Office of the Ohio Consumers' Counsel

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Contact: Ryan Lippe
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Consumers' Counsel seeks Supreme Court stay to protect AEP customers from retroactive rate increases

COLUMBUS, Ohio – September 22, 2009 – The Office of the Ohio Consumers’ Counsel (OCC) wants Ohio's top court to stop the collection of a retroactive increase in electric rates for customers of American Electric Power (AEP).

The Public Utilities Commission of Ohio’s (PUCO) modified and approved AEP’s electric security plan March 18, 2009. As part of its decision, the PUCO made the new, higher rates for AEP customer retroactive to Jan. 1, allowing the company to bill customers for 12 months worth of rate increases over nine months. The filing made late yesterday at the Supreme Court of Ohio is the OCC’s latest effort to protect AEP’s residential customers from the increase the agency considers to unlawful.

The OCC estimates if the retroactive rates are not stopped, it will cost all Columbus Southern Power (CSP) customers (residential, commercial and industrial) approximately $30 million, while all Ohio Power (OP) customers will pay an extra $33 million. CSP and OP are subsidiaries of AEP.

Consumers should not be burdened with paying retroactive rates. Prior legal decisions and state law prohibit the PUCO from allowing such action by a utility,” said Consumers’ Counsel Janine Migden-Ostrander. “Consumers should not have to pay higher rates for any period of time before the PUCO has made its decision.”

The OCC asserts that Ohio’s recent electric law, adopted in 2008, specifies that a utility only can collect the current rates in effect until a new rate is approved by the PUCO.

In April, the OCC – joined by Kroger, the Ohio Hospital Association and the Ohio Manufacturers’ Association – asked the Court to act immediately to block AEP from collecting the retroactive portion of the rate increase.

While in that request the parties asked for a “writ of prohibition” – which was denied by the Court – today’s action by the OCC requests the Court place a stay on the collection of retroactive rates until a final decision by the Court is made regarding the lawfulness of retroactive ratemaking.

In a related matter, on Sept. 10, 2009, the OCC filed an appeal with the Court asking that significant and unlawful portions of the PUCO’s approval of the AEP electric security plan in March be overturned.

The appeal noted the following errors by the PUCO:

Retroactive ratemaking: AEP was permitted to collect all new charges under its electric security plan retroactive to Jan. 1. Legal decisions and current law in Ohio prohibit this action;
Provider of last resort charges: AEP was permitted to recover 90 percent of its provider of last resort (POLR) charge request, which is costing all AEP customers $456 million over three years. The POLR charge is based on AEP’s estimated financial risk that customers who shop for alternative suppliers will come back to AEP, and AEP will be required to serve them. The OCC contends AEP has been overcompensated for this risk, which is practically nonexistent in the current market because no choices exist for residential customers. The new revenue to be collected by AEP for the POLR risk represents a 567 percent increase (Columbus Southern Power) and a 38 percent increase (Ohio Power) over the POLR charge collected from customers prior to the approval of the electric security plan;
Interest charges on environmental investments: AEP was permitted to charge customers “carrying charges,” or interest, for environmental investments that occurred since 2001. This would add approximately $110 million annually to all AEP customers’ bills. State law prohibits the collection of interest for past environmental expenses; and
Removing deferred charges from the calculation of significantly excess earnings: Charges that are deferred for recovery at a later date were removed from consideration of whether AEP has significantly excess earnings, which are prohibited under Ohio’s recent electric law. The OCC contends that deferrals should be included in the calculation because the costs will be recovered by AEP through rate increases to customers.

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.