Office of the Ohio Consumers' Counsel

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In 2007, the Office of the Ohio Consumers’ Counsel (OCC) addressed a range of important issues for residential natural gas consumers. OCC advocated in cases regarding rates, the safety of natural gas service, recommended programs to increase energy efficiency and proposed safeguards to protect consumers from excessive rates increases related to new utility accounting methods.

The price of natural gas continued to be steady throughout 2007. There were a few ups and downs, but the lack of extreme weather helped reduce the number of major spikes in the natural gas market.

Nevertheless, OCC worked diligently to represent residential consumers in proceedings that impacted the rates they pay.

Natural Gas Risers

In November 2006, the staff of the Public Utilities Commission of Ohio (PUCO) issued a report on its statewide investigation regarding the use and performance of natural gas risers. A natural gas riser is the vertical portion of the service line that connects the primary distribution pipeline to the customer’s meter.

The PUCO staff’s gas riser report indicated there is some safety and leakage risk with some gas risers under certain circumstances. According to the report, natural gas risers with plastic connectors which were exposed to severely cold weather during the installation process, and risers that were tightened incorrectly seem to be more likely to fail and risk a natural gas leak. The report estimated that approximately 34 percent of all plastic natural gas risers in Ohio are the types of risers prone to leaks and failures when installed incorrectly.

The OCC participated in the PUCO case related to this investigation and provided recommendations. The OCC’s recommendations included requiring utilities that do not have records of risers in their service territory to conduct an inventory and visual inspection of individual risers to check for improper tightening, and requiring gas utilities to take ownership of service lines so they will be able to quickly determine the correct course of action when faced with a leak. Also, OCC argued that the manufacturers, installation companies and utilities should pay costs associated with the inspections of existing risers and the replacement of failing risers.

The PUCO entertained applications from natural gas utilities seeking accounting deferrals for the costs of the investigation of risers. Accounting deferrals are a way to record costs for possible later collection from customers. OCC is concerned about cost deferrals because the PUCO typically allows utilities to later collect deferrals from customers. In 2007, Columbia Gas of Ohio, Dominion East Ohio Gas, and Vectren Energy Delivery of Ohio requested approval from the PUCO to defer such costs already spent on the natural gas riser investigation for future collection through customers’ rates.

The OCC argued against the gas utilities’ proposals to collect from customers any current or future costs related to the natural gas riser investigation. The OCC believed that consumers should not have to bear the entire costs of the inspections and inventory process since they have already paid for these expenses in base rates. In 2007, the PUCO agreed to allow Vectren to defer such costs, subject to a future PUCO decision about whether the costs can be collected through rates. At the close of 2007, Dominion’s deferral proposal was pending at the PUCO.

In an effort to secure benefits for residential customers, the OCC entered into an agreement in the Columbia case with parties that included the company and the PUCO staff. Under that agreement Columbia will replace or repair customer-owned risers that are prone to failure and associated customer-service lines that are found to have hazardous leaks. As noted in OCC’s testimony in this case, the agreement also requires Columbia to explore a more economical and efficient plan than the one it proposed, which could result in millions in potential savings for its customers. At the end of 2007, this gas riser case was still pending at the PUCO.

Decoupling

Several Ohio natural gas companies proposed the use of an accounting mechanism called “decoupling.” Decoupling permits utilities to recover revenue that would be lost if actual sales were reduced from the sales level assumed in rate proceedings that determined the gas utilities’ distribution rates. The OCC believes decoupling should only be approved if the natural gas company offers comprehensive energy efficiency programs and safeguards that will protect customers from unreasonable bill increases.

These energy efficiency programs can include rebates for purchasing energy efficient furnaces and water heaters, use of energy efficient appliances in new home construction, assistance with additional energy efficient upgrades to existing homes, and an online home energy audit. Customer safeguards that should accompany a decoupling mechanism would include having the utilities identify the total dollar amount of decoupling revenue it proposes to bill its customers, adjustments to ensure customers do not pay the utility for reduced revenues due to warmer than usual weather conditions, limitations on the amount rates could increase and a review and audit performed every 12 months to ensure the decoupling mechanism is functioning correctly.

