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Proposed budget cut would severely impact OCC's ability to represent utility customers

A reduction to the Office of the Ohio Consumers' Counsel's (OCC) operating budget of more than 51 percent would greatly undermine the agency's ability to advocate on behalf of Ohio's residential utility customers. The proposal was part of Gov. John Kasich's overall budget plan submitted to the Ohio General Assembly on March 15.

The cut was proposed despite the fact the OCC's budget is not part of Ohio's General Revenue Fund and would not relieve any of the state's projected $8 billion deficit. The agency is funded entirely by an assessment to the gross intrastate receipts from each of the state's regulated utilities.

Any funds taken from the OCC go directly back to the utilities, not to the customers.

The OCC currently operates on an annual budget of $8.5 million. By contrast, during the current budget cycle, the OCC has directly saved customers $54.8 million. Through its efforts with groups intervening in various utility cases, the OCC has taken the lead in providing additional shared savings of $1.9 billion.

If the governor's proposals are accepted by the Legislature, the OCC's budget level would be reduced to $4.1 million each of the next two budget years. Administrative costs, such as the need to cover unemployment benefits to employees laid off due to the cut, would further reduce the OCC's ability to allocate operating funds to fulfill its mission of representing residential customers.

The OCC's ability to advocate and represent residential utility customers will be significantly curtailed by such a substantial cut. The agency's staffing level could be reduced by up to two-thirds, which would limit the number of cases and amount of resources the OCC could use in its efforts to keep utility prices fair and reasonable.

Electric companies such as American Electric Power, Duke Energy Ohio and Dayton Power and Light have submitted, or are expected to submit, new electric security plans and/ or market rate offers in the coming months. Potential gas legislation could have the impact of increasing the number and frequency of utility filings to increase rates. These proceedings could subject customers to higher rates for years to come. Customers of investor-owned water companies, such as Ohio American Water and Aqua Ohio, who have benefited from the OCC's advocacy by having potential rate increases limited, could face higher rates because the OCC would lack the resources to contest them.

The OCC call center—with a staff of 10 compliance investigators—responds to 3,500- 5,500 customer interactions per month, since 2008 would be diminished or potentially eliminated, thereby impacting families who rely on the OCC to assist them with concerns regarding the loss of their utility services or other challenges. During the past year, one in 10 households has lost electric or natural gas service for non-payment. The call center has helped customers stay connected to their utility service by negotiating payment plans on their behalf.

In response to the theft of a data device in 2007 containing sensitive information about all 64,000 state employees, then Gov. Ted Strickland chose the OCC—over all other state agencies—to provide its call center staff and hotline in the response effort.

In addition to the limitation on its ability to negotiate for fair and reasonable utility rates, the OCC's unique ability to provide informational outreach to utility customers would be greatly reduced as well. Free publications, such as the OCC's newsletter, Consumers' Corner, and other important educational materials might cease to be available. Customers who have come to rely on the OCC to keep them educated about the true impact of pending rate increases or proposed legislation would no longer have access to timely fact sheets about such issues.

Customers would lose a vital source of information about changes in technology such as smart grid, energy efficiency tips, and programs available to help low-income customers. In sum, there would be less public information available to let customers know what is going on with their utility services.

On March 29, budget legislation was introduced in the Ohio House of Representatives. A decision on the budget has to be made by the legislature by June 30. Customers who wish to follow the ongoing OCC budget developments or contact their local representative to voice their opinion can visit pickocc.org/ budget for additional information.

By Marty Berkowitz

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OCC's advocacy works for businesses as well as residential customers

The Office of the Ohio Consumers' Counsel (OCC) was established in 1976 by the Ohio General Assembly. Its purpose is to advocate on behalf of residential utility customers in matters related to their electric, natural gas, telephone and water service. However, the efforts of the OCC have also provided benefits to commercial and large industrial customers.

During the last 35 years, the OCC has saved utility customers $10 billion in avoided costs through its intervention in cases before the Public Utilities Commission of Ohio (PUCO) and in the courts. Some savings have come as the result of PUCO orders upholding the OCC's advocacy efforts and many others have resulted from agreements among the OCC and interested parties that produced outcomes that benefited Ohioans.

When the OCC is successful at limiting utility revenue increases, each customer class pays a lower rate for its utility service that might otherwise have not occurred except for its advocacy. For every $100 in savings negotiated by the OCC in a particular electric rate case, for example, $40 goes to residential customers, while the remaining $60 goes to businesses, small and large. Energy costs are an important factor for new businesses considering locating in Ohio. When the OCC is able to help keep such costs fair and reasonable, the Ohio economy as a whole is strengthened.

