Office of the Ohio Consumers' Counsel

Media Center

Ohio Consumers’ Counsel opposes Duke Energy natural gas base rate increase

COLUMBUS, Ohio – Jan. 29, 2008 – A proposed rate increase for Duke Energy Ohio’s natural gas customers is unreasonable and should be rejected, the Office of the Ohio Consumers’ Counsel (OCC) says in extensive testimony to be filed today at the Public Utilities Commission of Ohio (PUCO). The OCC emphasized that 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.

“Under Duke Energy’s proposal, consumers could pay annually increasing fees for replacing pipes as well as a nearly tripled customer charge. By the ninth year, a typical customer could be forced to pay $345 annually before using any natural gas,” said Janine Migden-Ostrander, Consumers’ Counsel. “These proposed rates would harm consumers by increasing customer charges that must be paid and cannot be offset by using less energy. As a policy matter, this hurts customers’ ability to control the size of their bills through conservation or energy efficiency.”

Based on the OCC’s experts, nearly all of the proposed rate increase should be rejected because customers should not have to pay for many of the increased costs cited by the utility.

Within the utility’s request are increases associated with the base rate – including the customer charge – and an extension of the Accelerated Main Replacement Program, which is designed to replace steel pipes with plastic.

The following summarizes OCC’s three key concerns regarding Duke’s request:

Customer charge

Included in the base rate increase is the customer charge, which all customers must pay irrespective of how much natural gas they use. Currently, customers pay Duke $6 per month ($72 per year). Under Duke’s request, the customer charge would nearly triple to $15 per month ($180 per year). According to the OCC, the rate proposal would disproportionately impact residential customers who try to be energy efficient since the proposal would shift certain costs into the existing customer charge, which is a flat fee paid regardless of how much natural gas is used each month.

Accelerated Main Replacement Plan

Duke has proposed a nine-year continuation of its Accelerated Main Replacement Program, which was originally set up in 2001 as an add-on to customers’ bills. 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 customers have paid $137 million but only $8.5 million has been saved in maintenance costs.

Currently, Duke customers pay $5.77 per month (approximately $70 per year) toward this program. Under Duke’s request, the utility would impose charges leading to as much as $13.77 per month (approximately $165 per year) by 2017.

Base rate increase

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

About the Office of the Ohio Consumers' Counsel

The Office of the Ohio Consumers' Counsel (OCC), the residential utility consumer advocate, represents the interests of 4.5 million households in proceedings before state and federal regulators and in the courts. The state agency also educates consumers about electric, natural gas, telephone and water issues and resolves complaints from individuals. To receive utility information, brochures, schedule a presentation or file a utility complaint, residential consumers may call 1-877-PICKOCC (1-877-742-5622) toll free in Ohio or visit the OCC website at www.pickocc.org.