OCC Calls for Changes to AEP Rate Plan

Several of the charges that American Electric Power (AEP) has proposed for its rate plan should not be collected from residential customers, the Office of the Ohio Consumers’ Counsel (OCC) said in testimony filed last week.

AEP’s request to collect two brand new charges totaling more than $659 million should be denied, the OCC said. Another charge should be modified to ensure customers can receive a refund should the results of other pending cases affect the outcome of what AEP can charge its customers.

“The PUCO acted to protect Ohio consumers when it rejected the original settlement of this case,” Consumers’ Counsel Bruce Weston said. “At that time the PUCO emphasized its need for information in the ratemaking process, and today OCC is submitting testimony with our concerns about the impact of AEP’s rate proposal on Ohioans’ electricity bills.”

In the OCC’s testimony, the residential consumer advocate contends AEP’s proposal for a “Rate Stability Rider” is not needed, and a “Phased-In Recovery Rider” should be modified with lower interest rates and the potential to refund to customers costs that are a part of other pending cases.

• Rate Stability Rider – This $284 million charge, according to AEP, would provide the utility with a guaranteed revenue stream to account for the money it could lose from customers who shop for another provider of electric generation service. AEP has proposed to charge residential customers the largest portion of this rate even though they are shopping the least – only 8 percent of residential customers have chosen an alternative electric generation provider. All customers, whether they shop or not, would pay this charge. The value of shopping would be reduced, if approved. The OCC advocates this charge be rejected by the PUCO.
• Phase-In Recovery Rider – In the 2009-2011 electric security plan, AEP rate increases were capped but AEP was allowed to delay collections of any fuel-related costs that eclipsed the cap. The collection of deferred fuel costs was to begin after a separate PUCO case. But in AEP’s request, it has proposed to delay collection of the costs by one year. This would further increase the interest-related costs of the deferrals to the detriment of AEP customers. The charge, at a minimum, should be collected subject to refund so customers could receive a refund if other pending cases are ruled in their favor, the OCC said.

The OCC also has proposed that the affordability of AEP’s electric rates for customers be considered in the ratemaking process. Many AEP customers struggle to afford electric service, as more than 72,500 customers were disconnected in 2011 alone. Additionally, more than 112,000 residential customers (9 percent) use the low-income Percentage of Income Payment Program and more than 51,000 customers (4 percent) have payment plans to keep their electric service turned on. As poverty and unemployment continue to negatively affect Ohioans, utility rates must be kept affordable and consistent with Ohio law, the OCC said.

An evidentiary hearing, scheduled to begin May 14, is the next step in the case. Several weeks of hearings are expected for gathering evidence to make recommendations to the PUCO. A decision from the PUCO is not expected to come until at least July.