OCC, AEP Agreement to Reduce Rate Increase Request

American Electric Power Ohio (AEP Ohio) customers will not experience an increase to their base distribution rates after the Office of the Ohio Consumers’ Counsel (OCC), AEP Ohio and other parties reached an agreement Wednesday, that if approved by the Public Utilities Commission of Ohio (PUCO), would settle the utilities’ rate increase now under consideration.

Base distribution rates are paid by customers for the cost of delivering electricity. This cost includes maintaining the utilities’ wires and is included in the monthly customer charge and in a charge based on the amount of electricity used.

The agreement filed Wednesday is dependent on PUCO approval of AEP Ohio’s separate pending electric security plan case.  An electric security plan is a rate case a utility files with the PUCO to set the prices customers pay for electricity, among other things.

The OCC and others continue to oppose the Sept. 7 electric security plan agreement. In that case, the OCC has recommended the PUCO protect customers by denying a proposed charge that accelerates customer payments to AEP for investments in its distribution system.  However, if the PUCO approves that charge in the electric security plan agreement, the distribution rate case agreement would prevent AEP Ohio from collecting excess amounts from customers in the following ways:

• AEP’s proposed annual base distribution increase would be reduced from $93 million to zero;
• Residential customers would receive credits to their bills totaling more than $14 million annually from January 2012 through May 2015 (up to $50.2 million); and
• $1 million annually will be contributed to the Neighbor to Neighbor program from January 2012 to May 2015 to aid low-income customers who need assistance paying their electric bills.

“The proposed $93 million rate increase was eliminated and residential consumers will receive a credit to their bills totaling more than $14 million annually through May 2015,” Interim Consumers’ Counsel Bruce Weston said. “This is a positive outcome and one that benefits residential consumers.”

The agreement does recommend allowing AEP to begin charging customers in 2012 deferred costs the PUCO had previously approved for future collection from customers.   The advocacy of the OCC and others in the agreement will help reduce the final bill customers will pay for AEP Ohio’s distribution assets by starting collection of the costs one year earlier. Beginning the payment on the deferred costs one year early will reduce the interest and other carrying charges associated with the deferred costs. The costs will be collected in a charge separate from base distribution rates.

AEP Ohio also had originally requested to change the way it charges residential customers for distribution of electricity by shifting more costs into its fixed customer charge while creating one charge based on the amount of electricity customers use monthly. The OCC had opposed this sudden change because it was not gradual and would adversely affect some customers, particularly Columbus Southern Power customers who heat with electricity in the winter.  The current design charges customers a small fixed customer charge and separate summer and winter usage charges. Under the agreement, the customer and usage charges will remain the same.