Wednesday, December 10, 2008


This morning the STARK COUNTY POLITICAL REPORT (The Report) received an e-mail from Plain Township trustee Louis Giavasis about deficiencies in a Public Utilities Commission of Ohio (PUCO) notice on hearings concerning an electric rate increase case pending before the PUCO.

Giavasis, who is a Stark County leading light in fighting the AEP/Ohio Power 52% over three years rate increase request, complained that the Public Utilities Commission of Ohio had led the township trustees to believe that there would be at least one additional opportunity for the trustee and any other interested Ohioan to appear in Columbus to give additional testimony on the AEP request.

The STARK COUNTY POLITICAL REPORT (The Report) contacted Paul Duffy, chief legal counsel for the PUCO, and addressed questions to him about the notice that Plain trustees received.

Duffy said that he didn't think the PUCO did any thing wrong in terms of the content of a letter it sent to the township on November 28th acknowledge receiving the trustees' resolution opposing the AEP increase, but that he could see how the trustees could misconstrue the reference to the hearing aspect of the letter (see the yellow/green highlighted portions of the accompanying graphic to see the relevant language).

The Report too sees why the Plain trustees would (as they did) call the PUCO about the specifics of a hearing (location, date and time of day) looking at the language contained in the letter.

Imagine the trustees' consternation when told that THE hearing was in progress as they spoke.

Well, there was a hearing in progress but it was a hearing for "officially" entered intervenors only. As this is the last day that the hearing will be open (as The Report understands Duffy) barring a request that it be held open for an additional time for rebuttal of testimony given today.

So The Report thinks it is the job of Stark County's legislators (listen up Slesnick, legislator-elect Snitchler, Schuring and Oelslger to make inquiry with the PUCO as to how rephrase the letter so that future misapprehension of the hearing matter can be avoided.

In a nutshell, The Report does believe that the language is ripe to mislead and encourages the PUCO, with coaching from Stark County's area legislators, to restructure the discussion in its "stock letter" response to make it crystal clear that the letter IS NOT notice of a specific hearing.

1 comment:

Sandy Theis said...

Thanks for your interest in the topic. Here's some information released by the Ohio Manufactures' Association, which opposes the rate hike:

Businesses, Consumers Call AEP's 52% Rate Hike Request 'Excessive';

Urge State Utility Regulators to Keep Rates Affordable

For Immediate Release: December 9, 2008

COLUMBUS -- Business leaders, homeowners and economic development groups are asking state utility regulators to reject American Electric Power's request for a three-year, 52% rate hike, saying the increase is unjustified and would devastate Ohio's already-struggling economy.

AEP's current rates expire December 31, and the Public Utilities Commission of Ohio is holding hearings to determine whether to accept, reject or modify AEP's proposal to raise rates.

Under Ohio's comprehensive new energy law passed earlier this year, electric utilities cannot charge rates that would lead to "excessive" earnings. How the PUCO defines "excessive'' will determine how much customers pay for electricity in the future.

Expert witnesses hired by both consumer advocates and business groups agree that a utility's earnings would be "excessive'' if it has a Return on Equity higher than 14 or 15 %.

AEP disagrees. In the case of Columbus Southern Power – one of AEP's two Ohio companies – its Return on Equity would exceed 30 percent if the pending rate hike plan is approved, according to a new analysis by the Ohio Energy Group, an organization that represents large industrial customers.

"You don't need an expert to conclude that a 52 percent rate increase, especially in today's economy, is excessive,'' said Kevin Schmidt, director of public policy for the Ohio Manufacturers' Association. "Manufacturers, just like homeowners, are under extraordinary pressure to cut costs. AEP's request is unjustified and poorly timed. ''

The PUCO has been flooded with calls and letters from customers such as Columbus resident Sigrid Wagner, who cited AEP's persistent power outages as the only downside to his 1991 move from a small town in Georgia.

"I became so infuriated with AEP's Third World electrical 'service' that I started keeping track of the outages,'' wrote Wagner, who provided the PUCO with a three-page list of outages. "How can Ohio recruit new businesses to the state without reliable electric service?''

Gregory Johnson, president of the Herbert E. Orr Company in Paulding, said the proposed rate increase will decrease the forging company's competitiveness and put Ohio's economy in jeopardy.

"Manufacturers are facing the same volatility in markets and commodity prices that AEP-Ohio is, however manufacturers do not enjoy the ability to foist price increase upon our customers,'' Johnson wrote.

