Public Utilities Commission Ohio American Water Rate Case

In June 2009, Ohio American Water filed an application with the Public Utilities Commission of Ohio (PUCO) to increase the rates it charges customers for water and wastewater service. Currently, PUCO staff is reviewing the company’s application and will publish a summary of its findings in a report. The report is expected to be issued by the end of this year or early next year. The staff report is a recommendation to the commissioners. The commissioners are not bound by these recommendations and may implement some of the suggestions and reject others.

Once the staff report is issued, hearings will be held in which official parties to the case will provide testimony and call upon expert witnesses. The PUCO will also schedule local public hearings across Ohio American Water’s service area to provide customers the opportunity to provide testimony and express their concerns regarding the company’s application. These hearings will likely be scheduled for January and February 2010.

Finally, the commissioners will review the entire case record including the staff report, testimony, briefs, hearing transcripts and then issue a decision. Once a decision is issued, interested parties to the case have 30 days to file a request for the Commission to reconsider its decision.

What did Ohio American request in its application for a rate increase?

Ohio American requested a 60 percent revenue increase phased in over four years through stepped annual rate increases.

What is the PUCO’s role in setting water rates?

The PUCO regulates investor-owned water companies throughout the state. The PUCO is charged with monitoring service quality, setting rates and inspecting utility facilities to ensure they are in proper working order. Under Ohio law, a public utility is entitled to recover from its customers the expenses associated with operating the public utility, plus a reasonable return on its infrastructure investments.

When a public utility requests a rate adjustment from the PUCO, several steps are taken to review the company’s financial condition and to ensure the company is fulfilling its obligations to customers. The rate case application initiates a process that must, by law, be completed within 275 days. The PUCO takes great care to review the company’s financial records to ensure that the rates set by the PUCO do not result in over-collection of revenue by the company.

What are the steps in the PUCO rate case process?

1. The PUCO staff performs an investigation of the facts and issues raised in the utility’s application. At the same time, parties to the case file intervention petitions, begin the evidentiary process and typically hire experts to prepare testimony.
2. The PUCO staff prepares a report which advises the commissioners of the staff’s recommendations regarding the rate case. PUCO Staff conducts infrastructure inspections, reviews plant and financial records and assesses the quality of service provided to customers.
3. Within 30 days of the filing of the PUCO staff report, parties must file their objections to the staff report, framing the issues in the case.
4. The PUCO schedules hearings in the case, including local public hearings.
5. The parties to the case file their written expert testimony. 
6. The PUCO holds local hearings to take statements from customers and evidentiary hearings for the cross-examination of expert witnesses (depending on the complexity of the case, the expert hearing may last for several weeks). Parties then submit written briefs in argument supporting the reasonableness of their contentions by citing testimony and by contending the unreasonableness of other parties’ positions. 
7. The PUCO attorney examiner assigned to the case reviews the case record, including transcripts of the local public hearings and expert testimony, and then prepares a recommendation to the commissioners.
8. The five commissioners review the case record and the attorney examiner’s recommendation and then issue their decision through an “opinion and order.”
9. The parties to the case have 30 days to file an “application for rehearing” of the commissioners’ opinion and order.
10. Within 30 days of the filing of an application for rehearing, the commissioners must issue an “entry” or the application for rehearing is automatically denied. The Commission may: (a) deny rehearing, (b) grant rehearing and modify the opinion and order, or (c) grant rehearing and hold additional hearings then issue an “order on rehearing.”
11. Once the rehearing process is complete at the PUCO, parties may appeal the Commission decision to the Ohio Supreme Court.

How will the PUCO consider public opinion before reaching its decision?

The PUCO will hold local public hearings across the Ohio American Water service area sometime in early 2010. News media and the public will be notified of the hearing dates once they are scheduled. Ohio American Water customers may comment in writing at any time by addressing letters with case number 09-0391-WS-AIR in the subject line to:

PUCO
Attn: Docketing Division
180 E. Broad Street
Columbus, OH 43215

Customers may also submit comments online.

The PUCO has already received dozens of letters from customers and several resolutions from local governments. The PUCO files all written comments in the official case docket and will consider them along with verbal testimony from the local public hearings before issuing a decision.

Has Ohio American Water met the service quality commitments established in previous rate cases?

During the last two Ohio American rate cases, the PUCO had concerns about Ohio American Water’s progress towards service quality benchmarks. The PUCO required the company to take additional steps toward meeting those goals. These commitments included improving water treatment/softening, upgrading meters and providing budget billing information on customer bills. Ohio American Water has met all of these service quality commitments with the exception of one dealing with unaccounted-for-water. The company is making some headway in this area, but there is still work to be done.

Why are my rates different than neighboring non-PUCO regulated systems?

There are many variables, including system size, age of rates and treatment complexity that make it nearly impossible to make apples to apples rate comparisons between water systems, regardless of ownership. However, PUCO regulated water and wastewater systems, unlike municipal, county, cooperatives and regional water and sewer districts, are typically operated as for-profit corporations that pay income tax based upon their sales, and other financial variables.

Can the PUCO tell Ohio American Water to sell its systems to local government or cooperatives?

No. It is up to the company and any prospective buyer to negotiate such an agreement.

Does the PUCO examine the pay of corporate executives when evaluating a rate request?

PUCO staff reviews the level of all company employees and their wage rates to determine total labor expenses for their report.

How does the PUCO staff figure the average customer water usage estimates used in its reports?

The company provides PUCO staff with the total amount of water sold and divides that by the number of customers.

Can a utility recover legal costs associated with the rate case process?

All costs associated with filing a rate case, including legal expenses can be included and categorized as rate case expenses. The PUCO typically spreads the rate case expenses over a period of time. 

Does the PUCO look at similar water systems during its investigation and compare costs to “fair market value?”

PUCO staff does not value plant in service at fair market value.  Only the original cost of the investment that is used and useful is permitted under Ohio Statute.

Are the costs approved by the PUCO in a water rate case reimbursement for past investment or pre-payment for future investments?

Only investment that is in-service is included for ratemaking purposes. 

More Information

If you have additional questions about the Ohio American Water rate case, please contact the PUCO Consumer Call Center at (800) 686-PUCO (7826) or use the online comment form.

• Rate case process 
• Rate case timeline