Vectren Energy Delivery of Ohio Decoupling

The PUCO decided to allow Vectren Energy Delivery of Ohio to proceed with a program that would benefit only a small portion of customers at a great expense to other customers. The PUCO adopted an agreement that could allow as much as $15.2 million in charges to customers in return for providing only a $2 million low-income weatherization program. Vectren was given approval to recoup its lost revenue through decoupling.

The OCC opposed Vectren’s decoupling proposal after the PUCO made significant changes to the original agreement signed by stakeholders including OCC. After that agreement was altered, the PUCO changed the terms of the original settlement to significantly reduce the energy efficiency requirements while at the same time grouting a decoupling mechanism, the OCC withdrew from the agreement. The original agreement would have provided all residential customers with access to programs to reduce their gas consumption and therefore, their bills. The OCC believes decoupling should only be permitted in conjunction with a comprehensive energy efficiency program which helps all customers reduce their cost for natural gas service. — Case No. 05-1444-GA-UNC

Natural Gas Rate Increases

A number of Ohio natural gas companies have requested to increase their customer charges through the PUCO. In many of the cases, the natural gas companies proposed to increase their customer charge by 100 percent or more. The OCC is concerned that high customer charges do not promote energy conservation and will have an adverse impact on smaller use customers.

Duke Energy Ohio Base Rate Increase

In July, Duke Energy Ohio filed to increase rates with the PUCO through the customer charge, Accelerated Main Replacement Plan, and base rates. The company requested to increase the customer charge from $6 to $15 per month, or over $100 more per year and base rates would increase by as much as 33 percent. Duke also requested a continuation of the Accelerated Main Replacement Plan through 2017 that would gradually increase monthly rates from the current $5.77 per month leading to as much as $13.77 per month.

The OCC is participating in the case and has some concerns with Duke’s proposal. The increase in the customer charge would impact residential customers who try to be energy efficient since the proposal would shift certain costs into the existing customer charge, which is a flat fee paid regardless of how much natural gas is used each month. While the Accelerated Main Replacement Plan was touted as an effort to cut maintenance costs and improve efficiencies, Duke has shown during the first six years of the program that customers have paid $137 million but received only $8.5 million in maintenance cost savings. The OCC is also challenging the amount requested through base rates. At the end of 2007, the case is still pending at the PUCO. — Case No. 07-589-GA-AIR

Dominion East Ohio Gas Base Rate Increase

In July, Dominion East Ohio proposed to increase rates with the PUCO through base rates and the customer charge. If the PUCO approves the new rates, an additional $4.50 per month would be collected from a typical residential customer. At the end of 2007, the case is still pending at the PUCO. — Case No. 07-0829-GA-AIR

Vectren Energy Delivery of Ohio

In September, Vectren Energy Delivery of Ohio requested a two-stage increase in rates with the PUCO through the customer charge. Vectren is requesting a 139 percent increase in the customer charge from November through April, and a 42.8 percent increase from May through October. In Stage 2, Vectren proposed a 214 percent increase in the current customer charge from November through April. Vectren would need approval from the PUCO before Stage 2 could be implemented. As part of Vectren’s request, the volumetric charges would decrease in Stage 1 and 2. — Case No. 07-1080-GA-AIR

Columbia Gas of Ohio Gas Cost Recovery (GCR)

The OCC participated in the PUCO’s biennial proceedings for gas cost recovery management performance and financial audits of Columbia Gas of Ohio. In December 2007, an agreement was reached among the OCC, Columbia, PUCO staff and other parties that resolved these 2004 and 2005 audit cases.

If the PUCO adopts the agreement, Columbia customers will be refunded $35 million - $25 million as a result of the 2004/2005 audits and an advancement of $10 million from future off-system gas sales made by Columbia. Customers will receive credits on their bills for a one-year period, beginning January 31, 2008. OCC was pleased to negotiate with Columbia a comprehensive energy efficiency program to provide customers with tools to reduce their consumption and thereby, there bills. Columbia will offer residential customers the option to participate in comprehensive energy efficiency programs from 2009 through 2011. Columbia must achieve a verified energy usage reduction of three-quarters to one percent of their total annual residential and commercial natural gas sales. The energy efficiency programs will be funded by customers. — Case Nos. 05-221-GA-GCR, 04-221-GA-GCR, 96-1113-GA-ATA

