Office of the Ohio Consumers' Counsel

More action needed by Duke Energy natural gas customers

On May 28, 2008, the Public Utilities Commission of Ohio (PUCO) issued a decision in the Duke Energy natural gas rate case. While an agreement reached by the Office of the Ohio Consumers’ Counsel (OCC) and all other parties resolved issues regarding the amount of the rate increase, the issue of how those rates would be structured was the subject of a hearing.

As opposed to maintaining a small monthly flat-rate customer charge – with the bulk of the costs being recovered through a charge based on how much gas a customer uses – the PUCO instead increased the flat-rate charge by more than 300 percent over the next year while lowering the portion of the delivery charge that varies according to how much gas a customer uses. This increase in the flat-rate charge is well above what Duke even requested.

About the agreement

The approval of the agreement will benefit residential consumers by cutting Duke’s proposed base rate increase by $15.9 million per year. In addition, price caps and other changes to Duke’s Accelerated Main Replacement Program would limit some of the burden on households.

The agreement also places a cap on increases allowed through the continuation of the Accelerated Main Replacement Program, which provides funding for Duke to replace steel pipes with plastic. Duke reduced its projected investment and the agreement helps shift some of the costs away from residential consumers and at the same time spreads out the costs over more time. The changes will save residential consumers more than $100 million over the term of the plan.

Thank you to residential consumers who wrote letters or attended the local public hearings in Cincinnati and Mason. However, your help is now needed to encourage the PUCO to reconsider its decision related to the flat-rate customer charge (see below).

Customer charge

One important issue not resolved through the agreement is how Duke would collect its additional revenue and whether its base rates should be restructured. Despite objections of the OCC and many consumers, the PUCO ordered a record increase that will raise Duke Energy’s flat-rate customer charge by more than 300 percent while lowering the portion of the delivery charge that varies according to how much gas a customer uses. This is the highest natural gas customer charge in Ohio as well as the largest increase to a gas utility’s customer charge ever ordered by the PUCO.

The base rate portion of a customer’s bill includes a flat-rate customer charge as well as a component that varies according to how much natural gas a customer uses. The OCC opposes raising the flat-rate customer charge because it will disproportionately impact low-usage and low-income residential customers.

The PUCO ordered raising Duke’s monthly customer charge that must be paid regardless of how much natural gas a customer uses, from the current $6 charge to $15 through Sept. 2008. At that point, consumers will pay $20.25 per month through June 2009, and $25.33 in every month after that. The customer charge includes the cost a utility charges its customers for services such as meter reading, billing and maintaining the distribution equipment.

The PUCO’s decision means customers will pay these higher flat-rate amounts every month whether they use any natural gas or not, and whether they conserve or not. The OCC is concerned that this decision will negatively impact customers that attempt to conserve energy and will result in low-use customers subsidizing high-use customers.

What consumers can do

While the OCC will request the PUCO to reconsider its decision, individual customers can share their opinions with the PUCO by writing letters. All letters and envelopes should reference Case Number 07-589-GA-AIR. Letters should be sent to: Public Utilities Commission of Ohio, Attn: Docketing Division, 180 E. Broad Street, Columbus, OH 43215.

You may also write a letter to the editors of your local daily and weekly newspapers to explain this issue, raise public awareness and encourage the PUCO to reconsider its decision on the flat-rate customer charge.