Office of the Ohio Consumers' Counsel

2008 Annual Report

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Service reliability a priority for the OCC

(Case No. 08-1299-EL-UNC)

Photo of Electric Repair Truck The issue of service reliability became a major concern for consumers and the Office of the Ohio Consumers’ Counsel (OCC) in 2008 after winds from Hurricane Ike caused outages that left 2.6 million Ohioans without power for as long as two weeks. On Dec. 15, 2008, the OCC, with many consumer groups listed in the pleading as the Consumers for Reliable Electricity in Ohio, requested that the Public Utilities Commission of Ohio (PUCO) conduct an investigation into the reliability of Ohio’s electric utilities.

The call for the investigation came after lengthy outages in the service territories of all four major electric utilities plunged nearly all regions of Ohio into the dark. The OCC received a 21 percent increase in calls to its consumer hotline as a direct result of the outages.

In the request, the consumer groups asked the PUCO to investigate whether American Electric Power, Dayton Power & Light, Duke Energy Ohio and FirstEnergy are doing enough to limit the breadth and depth of power outages in their service territories. The groups argued that electric utilities should not be allowed to increase rates to pay for the costs related to the September windstorm until an investigation is conducted to determine whether some of the outages were preventable.

Ohio law requires that residential electric customers receive adequate service. This adequacy has come into question by consumers and consumer advocates alike. Consumers for Reliable Electricity in Ohio requested several specific actions be taken in the investigation including:

A review of each utility’s compliance with Ohio’s Electric Service and Safety Standards and other applicable safety and reliability standards;
An evaluation of the effectiveness of the current standards, including setting performance targets for momentary power interruptions;
Providing significant financial penalties for a utility’s failure to meet reliability standards;
Reviewing all reliability complaints filed at the PUCO and with the OCC;
Reviewing of the protocols used to determine a priority list for service restoration; and
An audit of the actual utility expenditures since January 1995 as compared to the amount customers paid in rates for adequate and reliable service.

By the end of 2008, the PUCO had not acted on the group’s request. It did, however, allow American Electric Power to defer an undetermined amount of money, with interest, for the costs it incurred during the windstorm.

Windstorm service restoration costs contested

(Case Nos. 08-1301-EL-AAM, 08-1332-EL-AAM, 08-709-EL-AAM)

In December 2008, three of Ohio’s investor-owned electric utilities, American Electric Power (AEP), Dayton Power and Light and Duke Energy, filed requests with the Public Utilities Commission of Ohio (PUCO) to defer operation and maintenance expenses related to Hurricane Ike. The deferral of expenses associated with storm damage was one of the subjects of the distribution rate case pending for FirstEnergy during 2008.

The Office of the Ohio Consumers’ Counsel (OCC) filed to intervene in the AEP case as 2008 drew to a close and planned to intervene in the Dayton Power & Light and Duke Energy cases as 2009 began.

In the AEP case, the OCC asserted that the utility’s application contained no detail and should not be approved unless the utility could prove the expenses were lawful, reasonable and prudently incurred. The OCC also objected to the interest rate proposed by AEP.

FirstEnergy distribution rates at issue

(Case Nos. 07-551-EL-AIR, 07-552-EL-ALT, 07-553-EL-AAM, 07-554-EL-AAM)

The Office of the Ohio Consumers’ Counsel (OCC) asserted that a proposed distribution rate increase filed by FirstEnergy should be cut by more than $300 million and that a new investigation is needed to address the utility’s service reliability. The distribution rate case was filed well before the Electric Security Plan and a decision was pending when the new proposals were accepted by the Public Utilities Commission of Ohio (PUCO).

In a post-hearing brief submitted to the PUCO in March 2008, the OCC testified that millions of dollars in FirstEnergy’s rate hike request should not be collected from consumers. In addition, 12 public hearings were attended by more than 600 consumers throughout FirstEnergy’s Cleveland Electric Illuminating, Ohio Edison and Toledo Edison service areas. The public testimony plus an additional three weeks of evidentiary hearings at the PUCO produced reports, some from FirstEnergy’s own testimony, of poor service quality being provided by the utility to some of its customers.In response, the OCC recommended a PUCO-ordered investigation and penalties for instances of noncompliance with the PUCO’s rules and the failure to meet performance targets. A decision from the PUCO was still pending at the end of 2008.

Federal electric issues

The Office of the Ohio Consumers’ Counsel (OCC), as part of its advocacy on behalf of residential customers, has continued its activities in a number of federal issues because the Federal Energy Regulatory Commission (FERC) authorizes electricity charges that Ohio residential utility consumers must pay. The FERC’s jurisdiction includes wholesale markets, transmission, sales of electricity for resale, and Regional Transmission Organizations (RTOs). The RTOs were created less than 10 years ago to independently administer the nation’s electric transmission systems that are owned by the utility industry. These transmission lines carry the electricity from the generating source to the local distribution systems that serve consumers. Maintaining and improving this transmission system raises issues involving reasonable rates and reliability of service, with corresponding opportunities for OCC to advocate on behalf of Ohio consumers.

