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Duke Energy Ohio's electric security plan

Electric security plan 101

An electric security plan (ESP) is a rate plan for the supply and pricing of electric generation service. The Public Utilities Commission of Ohio (PUCO) approved Duke Energy Ohio’s first ESP in December 2008, setting gradual increases for the base price of electric generation through December 2011.

On November 22, 2011, the PUCO approved an agreement that set electric generation rates for Duke’s customers from Jan. 1, 2012 through May 31, 2015. Under this ESP, Duke held auctions to determine generation rates and became a distribution-only utility.

From 2011 to 2013 Duke held five auctions conducted by independent bidding managers and monitored by the PUCO.

What did Duke request in its ESP filing?

In May 2014, Duke filed an application for the time period beginning June 1, 2015 through May 31, 2018.

In this application Duke proposed to secure all supply needed for its standard service offer (SSO) customers through a competitive bidding process. Duke proposed to conduct six auctions over a three-year period.

In the application, Duke requested the addition of three new riders.

The Distribution Capital Investment Rider was proposed to recover costs associated with updating aging distribution technologies and to ensure a reliable and increasingly sophisticated delivery of electric service.

Duke requested approval of a Distribution Storm Rider to balance storm recovery costs already incorporated in customers’ distribution rates and actual costs associated with unforeseen significant weather events.

In the application, Duke requested a Price Stabilization Rider in order to hedge benefits of the costs associated with the company’s contractual obligation to Ohio Valley Electric Corporation (OVEC). Duke proposed to sell its portion of energy and associated services into the competitive market in order to maintain the integrity of a fully-competitive auction process. In the application, Duke stated that this rider will help to relieve some volatility of the price customers pay for generation service because the amount paid in this rider will reflect market conditions.

In addition to the proposed new riders, Duke also asked for withdrawal of eight riders and modification of two.

How did the PUCO rule on Duke’s application?

In April 2015, the PUCO modified and approved Duke’s ESP application effective June 1, 2015 through May 31, 2018.

Duke will continue with its plan to implement full auction-based pricing for its SSO customers for the period of this ESP.  The competitive bidding process will ladder and blend products throughout the term of the ESP. Duke will continue to recover auction-related costs through its Retail Capacity and Retail Energy riders which have been modified in this ESP to better account for specific generation-related costs.

In order to enhance service reliability in its territory, Duke is authorized to recover incremental costs associated with proactively investing in the replacement and modernization of distribution infrastructure through the Distribution Capital Investment Rider.

Duke is authorized to defer operations and management expenses in excess of $5 million from major storms through its Distribution Storm Rider.

Although the PUCO found that Duke’s proposed Price Stabilization Rider (PSR) is permitted under Ohio law, the recovery of costs related to Duke’s OVEC obligations through this rider was not adopted. The PUCO was not persuaded that the rider, as proposed, would benefit ratepayers. Duke is authorized to establish a placeholder PSR, at a rate of zero, pending consideration of future proposals to the PUCO.

The PUCO denied Duke’s proposed reservation of right to terminate the three-year ESP after two years, stating that termination of the ESP before completing the three-year competitive bidding process could lead to price uncertainty.

Did the PUCO consider public opinion in the case?

In September 2014, the PUCO held four local public hearings to provide the public an opportunity to express their views regarding Duke's electric security plan application. There were three hearings held in Cincinnati and one in Middletown.

History of deregulation

A law enacted in 1999 restructured Ohio’s electric industry by changing the way customers shop for electricity. The law, which took effect January 2001, provided for a five-year market development period. During this time, electric rates were frozen to allow a competitive retail market to develop.

As the end of the market development period neared, there was a growing concern that an immediate shift to market-based rates in 2006 would not be in the best interest of customers. To minimize the effects of rate “sticker shock” and transition customers to market-based rates, the PUCO worked with Ohio’s electric utilities to develop rate stabilization plans. The rate stabilization plans, along with other changes, eliminated market uncertainty and provided customers with stable rates. Most of these plans expired at the end of 2008.

In 2008, the Ohio General Assembly passed Senate Bill 221 to keep electric rates stable going forward, create jobs, implement energy efficiency and expand Ohio’s alternative energy industry. The new law incorporated a system under which rates would be approved by the PUCO beginning in 2009. Senate Bill 221 also outlined alternative paths for electric utilities to implement different forms of market-based pricing.

How can I learn more?

To find out more about the pending case, visit our online Docketing Information System at www.PUCO.ohio.gov and search case number 14-0841-EL-SSO