Throughout its advocacy in utility cases, the OCC has supported the lowest cost option available to residential customers. In the electric and natural gas industries, the OCC has supported a movement toward a market approach to setting utility rates. Utilities, such as Dominion East Ohio Gas, Vectren Energy Delivery of Ohio and Columbia Gas of Ohio, have agreed to hold competitive auctions as result of negotiated settlements in which the OCC participated. This approach, particularly when taken in a wholesale auction, has resulted in residential customers paying lower rates. The OCC has attended such auctions and worked to ensure the proceedings were fair and encouraged competition. The results have consistently been successful as participation by suppliers has been robust and lower costs for customers have been achieved. For example, as a result of the Dominion auctions, residential customers choosing to continue purchasing their natural gas from the utility now pay nearly $138 less per year for their natural gas supply based on an average yearly usage of 99.1 thousand cubic feet (Mcf).

In its advocacy for utility customers, the OCC also has tackled several important business concerns. The OCC also supported a process that enables Ohio manufacturers to convert their waste heat into usable energy. The agency has advocated better interconnection standards at the PUCO and the removal of price barriers to their development. The OCC has supported companies who provided their own sources of electric generation and argued against high monthly back-up rates charged by utilities to these companies. During these cases, the OCC worked with several large business groups to make the business case to the PUCO.

The existing mission of the OCC is to advocate for residential customers and provide educational tools for people to better manage their energy costs. However, when the OCC has succeeded in its goals, all customer classes have seen improved outcomes.

By Marty Berkowitz

Customers faced with two increases from AEP

Customers of American Electric Power's (AEP) two Ohio utilities could be faced with increases to monthly electric bills. The utility filed two rate requests to collect additional costs with the Public Utilities Commission of Ohio (PUCO). In January, AEP filed its second electric security plan that would increase generation rates between 11 and 15 percent from January 2012 – May 2014. It also filed a request to increase its distribution rates between 10 and 16 percent in February.

Based on the testimonies filed by AEP, the generation rate (cost of electricity) for residential customers could increase a total of 10.2 percent for Columbus Southern Power customers and 9.7 percent for Ohio Power customers through the 29 months of the electric security plan. In addition to the generation rates increase, the utility proposed the continuation of several charges – some would increase while others would decrease – and the addition of more charges that could lead to higher costs on customers' bills. AEP estimates the total increases would be 11.3 percent for Columbus Southern Power customers and 14.9 percent for Ohio Power customers.

Of significance, AEP wants to create a charge that would allow it to recover costs caused by major storms not currently included in rates and fuel costs that were not collected between 2009 and 2011. The fuel costs amount to an additional $135 million per year that would be charged to customers through 2018.

Public hearings for the electric security plan have been set by the PUCO. Customers will be able to present their opinions and concerns about AEP's plan in Columbus (June 6 and 14), Canton (June 7), Lima (June 8) and Marietta (June 13);

Monday, June 6 at 6 p.m.
Whetstone Park of Roses Shelter House
3901 N. High St.
Columbus, Ohio 43214

Tuesday, June 7 at 6 p.m.
Glenwood Middle School Auditorium
1015 44th St. NW
Canton, Ohio 44709

Wednesday, June 8 at 6 p.m.
Lima Senior High School
1 Spartan Way
Lima, Ohio 45801

Monday, June 13 at 6 p.m.
Washington State Community College
Arts & Sciences Center,
Harvey Graham Auditorium
710 Colegate Drive
Marietta, Ohio 45750

Tuesday, June 14 at 12:30 p.m.
Public Utilities Commission of Ohio
Continental Plaza, Hearing Room 11-C
180 E. Broad St.
Columbus, Ohio 43215

AEP also has a request at the PUCO to increase the rates customers pay for the delivery of electricity and to change the way it charges customers for that delivery. AEP estimates the average increase in total distribution revenue for all customers would be 10.6 percent for Columbus Southern Power and 16 percent for Ohio Power. The request would allow AEP to recover more of the cost to deliver electricity through a fixed monthly charge, called a customer charge – and recover less delivery costs through a kilowatt-hour (kWh) volume based charge. This change in the design of distribution rates means customers could pay significantly more before they even start using any electricity. This is similar to what has recently happened for natural gas utilities such as Columbia Gas of Ohio and Dominion East Ohio.

