Office of the Ohio Consumers' Counsel

Consumers' Corner

March / April 2008

In this issue...

 

Energy alternatives, transparency crucial to energy future

The recent work of the Office of the Ohio Consumers’ Counsel to ensure residential utility consumers have the necessary protections within the state’s major energy policy legislation (Senate Bill 221) included the need to diversify Ohio’s energy resources and increase the transparency of utility companies. Consumers’ Counsel Janine Migden-Ostrander again was invited to testify before the House Public Utilities Committee to present the consumer perspective on these topics.

The decisions made by the Ohio legislature will have a profound effect on the future of consumers’ utility bills so it is important the OCC has been able to participate in the process to represent the residential consumer perspective.

Renewable energy/Energy efficiency

When it comes to developing alternatives to the traditional forms of electricity, Ohio has a tremendous opportunity because these alternatives have been largely untapped. As part of a portfolio of options to meet our growing demand for electricity in the years to come, renewable energy and energy efficiency should be a part of the equation. As environmental regulations and aging infrastructure systems contribute to increased electricity bills, reliance on energy efficiency and some renewable energy technologies can be a lower cost option.

By using renewable energy, such as solar, wind and biomass energy, less dependence is created for fossil fuels. Using renewable energy will cost less in the long run as there are no fuel costs to power renewable energy facilities. That is why the OCC recommended to the Ohio House to implement standards in Substitute Senate Bill 221 that would mandate that 10 percent of a utility’s supply by the year 2018 is from renewable energy. Benchmarks and penalties should also be added to ensure that Ohio begins to tap into this energy producing potential right away.

Ohio is also in a position to lower the demand for electricity through energy efficiency technologies. The elements of Senate Bill 221 are a good start to improving consumers’ efficiency but more is needed to provide the maximum benefit. The OCC believes that 22 percent of projected electricity consumption can be saved through energy efficiency by 2025.

Transparency

When utilities ask for rate increases it is imperative to have full disclosure of all elements of the rate – including side deals and special contracts – especially since cases are complex and involve increases in the millions and sometimes billions of dollars. When rates are verifiable and based on a utility’s actual costs, customers can be ensured that they are not overpaying the utility and that the rates are fair. Side deals and special contracts need scrutiny to protect residential consumers. Side deals are secret and it is not known how many have been made or their terms and conditions. These deals are not approved by the PUCO and are often worked out to settle a case between selected parties and the utility. Customers have a right to know who is getting a subsidy and why they are receiving it. Any potential to pass on costs to residential consumers for the benefit of other customers needs a full and transparent process so a proper decision is made by the Public Utilities Commission of Ohio.

Special contracts were originally given for a variety of reasons including economic development or because a company allowed the utility to interrupt service during times of high demand. Many of the contracts are nearly a decade old and may have been renewed. Senate Bill 221 would allow these contracts to continue – a move the OCC opposes. Special contracts should be allowed to expire and criteria should be established that an industrial customer would use to apply for a discount.

Transparency needs to be a part of all aspects of regulations. With an open and inclusive process that includes ample time to review complex utility requests, the OCC can effectively work to get the best outcomes for residential utility consumers. When accompanied by a diversified energy portfolio and decreased demand, legislation can be created to ensure a sound energy future for all Ohioans.

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March brings FirstEnergy customers the chance to speak up

Along with the potential for warmer weather, March will also provide residential customers of FirstEnergy (including Cleveland Electric Illuminating, Ohio Edison and Toledo Edison) the chance to participate in local public hearings. The hearings are part of the rate case process as the utility’s request for a $340 million annual revenue increase is considered by state regulators.

The local hearings will be held by the Public Utilities Commission of Ohio (PUCO), which regulates investor-owned electric utilities and makes rate decisions. The Office of the Ohio Consumers’ Counsel (OCC), the residential utility consumer advocate, will attend the hearings and be available to answer consumers’ questions.

The OCC believes the proposed rate increase for FirstEnergy is unreasonable. Based on the work of accountants, economists and other experts working for the OCC, the rate increases proposed for FirstEnergy should be reduced by millions of dollars.

The reliability of FirstEnergy’s distribution service continues to be a concern for the OCC and residential consumers.

The OCC encourages residents to discuss their service quality issues at the upcoming hearings. Sworn testimony provided by the public at the local hearings will become part of the official case and be considered as the PUCO Commissioners make a decision.

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OCC in your corner

OCC argues against telephone pricing decisions

Decisions giving AT&T and Cincinnati Bell the ability to raise rates in the price of basic local services for many AT&T and Cincinnati Bell residential customers were unlawful and should be overturned, the OCC recently told the Supreme Court of Ohio in oral arguments.

