and the Clean Air Mercury Rule.

The agreement, approved by the PUCO in January 2008, was reached after a series of AEP filings followed the PUCO’s 2007 approval of generation cost recovery riders. The riders had enabled AEP to request recovery of increases in costs permitted under its rate stabilization plan.

AEP’s rate plan allowed the utility to apply for generation rate increases up to an average of 4 percent per year from 2006 through 2008 for environmental and security expenses over and above automatic annual generation rate increases of 3 percent (Columbus Southern Power) and 7 percent (Ohio Power).

In its review, the OCC concluded that AEP was attempting to collect more environmental and transmission costs than necessary, that some costs were to provide electric service to customers outside of Ohio, while other costs were requested for work that AEP should have performed during the 1990s to meet federal regulations.

FirstEnergy fuel costs

(Case Nos. 07-1003-EL-ATA, 07-1004-EL-ATA, 08-124- EL- TA, 08-125-EL-AAM)

The Office of the Ohio Consumers’ Counsel succeeded in its argument to persuade the Public Utilities Commission of Ohio (PUCO) to subject FirstEnergy’s purchasing practices to an independent audit, potentially resulting in savings to customers of the utility.

The PUCO decision in January 2008 followed an August 2007 decision by the Supreme Court of Ohio requiring the PUCO to reconsider a 2005 ruling allowing the deferral of FirstEnergy’s fuel costs. The Court found error with the PUCO’s decision to allow the deferral of fuel costs to be recovered through distribution rates, rather than generation rates, as they are two different services, distinctly itemized on customers’ bills since 2001. Generation service relates to the production of electricity at power plants, while distribution service covers local poles, wires and facilities.

In response to the Court’s decision, FirstEnergy filed a proposal to establish two generation-related riders. One would raise fuel costs from the beginning of the deferral period (2006) though September 2007, using the utility’s 2002 fuel costs as a baseline of comparison. A second rider would recover fuel costs from October 2007 through December 2008.

In its response, the OCC asked that FirstEnergy be required to spread out collections from customers over time to lessen the immediate impact and not collect all the deferred costs in one year.

In January 2008, the PUCO concluded that FirstEnergy’s request to recover 2006 and 2007 costs in 2008 was unreasonable and required the utility to file an alternative method.

FirstEnergy then filed to collect the deferred costs over a period of between five and 25 years. The alternative proposal is pending at the PUCO.

A report by the PUCO staff reviewing the prudence of FirstEnergy’s purchasing practices was issued in June 2008. The evidentiary hearing on the report was continued indefinitely by the PUCO.

Home Legislative Services Electric (Continued 1)

OCC has had to cancel many of its services, including its consumer call center, due to recent budget cuts. We realize you may continue to need assistance with your utility services. OCC's website provides free access to publications and resources.

You may seek assistance with utility complaints from the Public Utilities Commission of Ohio: 800-686-7826. For complaints about non-utility related services, you may call the Ohio Attorney General at 800-282-0515.