Agency Reccommends Lowering AEP Rates

The Office of the Ohio Consumers’ Counsel (OCC) Monday recommended a reduction of $51.8 million in American Electric Power’s distribution revenues as a part of the utility’s currently pending rate case. After evaluation of AEP’s proposal to increase distribution rates by $93 million, the OCC filed testimony at the Public Utilities Commission of Ohio (PUCO) to recommend a revenue reduction to AEP’s Columbus Southern Power of 12.43 percent and to Ohio Power by 1.37 percent.

The reduction was advocated after the OCC questioned the methods used to calculate costs related to pensions, operating income, labor expenses and other charges. Correction of the PUCO Staff’s methods led the OCC to recommend a reduction in rates for AEP customers.

According to the OCC’s recommended decrease, the average residential Columbus Southern Power customer would save $3.67 per month in the winter and $6.08 per month during the summer. Low-use customers of Columbus Southern Power would on average save $2.43 per month in the winter and $1.54 per month in the summer. The average residential Ohio Power customer would save $0.37 per month throughout the year. These savings are on the delivery portion of customers’ electric bills which is about 25 percent of the total bill.

The OCC also disagreed with AEP’s proposal to shift more of its costs into its fixed customer charge while creating one energy charge for all usage. The change, as proposed, is sudden and does not follow the ratemaking principle of gradualism, particularly for Columbus Southern Power customers who heat with electricity in the winter. Because the OCC has recommended a decrease in AEP’s revenue requirement, the PUCO should instead “maintain the current rate design structure … with only the necessary changes to the energy components,” the OCC said in testimony.

If the PUCO adopts an increase along with the rate design change proposed by AEP, the change should be implemented through a gradual five-year transition to avoid rate shock for AEP’s customers, the OCC said.

The PUCO will consider the testimonies of the OCC, PUCO staff and other parties as it makes its decision on AEP’s proposed distribution rate increase. A decision in the case is not likely until the first quarter of 2012.