AEP wants OK of 12.6% rate cut

Source: By Dan Gearino, The Columbus Dispatch • Posted: Thursday, May 29, 2014

American Electric Power proposes a rate cut for most residential customers, and a trial-like regulatory hearing process that is required to implement it begins next week.

A typical household bill would be 12.6 percent less than under current rates, based on forecasts of market conditions next year, when the plan would take effect.

Little has been said or written about the proposal, largely because it is free of the rate increases and other controversial elements that were in the company’s 2008 and 2011 plans.

“I’m not going to lose a lot of sleep over this one,” said Dave Rinebolt, executive director of Ohio Partners for Affordable Energy, an advocate for low-income customers.

AEP released the plan in December. Since then, about 30 trade groups, companies and other participants have filed written testimony. A hearing is to begin on June 3 and probably will go on for several weeks.

PUCO probably will issue a ruling this summer or fall, and the plan would take effect in June 2015.

Under the proposal, a typical central Ohio household would pay $133.42 per month, which is 12.6 percent less than under current rates. The dollar figure is based on monthly usage of 1,000 kilowatt-hours at AEP’s winter rate, which runs from October to May.

This is the price of AEP’s standard service, which would apply to the roughly 70 percent of households that have not signed up with alternative power providers.

The rate would fall because AEP will be buying power through an auction process in which power-plant operators compete to offer the lowest price. The result will be prices that are in line with those in the larger electricity market.

This is a shift from a system in which the prices were set by regulators, who in recent years have allowed prices that are higher than market prices.

Specifically, the auction will be used to set the price for electricity-generation service, which represents about half of the electricity bill for a typical household. The remainder of the bill involves charges for delivery and other items.

But the forecast of a rate decrease comes with a caveat. Electricity markets can be volatile, and the auction results could be higher or lower than what AEP is forecasting.

The rate plan also includes, for the first time, a late fee of 1.5 percent, with a five-day grace period. That would put AEP in line with just about every other major utility, including Akron-based FirstEnergy and Columbus-based Columbia Gas of Ohio, both of which charge 1.5 percent on late payments.

AEP hopes that the fee will make more customers pay on time. That would reduce the utility’s interest costs to cover its shortfalls related to late payments. About one-third of AEP customers are late in paying their bills each month.

The company says the fee would offset other costs that customers already pay.

“We’re not making any money from it,” said spokeswoman Terri Flora.

Consumer advocates do not oppose the charge but have questions.

“The utility provided no justification for the need for a late-payment charge other than the fact that other utilities have a late-payment charge,” said Jim Williams, an analyst with the Office of the Ohio Consumers’ Counsel, in a filing.