Office of the Ohio Consumers' Counsel

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Contact: Marty Berkowitz
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OCC argues before the Supreme Court of Ohio for reducing delivery charges to Dominion, Duke natural gas customers

COLUMBUS, Ohio – September 16, 2009 – The Office of the Ohio Consumers’ Counsel (OCC) argued its case today before the Supreme Court of Ohio for a reduction in the fixed customer charges paid monthly by Duke Energy and Dominion East Ohio customers.

On behalf of residential ratepayers, attorneys for the OCC stated that the PUCO violated their statutory authority by neglecting to provide sufficient notice to customers of the changes to the structure of the delivery charges, nor did they explain the reasons for them.

This negligence prevented a complete review by customers and represented what the OCC referred to as an “unnecessary rush” to unilaterally impose the new rate increase system on consumers ill-prepared to understand its consequences. The OCC claimed that the public never received the formal notice about the rate design and its impact as required by law.

The OCC has consistently opposed the straight-fixed variable rate design (a system that places the majority of a utility’s delivery costs such as transportation, pipeline maintenance, meter reading and billing into a fixed monthly customer charge). The agency has provided testimonial evidence that this structure places a disproportionate share of the burden on low-usage, lowincome customers and creates a disincentive for customers to conserve energy. In addition, the OCC has cited a concern that low-usage customers who heat their homes with electricity may opt to drop natural gas service entirely, creating a possible revenue loss to utilities. This could cause additional rate increases in the future.

“We feel that the PUCO’s decision to impose an overhaul to the way distribution charges are imposed, which the utilities did not request, and without formal notice to customers is unlawful and creates an undue burden on low-income, low-usage customers who are not on an assistance program, especially at a time when statistics show a decrease in the median income for Ohioans and approximately 11 percent of our citizens have been faced with disconnection of their natural gas or electric service within the past year,” said Janine Migden-Ostrander, Consumers’ Counsel.

“The OCC staff also believes that raising the fixed charge takes controlling their bills out of the hands of customers,” Migden-Ostrander continued. “A higher fixed rate creates a disincentive for consumers to save money by decreasing their usage, which is contrary to established public policy and makes energy efficiency efforts less likely.”

Natural gas utility customers are generally assessed a delivery charge on their monthly bills in addition to the cost of the commodity. At the time of the case filings by Duke and Dominion, these charges reflected approximately 25 percent of each customer’s bill. However, as pointed out in questioning by the justices of the Supreme Court of Ohio, the recent decrease in natural gas costs (to less than half of what they were in 2008) has substantially affected that equation.

In the past, the delivery charges consisted of a volumetric charge, based on a customer’s usage, and a nominal fixed customer charge. In imposing the straight-fixed variable rate structure, the PUCO mandated fixed-rate increases of 170 percent for Duke, and 300 percent for Dominion with some decreases to the volumetric rates. For example, before rising to its current levels, Duke’s fixed charge was $6 per month, while Dominion’s customer charge was $5.70 per month. Those charges rose, as a result of the PUCO’s orders, to $25.33 (Duke) and $15.70 (Dominion) respectively with decreases in the volumetric charges.

The Supreme Court of Ohio is expected to issue a decision on the straight-fixed variable rate design by the spring of 2010.

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.