Dayton Power & Light distribution rate case
In November 2015, Dayton Power & Light (DP&L) filed an application at the Public Utilities Commission of Ohio (PUCO) to increase distribution rates billed to its customers.
What are distribution rates?
Electric bills are comprised of two main parts — the cost of producing or purchasing electricity for customers and the cost of delivering electricity to customers’ homes and businesses. The cost of producing or purchasing electricity, known as generation rates, makes up about 60 percent of an average electric bill.
The distribution rate represents the costs associated with delivering electricity to your home or business. These costs include things such as installing and maintaining electric lines that run through neighborhoods, reading electric meters, processing bills and responding to 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 finances and to ensure the company is fulfilling its responsibilities.
When evaluating proposed rates, PUCO staff looks at whether the proposed rates would provide the utility 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 utility’s revenue requirement. The revenue requirement is the amount of money a company is allowed to collect from its customers during a given year. The 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 is DP&L requesting in its application?
DP&L requested an increase of its revenue requirement by $65.8 million and an increase in the customer charge from $4.25 to $13.73 per month. In addition, DP&L requests to establish three new riders: the Uncollectible Rider, allowing the company to recover the actual amount of bad debt costs instead of an estimate in base rates; the Regulatory Compliance Rider, allowing recovery of costs associated with unforeseen regulatory changes; and the Storm Cost Recovery Rider, to allow recovery of costs incurred as a result of major storms.
What did the PUCO staff recommend?
On March 12, 2018 the PUCO staff filed its report of investigation regarding DP&L’s application. The staff report recommended limiting the annual revenue increase in the range of $23.2 to $28.1 million, and limiting the proposed customer charge to $7.88 per month. Using its recommendations, PUCO staff estimates a residential customer using 1,000kWh would see a monthly increase of $3.39.
The PUCO staff report advises the PUCO commissioners of the staff’s recommendations. However, the Commission is not bound by the staff recommendations and may implement some of the staff’s suggestions and reject others.
On June 18, 2018, 12 parties in the case filed a stipulation and recommendation. The stipulation serves as a settlement agreement between the signing parties, and acts as a recommendation to the PUCO commissioners, who are the ultimate decision makers. The commission has the authority to accept, reject or modify a stipulation.
The stipulation agrees to an annual revenue increase of $29.78 million. Additionally, the residential fixed customer charge would increase to $7.00 a month. According to a PUCO staff analysis, if accepted, the terms of the stipulations would result in the average residential customer using 1,000 kWh experiencing a $2.64 increase in their monthly bill.
Also included in the stipulations are commitments to immediately reflect the reduction in the corporate tax rate effectuated by the Tax Cuts and Jobs Act of 2017. DP&L will return savings to customers through utility bill credits to account for deferred tax savings within a 10-year period.
DP&L will implement a revenue decoupling rider, intended to reduce the utility’s incentive to sell increasing amounts of electricity.
DP&L will spend up to $1 million in capital investments to support electric vehicle charging stations throughout its service territory under the terms of the stipulation.
The full stipulation and recommendation is available in the case docket here.
The stipulation was signed by DP&L, PUCO staff, Ohio Consumers’ Counsel, Ohio Energy Group, Kroger, Walmart, Ohio Hospital Association, Natural Resources Defense Council, Ohio Environmental Council and Environmental Defense Fund, Environmental Law & Policy Center, Edgemont Neighborhood Coalition, and Ohio Partner’s For Affordable Energy. Additionally, Industrial Energy Users-Ohio, Ohio Manufacturers’ Association Energy Group, Buckeye Power and One Energy agreed not to oppose the stipulation.
DP&L TCJA Implementation
The Tax Cuts and Jobs Act of 2019 (TCJA) provides for a number of changes in the federal tax system, including a reduction of the federal corporate income tax rate from 35% to 21%. In October 2018, the PUCO ordered all regulated utilities to file applications to return to customers taxes that were over collected from January 2018 until the new rates are effective. Going forward, all utilities’ distribution rates will be calculated using the new tax rate.
In March 2019, DP&L filed an application to establish a mechanism to return the over collected taxes to customers. In September 2019, an agreement, also known as a stipulation, was filed by DP&L which outlined the method in which the company would refund its customers. On Sept. 26, 2019 the Commission approved the stipulation and ordered DP&L to begin the process of refunding customers.
The agreement establishes a Tax Savings Credit Rider that will refund customers the over collected taxes as well as savings from reductions in revenues and other Commission approved riders. The new tax savings rider will be allocated among all customers based on their distribution rates.
How can I make my voice heard?
Two local public hearings were held to provide customers an opportunity to express their views on DP&L’s proposal to increase its rates for electric distribution service.
Tuesday, May 8, 2018 at 1:00 p.m.
Dayton Municipal Building
101 W. Third St.
Dayton, Ohio 45402
Thursday, May 10, 2018 at 6:00 p.m.
Dayton Municipal Building
101 W. Third St.
Dayton, Ohio 45402
Those who testify at the local public hearings will have their comments added to the case record.
Consumers may also submit comments online at www.PUCO.ohio.gov or by mail addressed to 180 E. Broad St., Columbus, OH 43215. Correspondence should include the case number 15-1830-EL-AIR.
An evidentiary hearing is scheduled for July 23, 2018 at 10:00 a.m. at the PUCO offices in Columbus.
Where can I learn more?
The entire case record, including the company’s application, accompanying testimony and the staff report is available on the PUCO website. Click on the link to Docketing Information System (DIS) and search for case number 15-1830-EL-AIR.