Under its distribution rate request, AEP would increase the monthly residential customer charge for Columbus Southern Power customers from $4.52 to $8.40 and for Ohio Power customers from $3.82 to $8.40. The energy charge for all usage would be set at 2.14 cents per kWh. The lower rates customers receive for usage above 800 kWh per month would be eliminated.

The Office of the Ohio Consumers' Counsel is currently reviewing and evaluating AEP's two requests to determine the best way to advocate for residential customers Decisions in the two AEP cases may occur before the end of 2011.

By Anthony Rodriguez

1 Rates shown are those which the majority of Columbus Southern Power residential customers are served (residential tariff R-R). There are four other residential tariffs under which customers are served.

2 Rates shown are those which the majority of Ohio Power residential customers are served (residential tariff RS). There is one other residential tariff under which customers are served.

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Concerns linger with revised natural gas legislation; OCC seeks improvements to protect customers

The Office of the Ohio Consumers' Counsel (OCC) continues to negotiate changes to proposed natural gas legislation that, if passed, will make it easier for natural gas utilities to raise distribution rates. Substitute House Bill 95 (Sub. HB 95) also would reduce the ability of the OCC and other customer advocates to ensure costs are just and reasonable.

Distribution rates include the fixed and usage-based charges customers pay for delivery of their natural gas, as well as expenses utilities incur for pipeline maintenance and other operations costs. These charges account for about 30 percent of a customer's average monthly bill. They are separate from the actual cost of natural gas which customers have some control over with their ability to choose their supplier.

The OCC has concerns about the legislation which, although modified to allow the Public Utilities Commission of Ohio (PUCO) to retain oversight authority removed in the original version, still enables natural gas companies to raise rates without the benefit of a thorough review by the OCC and other customer advocates. Sub. HB 95 would allow natural gas utilities to increase distribution rates by:

• Adding an unlimited number of charges to customers' bills for an unlimited number of expenses without being periodically reviewed;

• Allowing natural gas utilities to apply for an "alternative rate plan" or continue an existing plan without going through a review process. For example, if a customer charge is about to expire and a review would determine that rates could actually be lowered, the original plan could still be continued. This might result in customers continuing to pay for costs the utility is no longer incurring;

• Reducing public notice requirements for proposed increases. This makes it harder for customers who rely on such notices to voice their opposition; and

• Eliminating a mandatory evidentiary hearing, with the PUCO as judge, before utilities can raise rates. This is left to the PUCO's discretion in the bill's current form. At an evidentiary hearing, all parties are entitled to produce supporting documentation and examine and cross-examine witnesses. In many cases, the parties are able to come to an agreement that benefits customers and utilities.

Negotiations to modify or improve Sub HB 95 were ongoing as of April in the Ohio House of Representatives. Customers with questions or concerns about this legislation or any other utilityrelated matter should contact the OCC at 1-877- 742-5622 or visit its website at www.pickocc.org.

By Marty Berkowitz

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Editor's note

Dear Readers of the Consumers' Corner Newsletter,

As of late April, as the May-June 2011 edition of Consumers' Corner is heading to the printer, the Office of the Ohio Consumers' Counsel is among the state agencies going through the biennial budget process. As noted in the story on page 1 of this newsletter, the OCC is facing a 51.3 percent budget cut of its operations. With this cut, it is estimated that two-thirds of the OCC staff may be laid off and many of the valuable services provided by the OCC will cease to exist. Among those services that could be eliminated is the Consumers' Corner newsletter. This newsletter has existed in some form for decades. The agency's long commitment to keeping Ohio's residential utility customers informed about key utility issues has been realized in part, through this newsletter. Nearly 100,000 homes receive either the printed or electronic version of Consumers' Corner.

We are continuing to work at restoring the budget of the OCC so that we can continue to represent your interests in utility matters. It is our hope that our endeavors will be successful. Many have asked about the OCC budget. We have established a page on our website dedicated to providing accurate information about the OCC budget. People have also asked the OCC staff for contact information about to whom to write to make their voices heard about the OCC. That information is also on the web page: www.pickocc.org/budget.

It is our hope that we will continue to be able to provide you with the Consumers' Corner newsletter, however, if that is not the case we want you to know why the publication may end. We have valued your support, readership and interest in utility issues over the years and it is with profound regret that this may be our final edition.

Most sincerely,
Beth Gianforcaro
Editor

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