Duke Energy Ohio's Natural Gas 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 natural gas distribution service.

What are distribution rates?

Natural gas bills are comprised of two main parts – the cost of the natural gas and the cost of distribution.

The distribution rate pays for all the things that Duke must do to deliver gas to its customers including installing and maintaining gas pipelines, reading gas meters, processing bills and taking customer service calls. Duke spends the same amount of money per residential customer to do these things, whether a customer uses a little natural gas each month, or a lot. Since these distribution costs do not change with customer usage, they are referred to as “fixed costs.”

What is the PUCO’s role in setting 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 revenues by approximately $44.6 million or about 18 percent over current revenues. Duke also proposes new charges to support economic development, natural gas vehicle use, recover costs for infrastructure replacement relating to mass transit projects, a voluntary program designed to encourage natural gas fired electric generation, as well as anew reconnection charge for customers who voluntarily have their service disconnected for a period of time.

Duke also proposes to begin recovery of deferred costs related to environmental remediation of two manufactured gas plants totaling approximately $65 million.

Additionally, Duke proposes to extend current riders related to the replacement of aging infrastructure.

What did PUCO staff recommend in its report?

PUCO staff filed a summary of its investigation on Jan. 4, 2013. During its investigation, PUCO staff adjusted the company’s rate base and operating income to ensure that only costs related to providing distribution services are recovered from customers. After making adjustments, PUCO staff recommended the Commission reduce distribution revenues from current levels between approximately $3.4 million and $10.7 million, or approximately 0.88 and 2.8 percent

After reviewing documents, inspecting sites and eliminating costs not viewed as related to providing distribution service, staff recommends that Duke be permitted to recover approximately $6.4 million in costs related to environmental remediation of manufactured gas plants.

Will any of this affect the cost of natural gas itself?

No, the cost of natural gas, which makes up the majority of bills, will continue to be passed on to customers through Duke’s gas cost recovery charge or a gas marketer’s rate. Either way, Duke makes no profit on this part of the bill.

How can I make my voice heard?

Four local public hearings have been scheduled to allow the public an opportunity to provide testimony on the company’s application. Hearings are scheduled for:

Customers can also submit written comments via the PUCO’s website at www.PUCO.ohio.gov, or by U.S. mail addressed to:

PUCO
180 East Broad Street
Columbus, OH 43215

Be sure to include case number 12-1685-GA-AIR in letters.

An evidentiary hearing for the electric rate case will be begin March 25, 2013 at 10 a.m. at the PUCO offices in Columbus, and the evidentiary hearing for the natural gas rate case will begin at the conclusion of the electric hearing.

How can I learn more?

Case docket

Duke's application

PUCO staff's report