Duke Energy Ohio's electric security plan IV
What is the role of the Commission?
In formulating its decision in a case, the Commission must balance the interests of many parties and stakeholders while adhering to its mission, “to assure all residential and business consumers access to adequate, safe and reliable utility services at fair prices, while facilitating an environment that provides competitive choices.”
The Commission must balance this responsibility with an obligation to ensure Ohio’s regulated utilities the ability to continue to provide adequate, safe and cost-effective services to Ohio’s consumers and continue to invest in infrastructure improvements and innovative technologies.
In every case that comes before the Commission, a formal record is created. The case record includes written testimony, public testimony and cross-examination of expert witnesses. The Commission cannot make arbitrary decisions; information that is not in the formal record cannot be considered by the Commission in formulating its decision in a case. Working as the neutral arbiter, it is the Commission’s goal to put Ohio in a position as a leader in developing regulatory certainty, rate stability and modernized grid technologies.
What is an Electric Security Plan?
State law requires electric distribution utilities to provide their customers a default generation service. This is called a standard service offer, or SSO. An SSO may be in the form of either an electric security plan (ESP) or market rate offer (MRO). Electric distribution utilities are required to file applications with the PUCO to establish either an ESP or MRO.
ESPs establish the pricing and supply of generation service, and may include distribution system investments, grid modernization, economic development and job retention initiatives and energy efficiency measures. The PUCO is tasked with determining whether an ESP, including its pricing and all other terms and conditions, is more favorable in the aggregate as compared to the expected results that would otherwise apply under an MRO.
What is the history of Duke Energy Ohio’s ESP?
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.
In November 2011, the PUCO approved Duke Energy Ohio's second ESP, in effect until May 2015. Under this ESP, Duke's standard service offer (SSO) load was ordered to be provided through competitive auctions.
In April 2015, the PUCO approved Duke Energy Ohio's third ESP, in effect until May 31, 2018. The third ESP again planned for Duke Energy Ohio’s SSO load to be provided through competitive auctions.
What did Duke Energy Ohio request in its ESP IV filing?
In June 2017, Duke Energy Ohio filed an application for its fourth ESP, to take effect June 2018 through May 2024, with PUCO review of the plan in its fourth year. The proposed ESP would secure all supply needed for its (SSO) customers through a competitive bidding process.
In the application, Duke requested the addition of four new riders:
- The Regulatory Mandates Rider would recover the operations and maintenance expenses resulting from federal, state or Commission mandates that are not otherwise recovered in base rates or other riders.
- The Incentive Rate Making Mechanism Rider would provide a credit or charge to customers based on an earnings range and the company’s actual earnings.
- The PowerForward Rider would include the costs related to the PUCO’s PowerForward initiative.
- The Electric Service Reliability Rider would recover incremental vegetation management expenses, including incremental operations and maintenance expenses since Jan. 1, 2017.
In this application Duke proposed the modification of several current riders, the elimination of two and the extension of Rider Price Stabilization Rider (PSR) beyond May 31, 2018.
How did the PUCO rule on the application?
On April 13, 2018, a settlement agreement was filed, intended to resolve the signatory party’s issues in the distribution rate case, electric security plan, and reliability standards application. The settlement agreement was signed by Duke Energy Ohio, PUCO staff, city of Cincinnati, Ohio Partners for Affordable Energy, Ohio Energy Group, Ohio Hospital Association and People Working Cooperatively, Kroger, Industrial Energy Users-Ohio, Ohio Manufacturers’ Association Energy Group, and Walmart.
The PUCO approved the settlement agreement on Dec. 19, 2018, allowing Duke’s electric security plan to continue to set default generation rates through competitive auctions through May 2025. The Commission’s order resolved Duke Energy Ohio’s electric security plan, distribution rate case, reliability standard case and power purchase agreement.
Duke’s base distribution rates will be lowered by more than $19 million annually and establish a rate of return of 7.54 percent. Duke will provide $772,000 in annual funding for various low income assistance programs in coordination with the city of Cincinnati and people Working Cooperatively.
Duke will continue to make grid modernization investments and capital improvements during the term of the ESP, subject to annual cost caps and ongoing Commission review. Grid modernization efforts will allow competitive electric suppliers and third-parties access to usage data, enabling them to offer innovative products and services to their customers.
Through this Commission’s order, Duke will pursue more aggressive annual reliability measures during the term of the ESP. Duke will also continue its five-year vegetation management program to ensure system reliability.
Duke will recover/credit the net proceeds from selling power from its share of the Ohio Valley Electric Corporation into the regional marketplace through the nonbypassable rider PSR, consistent with previous Commission decisions for AEP Ohio and Dayton Power & Light Company.
How will my bill be affected?
A residential customer using 1,000 kilowatt hours (kWh) per month will see an increase in their monthly bill by approximately $1.57. However, the Commission also noted that a pending proceeding related to a rate reduction as a result of the Tax Cuts and Jobs Act of 2017 will help to mitigate this rate increase.
Did the PUCO consider public opinion in this case?
The PUCO held two local public hearings to provide the public an opportunity to express their views and provide testimony regarding the company’s application in Middletown and Cincinnati on Oct 23 and Oct 26, 2017.
For more information?
If you would like to know more about the PUCO or have utility-related questions or concerns, contact the PUCO at (800) 686-PUCO (7826) or visit us online at www.PUCO.ohio.gov.