Dominion East Ohio Gas Audit

The OCC participated in the hearing for the PUCO’s biennial audit of Dominion East Ohio’s gas purchasing practices. The OCC questioned natural gas purchases involving Dominion and its affiliates that were made before the audit period, which caused consumers to pay higher natural gas rates. The OCC also argued that Dominion customers were harmed by Dominion engaging in park, loan and exchange (PLE) gas transactions rather than off-system gas sales transactions. This is because under PLE, the company keeps all the profits despite the customers’ payments that make these transactions possible, whereas with off-system sales, the company is required to share the profits with the customers. In park transactions Dominion accepts an amount of natural gas from a supplier and gives the supplier the same amount back at a later time. For loan transactions, Dominion gives a supplier a specific amount of natural gas and accepts the same amount back at a later time. Exchange transactions refer to Dominion accepting an amount of natural gas from a supplier at one location and giving the same amount to the supplier from a different location at the same time.

In January 2007, the PUCO approved an agreement among Dominion, Interstate Gas Supply, Industrial Energy Users-Ohio, and the PUCO staff settling this case. However, the OCC did not sign the agreement. The agreement did not adopt OCC’s positions which would have resulted in a refund to customers and provided a tool for offsetting future high natural gas costs. The agreement stated that Dominion would only have to conduct statistical examinations of prices it paid for purchases made from affiliated companies to ensure those prices were not out of the range of prices that purchases from nonaffiliated companies would cost. In addition, Dominion is to perform a study on its lost and unaccounted for natural gas and document negotiations regarding natural gas transactions paid for by choice customers that are used for the park, loan and exchange transactions, and allocate a portion of revenue from those transactions to be credited to choice customers. The OCC requested a rehearing and the PUCO denied that request. The OCC believed that Dominion’s revenue from PLE transactions should be shared with consumers. Also, $4,177,700 in natural gas purchases involving Dominion and its affiliate should be refunded to their customers since these purchases were unreasonable. — Case No 05-219-GA-GCR

Vectren Energy Delivery of Ohio Financial and Management Performance Audit

In 2005, management performance and financial audits were conducted by the PUCO to review Vectren Energy Delivery of Ohio’s natural gas purchasing practices and accounting accuracy for natural gas costs in the company’s GCR rates. During a review of the audits, the OCC recommended the disallowance of costs associated with Vectren’s five percent reserve margin based on the same rationale the OCC used in Vectren’s previous GCR audit proceedings (Case No. 02-220- GA-GCR) which had resulted in the Commission ordering a disallowance.

In this case, the PUCO agreed that Vectren’s five percent reserve margin was excessive and ordered the gas utility to refund approximately $800,000 to customers in costs incurred with maintaining a five percent reserve margin. The credits will be treated as an adjustment to all Vectren customers through a Gas Cost Recovery Reconciliation Rider. Also, the PUCO directed the next audit to include a review of Vectren’s books to ensure the company followed the agreement and refunded the correct amount of money to customers. — Case Nos. 04-220-GA-GCR & 05-220-GAGCR

Vectren Energy Delivery of Ohio Bill Format

In April 2007, Vectren Energy Delivery of Ohio requested approval to revise its customer bill format. After reviewing the proposed changes to bills, the OCC filed comments with the PUCO, recommending improvements to the bill format requested by Vectren.

The OCC was concerned that Vectren’s proposed bill format would condense bill information and make it more difficult for customers to read, especially visually impaired customers. The OCC recommended that the utility should offer bills in large print and Braille formats for the elderly and visually impaired. Also, the OCC recommended better promotion of Vectren’s interpreter services for customers who do not speak English. In addition, the OCC requested that payment plan options be described on disconnect notices, language be added to the account balance section to improve clarity, and that the company ensure information is located in the correct area when referenced on the bill.

In July, the PUCO approved a new bill format for Vectren in this case. The PUCO agreed with several OCC recommendations. Vectren agreed to provide a large print version of its new bill format. Also, Vectren will improve the language about debt obligation for Percentage of Payment Plan (PIPP) customers and clearly list the contact telephone numbers for gas suppliers in bills of customers participating in gas choice. Vectren will improve the language about debt obligation for Percentage of Payment Plan (PIPP) customers and clearly list the contact telephone numbers for suppliers in the choice bill. — Case 07-477-GA-UNC

 

 

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