Office of the Ohio Consumers' Counsel

Message from the Consumers' Counsel:

Consumer action needed in natural gas rate cases

At the same time household budgets are being stretched thin by the cost of gasoline, the cost of another necessity – natural gas that heats our homes – also will likely be higher this winter. Some experts predict that natural gas prices will increase to levels that would have been unthinkable prior to the inflated costs that resulted from damage caused by Hurricane Katrina.

In addition to the higher prices consumers are likely to pay for the actual supply of natural gas, Ohio’s major natural gas utilities have requested to increase the base rate, or delivery portion of a customer’s bill. The base rate includes a flat-rate customer charge as well as a component that varies according to how much natural gas a customer uses.

The Office of the Ohio Consumers’ Counsel (OCC) is working to represent the customers of the major natural gas companies throughout Ohio and is challenging the rate increases as well as the new cost structures that could go into effect. While a case involving Duke Energy has been decided by the Public Utilities Commission of Ohio (PUCO) and the higher fixed customer charges approved, opportunities remain for customers of other utilities to speak out at public hearings being conducted by the PUCO in each region.

Those who cannot attend a public hearing in person and have concerns about the rising cost of their natural gas bills are strongly urged to write letters to the PUCO, 180 East Broad Street, Columbus, OH 43215 addressed to the docket number of the specific case involving their gas company: The numbers are as follows:

Dominion East Ohio: 07-0829-GA-AIR
Columbia Gas of Ohio: 08-0072-GA-AIR
Vectren Energy Delivery: 07-1080-GA-AIR

Understanding the straight-fixed variable rate
A “straight fixed variable” rate shifts most of a utility’s delivery charges into the flat-rate customer charge. Since the flat-rate charge would increase significantly, the component that varies according to how much natural gas a customer uses is reduced or in some cases eliminated.

One of the biggest concerns voiced by the OCC and other consumer advocacy groups in Ohio is that by adopting a new “straight-fixed variable” rate design, major utilities would raise the fixed rate charged to consumers regardless of the amount of natural gas they use. This will result in taking away part of the incentive that residential customers have to conserve natural gas. In addition, low-usage customers will be paying the same fixed rate for their natural gas as heavy-volume users.

If these cases establish higher fixed-rate charges, the new structure could cause residents living in small homes to subsidize those in large luxury homes for the delivery portion of their bill. The OCC believes that is not fair and has opposed straight fixed variable rate proposals by utilities and the PUCO staff.

What will happen to rates?
In the case of Duke Energy, the PUCO ordered that the utility’s $6 customer charge be increased to $15 through Sept. 2008. The charge will increase to $20.25 per month through June 2009, and $25.33 in every subsequent month. At the same time, the volumetric rate will go down.

Columbia Gas of Ohio has proposed that its fixed-rate customer charge increase from $6.50 to $12.97 during the first year of the new rates. Beginning in the second year, that fixed-rate customer charge would increase to $19.76.

For Dominion East Ohio customers, the PUCO staff has recommended that the utility’s $5.70 customer charge in northeast Ohio be increased to $17.50 per month.  As with Duke, in all these cases the volumetric charge would go down.

Vectren has proposed that its current $7 customer charge be increased to $10 in the summer months and to $16.75 in the winter months.

What you can do
Decision-makers need to hear from residential consumers who will be impacted by higher natural gas bills. The OCC encourages participation by anyone who can attend a public hearing in their area or write to the PUCO. Customers’ testimonies will become part of the official record of the case and be considered as the PUCO makes its decision.

Customers’ real experiences about natural gas issues need to be told. Individuals placed in difficult situations by the high cost of paying for their utilities can make a worthwhile contribution. Public pressure and awareness is especially important at a time when Ohioans are faced with the ever-mounting costs of providing the daily necessities of life.

Best regards,

Janine L. Migden-Ostrander