In Canton, Stephen L. Paquette, President and CEO of the Stark Development Board, warned the PUCO that approval of the increase "could result in a significant loss of the existing companies that are presently located and doing business in Stark County, Ohio. Our experience has been that as the costs of doing business increase, companies begin to seek alternative locations that can provide them a business environment that is more conducive to reducing their operating costs.''

In Portsmouth, OSCO Industries President John Burke said the company built its newest iron foundry in Portsmouth 11 years ago because of AEP's competitive rates. OSCO spends about $4 million annually on electricity, and if AEP gets it way, prices will jump by more than $2 million, Burke said.

The rate hike request comes as OSCO, facing unprecedented pressure to lower its costs, has already absorbed steady price increases from AEP.

"As you are probably in the best position to know, utilities are quite different from other corporations,'' Burke wrote. "First, a utility has a monopoly and is not exposed to direct or global competition. Second, a utility is not exposed to the same level of risk as a normal corporation…. AEP's rate request highlights a profound lack of understanding of the competitive environment within which AEP's industrial customers operate.''

And Fredericktown resident Susan Higgins noted that AEP wants a price increase, despite its poor service record.

"(M)ost of us now own generators, for the frequent power outages we experience,'' Higgins wrote. "Perhaps it's time for them (AEP executives) to tighten their belts….''

For More Information, Contact:

Sandy Theis, spokeswoman, Ohio Manufacturers' Association, 614-940-0131

AEP Rate Hike Fact Sheet

Ohio's electric utilities enjoy a favored status: The state guarantees they will make a profit and requires its customers to pay for new power plants that are justified. In exchange for these guarantees, Ohio's new energy law prevents utilities from charging rates that would lead to "excessive'' earnings.

Despite the new law, AEP is asking the Public Utilities Commission of Ohio for a three-year, 52% rate increase. Its current rates expire on December 31.

In hearings before the Commission, the following facts have emerged:

* AEP's Ohio companies (Columbus Southern Power and Ohio Power) already charge higher rates than their affiliated companies in Michigan, West Virginia, Kentucky and Indiana;

* AEP wants a 15% annual increase, each year for three years, which amounts to a total increase of 52% when compounded.

* Duke Energy, which serves southwest Ohio, agreed to a modest 2% rate increase, each year for three years. Because fuel costs are falling, Duke customers could eventually see a rate decrease;

* Even if AEP gets no increase at all, many experts agree that rates charged by Columbus Southern are already "excessive.'' If Ohio Power gets the increases it seeks, its earnings would be excessive, too;

* AEP's rate-hike request assumes that its fuel costs will double, even though prices for natural gas and coal have been decreasing;

* One component of the rate increase request for Columbus Southern is an additional $93.6 million next year – a 642% increase over the previous year – to cover the "risks" it faces if customers shop for power elsewhere, then return to CSP. AEP stands by this request even though company officials admitted that Ohio Power has had no customers leave, then return;

* Advocates representing every type of electricity customer – residential, industrial, commercial and low-income homeowners - have asked the PUCO to reject AEP's proposal because it unjustified;

* Exorbitant rate hikes would disproportionately harm Ohio's largest employers, including steelmakers and automakers that spend millions of dollars each year on electricity and are struggling to cut costs;

* Both the Office of Consumers' Counsel (OCC), headed by Ohio's advocate for residential electricity customers, and the Ohio Energy Group (OEG), which represents large industrial customers, generally agree that Columbus Southern Power and Ohio Power's Return on Equity (ROE) would be excessive somewhere between 14 percent and 15 percent annually;

* Excessive earnings are measured by examining a company's ROE and comparing it to other businesses with comparable risks. The risks for utilities are relatively low because unlike most other businesses, they are guaranteed a profit – and cost recovery if they must build a new power plant or upgrade an existing one;

* If AEP gets its way, Columbus Southern Power's Return of Equity will top an unprecedented 30 percent.

Columbus Southern Ohio Power

OCC defines an excessive ROE: 14.9 % 15.3 %

OEG defines an excessive ROE: 14.2 % 14.2 %

AEP's ROE today: 22.1 % 13.7 %

AEP's ROE if its rate hikes are approved: 31.0 % (2009) 17.0 % (2009)

33.0% (2010) 19.0 % (2009)

36.0% (2011) 21.0 % (2011)