The appeal was based on PUCO decisions which allow “alternative regulation” for stand-alone basic local service and basic Caller ID. Stand-alone basic service is dial tone and local calling without additional services such as voicemail and Call Waiting.

A PUCO decision allows Cincinnati Bell to raise customers’ basic rates in its two largest exchanges in and around the cities of Cincinnati and Hamilton. Cincinnati Bell used its new authority to increase its rates for basic local service by the maximum $1.25 in January 2007 and again in January 2008.

A separate PUCO decision permits AT&T to raise the rates in 136 of its 192 exchanges. AT&T has yet to impose increases for its basic rates, but received permission to fall under alternative regulation for an additional eight exchanges in June 2007 and is seeking permission to raise basic rates in 19 other exchanges. Embarq also has been granted permission to raise basic service rates in four exchanges but has not yet imposed those increases.

The OCC argued that the law requires telephone companies’ stand-alone basic telephone service to be subject to competition or that customers have reasonably available alternatives prior to being approved for alternative regulation. The law also requires that competitors face no barriers in providing basic local service.

The OCC contends that more expensive packages of features through landline or wireless telephones are not substitutes for basic local service without the bells and whistles. In addition, cable and wireless services are not typically available to all customers throughout an exchange.

Advocacy helps lead to penalty against UMCC

Efforts by the OCC helped result in a $208,000 fine against UMCC Holdings, Inc. and a finding that the telephone company provided inadequate service. According to a PUCO order, UMCC must also stop providing any telecommunications service in Ohio as well as cease billing and collecting payments from Ohio consumers.

The OCC proved to the PUCO that the company violated state rules by providing telephone services without a required certificate, failed to notify the PUCO and customers about a transfer of consumer accounts from Buzz Telecom and neglected to include necessary information on monthly bills. Consumers who believe they were harmed by UMCC can call the OCC or file a case at the PUCO or in a court.

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Utility rate cases begin heating up

The Office of the Ohio Consumers’ Counsel (OCC) has been advocating for residential consumers in several major utility rate cases. Developments involving four utilities are highlighted below to provide consumers with case updates and how the OCC is representing their interests.

OCC opposes FirstEnergy distribution rate increases

The OCC stood up for residential customers by weighing in on the utility’s proposed distribution rate increase. In extensive testimony filed at the PUCO, the OCC showed that FirstEnergy’s request for a $340 million annual revenue increase was unreasonable.

According to the OCC’s experts, distribution rates should be reduced significantly from those filed by Cleveland Electric Illuminating, Ohio Edison and Toledo Edison. Among other reasons, the OCC cited various costs that customers should not have to pay as well as FirstEnergy’s declining service reliability.

Distribution rates generally recover a utility’s costs for local facilities and equipment such as poles and wires and account for 30 to 40 percent of a typical customer’s monthly electric bill.

OCC: Minimize Duke Energy rate increase

The OCC presented testimony showing why a proposed rate increase for Duke Energy Ohio’s natural gas customers should be rejected. When all components of Duke’s plan are considered, the case could cost all customers (residential, commercial and industrial) $500 million over the next several years.

Duke has proposed a nine-year continuation of its Accelerated Main Replacement Program to replace steel pipes with plastic, which was originally set up in 2001. The continuation of this program would raise customers’ bills by as much as $480 million over the next nine years.

While this program was touted as an effort to cut maintenance costs and improve efficiencies, Duke has shown during the first six years of the program that customers have paid $137 million but only $8.5 million has been saved in maintenance costs.

Under Duke’s proposal, base rates would go up by as much as 33 percent. Customers’ base rates pay for the maintenance of pipes and other local equipment. Under Duke’s request, the utility seeks $34.1 million per year in additional revenue. The OCC’s experts believe the utility should receive no more than between an additional $1.4 million and $6.5 million per year.

Included in the base rate increase is the customer charge. Currently, customers pay Duke $6 per month (approximately $72 per year). Under Duke’s request, the customer charge would nearly triple to $15 per month (approximately $180 per year).

OCC stands up for Ohio American Water customers

In January, the OCC asked the PUCO to dismiss the request to increase water and sewer rates in Franklin and Portage counties by Ohio American Water.

The OCC originally asked the PUCO in December to dismiss the application for a rate increase because Ohio American Water had failed to comply with its commitments to resolve the poor quality of water in those two counties. The OCC also asked the PUCO to use a consumer-friendly notice instead of a more complicated and lengthy notice proposed by Ohio American Water.

The PUCO denied the OCC’s request regarding the public notice and allowed the application to increase rates to be considered. The OCC’s January filing asked the PUCO to reconsider its adverse ruling.

As part of a previous case, Ohio American Water agreed to resolve a discolored water issue in a portion of the utility’s service territory and to maintain clean water for 12 consecutive months. The OCC argued the earliest the utility would be able to come in for any type of increase would be May 2008.

