Office of the Ohio Consumers' Counsel

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Contact: Anthony Rodriguez
(614) 466-9547

OCC: Duke’s electric delivery costs too high

COLUMBUS, Ohio – February 27, 2009 – A rate increase proposed by Duke Energy Ohio that would raise the rates it charges to deliver electricity should be cut by $46 million, said experts from the Office of the Ohio Consumers’ Counsel (OCC). In testimony filed yesterday at the Public Utilities Commission of Ohio (PUCO), the OCC showed that Duke has overstated its need for an $85.6 million increase in total distribution rates.

“The increase Duke Energy has asked for is out of bounds. It includes several elements which it should not be allowed to collect from customers,” said Janine Migden-Ostrander, Consumers’ Counsel. “The utility has loaded a majority of costs into a flat-rate monthly charge, which does not enable customers to properly see savings through energy efficiency. This change also may make it more difficult for low-income customers to pay their electric bill.”

The OCC made proposals to protect consumers with regard to several items in Duke Energy’s distribution rate case including:

A high fixed customer charge – As Duke did in its natural gas distribution case, it has asked the PUCO to approve a high fixed-rate customer charge while lowering the portion of the distribution rate that is based on how much electricity is used. Duke has proposed to increase its current customer charge of $4.50 to $10, while proportionately lowering its volumetric charge. This unavoidable fixed charge harms customers who try to conserve energy. Approval of this kind of charge also could jeopardize Ohio’s ability to access millions of dollars from the federal stimulus bill. One of the conditions to receive these funds is that rates cannot be designed as Duke has proposed. Congress has excluded any receipt of stimulus dollars if utility programs discourage the national goal of energy efficiency and conservation.
Better allocation of any rate increase – The PUCO staff has proposed to make a disproportionately high amount of the rate increase the responsibility of residential customers to pay. The OCC has argued that there should be more sharing of the distribution costs by non-residential customers to better reflect what it costs to serve each customer class and not be so weighted toward residents to pay.
Storm cost recovery – The OCC has objected to a proposal that would allow Duke to have the costs it incurred during the September 2008 windstorm collected without considering the prudence of its restoration efforts and emergency practices. Duke Energy estimated it cost $31 million to restore service because of the windstorm outages.
The removal of bonuses and incentive compensation – Asking residential customers to pay for bonuses and incentives is inappropriate related to financial goals. These costs should be borne by shareholders who benefit from this compensation, not customers.

Under Duke Energy’s proposal, rates for all customers would increase by $85.6 million, a 27 percent increase. For a residential customer using 800 kilowatt-hours per month, rates would increase $4.91 per month to an average monthly charge of $90.13, a 5.8 percent increase.

Distribution costs represent 25 percent of a residential customer’s electric bill. These costs pay for operating and maintenance, wires, poles, meters, employee salaries and taxes among others.

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 Web site at www.pickocc.org.