Duke Energy Ohio's Electric Distribution Rate Case
On July 9, 2012, Duke Energy Ohio filed an application with the Public Utilities Commission of Ohio (PUCO) to increase rates for electric distribution service.
What are distribution rates?
Electric bills are comprised of three main parts – the cost of producing or purchasing electricity for customers, the cost of transporting the electricity from generation sites to local substations and the cost of delivering electricity to homes or businesses. The cost of producing electricity makes up about 50 percent of your total electric bill and the other two charges make up the remaining 50 percent. In 2011, the PUCO approved Duke’s electric security plan for the pricing of electric generation service through May 2015. More information on that plan is available here.
The distribution rate covers the cost of delivering electricity to your home. The distribution rate pays for all the things such as the cost of installing and maintaining the electric lines that run through neighborhoods, reading electric meters, processing bills and taking customer service calls.
What is the PUCO’s role in setting electric distribution rates?
Under Ohio law, a public utility is allowed to recover from customers its operating expenses, plus a reasonable return on its infrastructure investments. When a utility requests a rate increase from the PUCO, several steps are taken to review the company’s financial condition and ensure the company is fulfilling its obligations to customers.
When evaluating the company’s application, PUCO staff examines whether the proposed rates will provide the company with adequate operating revenue. In general, the cost of providing service to customers, maintenance of infrastructure and equipment expenses, depreciation expense, taxes and a return on the company’s infrastructure investment are used to calculate the company’s revenue requirement. PUCO staff prepares a report that makes recommendations to the Commission. The Commission is not bound by the staff recommendations and may implement some suggestions and reject others.
What did Duke request in its application?
Duke is requesting to increase distribution rates approximately $86.6 million, or an increase of 24.02 percent. Duke is also requesting a new Facilities Relocation and Transportation (FRT) rider to recover relocation expenses associated with mass transportation projects. Additionally, Duke seeks approval for changing their accounting methods to track storm costs.
How did the PUCO rule?
On April 2, 2013, several parties to the case filed a stipulation resolving all outstanding issues in the proceedings. The stipulation was signed by PUCO staff, Duke, the Ohio Consumers’ Counsel, OPAE, The Greater Cincinnati Health Council, Cincinnati Bell, Kroger, Direct Energy, PWC and the Ohio Environmental Council.
On May 1, 2013, the PUCO issued its opinion and order accepting the stipulation. The approved stipulation allows Duke to increase baseline distribution revenues by $49 million to cover its costs of providing services and establishes a rate of return of 7.73 percent. In addition, a provision that would have allowed Duke’s to establish a mechanism to fund mass transit facility relocations was removed.
Duke will also continue to provide $522,000 annually to People Working Cooperatively (PWC) weatherization, as well as contribute $350,000 annually through shareholder funds to Ohio Partners for Affordable Energy (OPAE) to establish a fuel fund.
How does this effect my bill?
This increase will impact residential bills by $3.72 per month (3.3%) for customers using 1000 kWh. Additionally, The residential customer charge increases by 50 cents, to $6.00 per month.The monthly customer charge for low-income residential service is $2.00
Did the PUCO consider public opinion before reaching its decision?
Yes. The PUCO held four local public hearings, two in Cincinnati and one in each Hamilton and Middletown in February 2013. 75 witness offered testimony. The PUCO also received hundreds of letters and emails about the case from customers.
How can I learn more?