Regional Transmission Organizations

Ohio is served by RTOs from two regions. PJM Interconnection LLC (PJM) operates in 13 states and the District of Columbia. Its membership includes American Electric Power’s two Ohio utilities and Dayton Power & Light. The Midwest ISO, Inc. (MISO) is comprised of 15 states and the Province of Manitoba. Its membership includes FirstEnergy’s three Ohio utilities and Duke Energy. PJM and MISO administer wholesale electric markets and market-related services. Because of this geographic split of the markets, the RTOs must closely coordinate operations in order to effectively and efficiently operate the transmission grid in and around Ohio. The geographic split also requires the OCC to learn about and monitor two separate transmission operators in order to advocate effectively for consumers.

The RTOs’ decisions can affect consumers’ rates through transmission charges, market costs for electricity and delivery costs. In general, the RTOs cannot levy charges for consumers to pay in retail rates unless the charges are authorized by FERC. The OCC participates in cases at FERC and in the stakeholder processes at the RTOs to advocate on behalf of Ohio’s residential consumers for reasonable rates and reliable electric service. The OCC also has advocated at the federal level to promote the use of energy efficiency and demand response, preventing abuses of wholesale market power, and removing obstacles to wholesale competition.

In wholesale electric markets, utilities (and others) buy and sell power to supply their customers. The OCC’s efforts to reduce the wholesale cost of electricity by encouraging energy efficiency and demand response are first presented to the RTOs through the stakeholder process, which includes committees and working groups. The voices and interests of consumers must be heard in this process, not just the voices and interests of transmission owners and power generators. The OCC actively participated in PJM’s policy discussions and implementation procedures for incorporating energy efficiency and demand response in both capacity and energy markets. The OCC is involved in similar discussions at MISO.

Federal Energy Regulatory Commission

The Federal Energy Regulatory Commission (FERC) regulates transmission and the wholesale markets. These issues may be agreed upon in the RTO stakeholder process, which can avoid litigation at FERC. In these cases, it is important that the OCC participate by representing the residential customers’ interests in having reasonable rates and reliable service. In some cases, however, a settlement is not possible and the cases proceed to litigation. The OCC participated at FERC on matters that will impact costs and reliability for Ohio’s residential consumers.

Transmission Cost Allocation

The OCC participated in several cases concerning FERC’s allocation of transmission costs to PJM members. Much of the proposed new transmission is for construction east of Ohio, where new transmission and generation are needed. In the past, new transmission costs were allocated on a “beneficiary pays” method. This minimizes costs to Ohio. Last year, FERC changed the cost allocation from “beneficiary pays” to one where everyone in the RTO region must pay for new transmission systems 500 kV and above in size. Ohio now pays for all its existing transmission as well as for a portion of all new transmission, even if it serves areas other than Ohio, and the service does not benefit Ohio. This significantly increases the cost to Ohio customers from PJM. The OCC intervened in several FERC cases where costs of new transmission are requested, and opposed portions of the new transmission cost increases.

MISO Ancillary Services Market

The MISO market for electricity began in 2004. This year, MISO made great strides in making the regional market more efficient by expanding its responsibilities and by taking certain grid operations over from local utilities’ Ancillary Services Market (ASM). The MISO regionally consolidated the dispatch of generating units and the monitoring and balancing of the electric grid to maintain the correct level of load and voltage. The MISO also determines which generating units must stand ready to produce electricity in times of operational emergencies.

The ASM is a major development in MISO’s new regional market and should provide consumers with more efficient systems and enhance grid reliability. As part of the ASM, the MISO will encourage demand response and propose a method for measuring it. The OCC agrees these issues are essential for MISO to operate properly. MISO is complying with FERC’s requirements. The ASM launched Jan. 6, 2009.

PJM Demand Response

The OCC also has been active at PJM in demand response issues. Demand response is the reduction in the use of (or demand for) electricity by customers when prices are high during peak usage. Demand response can reduce prices for all customers by reducing the demand for electricity. On a positive note, the OCC was part of the PJM advisory group that convened high-level policy meetings to encourage greater demand response and to address the coordination of state and federal programs. The OCC actively participated in proceedings to implement energy efficiency in the PJM capacity market by using a Reliability Pricing Model (RPM). The OCC is encouraged by the progress to reduce wholesale electricity costs.

PJM Capacity Market

The OCC has been involved in PJM’s capacity market since it was contested at FERC in 2006. In Spring 2008, the OCC was one of several parties to file a complaint at FERC challenging the RPM as unjust and unreasonable. As a result, the OCC has been active in proposing modifications to the RPM that will reduce the costs of the capacity market in PJM, thereby reducing the costs Ohio residential customers pay in retail rates. There has been success in making modifications to the RPM to more accurately reflect capacity costs, reducing these costs to customers. This involvement by the OCC will be an ongoing process to continually refine the market to reflect more accurate, and lower, costs to customers.

PJM Market Power Test

There was an effort by certain PJM members to change the market power test to be more lenient. The OCC opposed this change at FERC. The new test would allow an unacceptable level of market power to prevail in PJM. The existing standard, the Three Pivotal Supplier Test (TPS) is designed to prevent market power on a prospective basis. This issue is pending before FERC.

FERC Generic Proceedings

The OCC also worked to protect the interests of Ohio consumers by participating in several proceedings at FERC that involved nationwide issues affecting Ohio and other states. The proceedings included advanced rulemaking on competition in the electric wholesale markets.

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