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Ohio American / Aqua Ohio Water Rate Case

In August 2011, 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. Ohio American requested a 22 percent revenue increase for water service and a 12 percent increase for wastewater service.

In a separate proceeding, the PUCO recently approved the sale of Ohio American Water to Aqua Ohio. As a result, Ohio American customers are now Aqua Ohio customers. Customers will initially continue to be served at existing rates while the rate case proceeds under the new Aqua Ohio ownership.

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 an evidentiary hearing for the cross-examination of expert witnesses (depending on the complexity of the case, the evidentiary hearing may last for several weeks). Parties then submit written briefs in argument supporting the reasonableness of their contentions by citing testimony and by attempting to discredit other parties’ positions. 
  7. The PUCO attorney examiner assigned to the case reviews the case record, including the transcripts of the local public hearings and evidentiary hearing, and prepares a recommendation to the commissioners.
  8. The five PUCO 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 after the issuance of the opinion and order 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 by operation of law. The Commission may, when ruling upon an application for rehearing: deny rehearing, grant rehearing and modify the opinion and order, or grant rehearing and hold additional hearings then issue an “order on rehearing.”
  11. Following the rehearing process, parties may appeal to the Ohio Supreme Court.

When did PUCO Staff file its report?

The PUCO staff report was issued on January 31, 2012. A copy of the staff report may be viewed by visiting the PUCO Docketing Information Systems website at http://dis.puc.state.us and entering case number 11-4161-WS-AIR into the search field.In its report, the staff proposed a reduced revenue increase based upon the company’s current investment and operating expenses. 

 

Did the PUCO consider public opinion before reaching its decision?

The PUCO held five local public hearings in Galloway, Tiffin, Groveport, Ashtabula Township, and Marion.

How did the PUCO rule?

On June 13, 2012, the PUCO authorized Aqua Ohio to implement new rates that will result in an additional $4.2 million in revenues, a 10.85 percent increase.

How will my bill change?

Based on a typical monthly usage of 600 cubic feet, customers in Aqua Ohio’s Ashtabula, Lake White, Lawrence County, Mansfield, Marion and Tiffin service districts will see their monthly bills increase an average of $4.44 for water service. Customers in the Portage County and Franklin County service districts will see an average monthly bill increase of $5.76 for water service. The company’s wastewater customers in Franklin County will see an average wastewater service increase of $2.18.

The PUCO also ordered Aqua Ohio to reduce the monthly customer charge from $9.51 to $8.55. Aqua Ohio will continue to review water quality issues in the Blacklick service area and submit its findings to the PUCO staff and the Office of the Ohio Consumers’ Counsel within 180 days.

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

During previous 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, providing budget billing information on customer bills, and identifying unaccounted-for-water. In its January 2011 report, staff found that the utility is currently meeting all of these service quality commitments and recommended that the company continue to work with its customers to improve service.

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, cooperative, 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 / Aqua Ohio 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.

How does the PUCO staff determine 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.  PUCO staff recommended moving to a uniform rate structure across its various service territories that will reduce future costs.

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.