Ohio American Water has requested to increase overall rates by an average of 16.38 percent. In Franklin and Portage counties the increases would surpass 30 percent for water rates and the company has sought a nearly 37 percent increase for sewer rates in Franklin County.

OCC calls for rate protection of Aqua Ohio customers

The OCC has told the PUCO that a rate increase requested by Aqua Ohio exceeds what is considered fair. The OCC has asked the PUCO to limit the company’s request as it could cause residential rates to increase an average of 26.6 percent. Rates for some typical residential customers could increase as much as 46.3 percent for water service under the company’s proposal. For example, a typical Aqua Ohio customer in Williams County pays about $21 per month but would pay $30 under the company’s proposal.

Aqua Ohio has requested an overall increase in rates of $3.2 million. The OCC believes the company’s request is not justified and should result in no more than an average 8.27 percent increase in rates.

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Natural gas agreements to benefit Columbia Gas customers

Two agreements entered into by the Office of the Ohio Consumers’ Counsel (OCC), the staff of the Public Utilities Commission of Ohio (PUCO), Columbia Gas of Ohio and other parties will bring several key benefits to consumers.

One agreement dealt with an audit of how Columbia obtains its natural gas. The benefits obtained for consumers include:

  • $35 million in refunds will be provided to customers through adjustments to the rates charged for natural gas. The refunds will help offset the growing cost of using natural gas.

  • A wholesale auction process will be developed by 2010 to determine the rate that is paid by customers who have not switched to an alternative supplier. The auction will allow natural gas suppliers to bid on the natural gas supplies that Columbia purchases for those customers. Columbia would continue to be responsible for the distribution of natural gas as well as billing, reading meters and maintaining pipelines.

  • This auction process will be similar to the one currently being used by Dominion East Ohio. The Dominion auction, which was deemed successful by participating stakeholders including the OCC, PUCO, Dominion and suppliers, resulted in a fee of $1.44 that would be added to natural gas market prices to determine monthly commodity rates for consumers. This rate is less than customers had been paying under the traditional Gas Cost Recovery (GCR) rate. The typical residential natural gas customer in Dominion service area saved approximately $100 last year.

  • An energy efficiency program will provide customers with tools to reduce their consumption. With natural gas prices having doubled over the last several years and the presence of a volatile wholesale pricing market, energy efficiency will help reduce customers’ demand by up to 1 percent by 2011.

The second major agreement addressed the issue of natural gas risers in Columbia’s service area. A natural gas riser is the vertical portion of the service line that connects the primary distribution pipeline to the customer’s meter. In November 2006, the PUCO staff issued a report on a statewide investigation into the installation, use and performance of natural gas service risers. The report showed that upon review of a sampling of natural gas risers throughout the major natural gas utilities’ service territories, there is some risk with certain risers under specific circumstances.

The agreement addressed concerns the OCC had about safety as well as the cost to residential consumers for fixing the problems. The OCC found that Duke Energy was able to resolve safety problems with risers in its service area in a more cost-effective manner than was proposed by Columbia. If this fix is implemented in the Columbia service area, it estimated that up to $30 million could be saved.

The OCC was able to negotiate a requirement that Columbia review less costly options than it had originally proposed and provide a report. Comments on the report could then be filed by the OCC and other stakeholders. Columbia has agreed to use the more cost-effective process where circumstances permit its use.

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Q&A: My utility wants to raise my rates. What can I do?

When public utility issues affect you directly, you may have an opportunity to get involved. One of the best ways to make your voice heard is to testify at local public hearings.

Q. How do I get informed?

A. For rate cases, the PUCO must have at least one public hearing located within the utility’s service area and in cities with a population of at least 100,000. In most other cases, the PUCO may hold public hearings based on public interest. To request a hearing in your community, contact the PUCO at 1-800-686-PUCO (7826).

Q. How can I prepare effective testimony?

A.

  • Create a speech or note cards to help present a short and organized statement.
  • Practice your testimony in front of others.
  • Provide details or exhibits, if available, to help make your point.

Q. What can I expect at the hearing?

A. To testify, sign your name on a roster. The hearing examiner will call your name when it is your turn to speak. You’ll be asked to offer either sworn or unsworn testimony. Sworn testimony is part of the official record. You will then be asked to recite an oath, voice your opinion, and potentially answer questions asked by the PUCO, OCC or utility.

Q. Are there ways to get involved?

A. Yes!

  • File petitions at the PUCO to the docket assigned to the case.

  • Contact your legislator and/or talk to your local elected officials about the case.

  • Inform the local news media about the importance of attending the local hearing.

  • Write letters to the PUCO, 180 E. Broad St., Columbus, OH, 43215. Include the company name, case number and ask that the letter be docketed in the case file.

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