Office of the Ohio Consumers' Counsel

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American Electric Power proposal would hurt residential consumers

Office of the Consumers' Counsel opposes rate increases

Columbus, Ohio –April 8, 2004 – A proposal by American Electric Power (AEP) could raise some electric rates by as much as 33 percent and could take away a state-approved rate reduction, according to the Office of the Consumers’ Counsel (OCC), the residential utility advocate. Today, the OCC will file its objections to AEP’s proposal at the Public Utilities Commission of Ohio (PUCO).

“Consumers need protection from higher rates and AEP’s proposal fails to deliver,” said Janine Migden-Ostrander, Consumers’ Counsel. “If AEP has its way, significant price increases will be imposed on residential customers as they continue to have no choice of electric suppliers. The PUCO should reject this proposal.”

If approved by the PUCO, AEP’s proposal would establish a large portion of the electric rates that consumers of its two Ohio companies – Columbus Southern Power and Ohio Power – will pay after the current five-year generation rate cap ends on December 31, 2005.

The OCC objects to AEP’s proposal because it could:

Allow generation rates to increase by as much as 33 percent from 2006 through 2008. If the proposal is approved, Columbus Southern Power customers would see generation rates automatically increase by approximately 5 percent each year over three years. The proposal would automatically raise Ohio Power rates by approximately 17 percent during that time. In addition, the proposal would allow AEP to seek additional generation rate increases based on a variety of factors, including increased security costs, taxes and generation-related regulatory requirements.

In total, the increases proposed by AEP could allow Columbus Southern Power customers’ generation rates to go up by over 20 percent and Ohio Power rate increases to add up to over 33 percent. Generation rates account for approximately two-thirds of a residential customer’s total monthly bill.
Eliminate a current 5 percent generation rate discount, costing customers an estimated $40 million over the next 18 months. As part of AEP’s electric restructuring plan which is currently in effect, the company has committed to providing residential customers a 5 percent reduction off the generation rate through December 2005. The company’s proposal would end that discount 18 months early – on June 30, 2004.
While AEP has presented an alternative that would maintain the 5 percent rate reduction through 2005, this option would then impose higher automatic increases to customers’ generation rates during 2006 through 2008. Under that scenario, Columbus Southern Power customers would receive automatic increases of over 15 percent from 2006 through 2008 while Ohio Power customers would see their generation rates rise by nearly 30 percent over those years.
Permit distribution rate increases beginning January 2006. In addition to the generation rate increases, AEP’s proposal enables the company to increase distribution rates beyond what is allowed under the company’s current PUCO-approved restructuring plan. Based on the proposal, customers could see significant distribution rate increases based on numerous conditions, such as increased security or environmental costs.

It is essential that protections be put in place to protect AEP customers from unreasonable rate increases and promote meaningful competition. The OCC encourages residential consumers to attend a PUCO local public hearing to express their opinions about the AEP proposal. The hearings are scheduled as follows:

Canton: May 19, 6:30 p.m.
City Hall, Council Chambers
218 Cleveland Avenue S.W., 1st Floor

Columbus: May 24, 10:00 a.m.
Public Utilities Commission of Ohio
180 E. Broad Street, 11th Floor, Hearing Room 11-D

Residential consumers can learn more about the AEP proposal and how they can voice their opinion to the PUCO by obtaining a copy of “How to Testify at Local Public Hearings” available free of charge at www.pickocc.org or by calling 1-877-PICKOCC (1-877-742-5622) toll free.

About the Office of the Ohio Consumers' Counsel

The Office of the Ohio Consumers' Counsel (OCC), the residential utility consumer advocate, represents the interests of 4.5 million households in proceedings before state and federal regulators and in the courts. The state agency also educates consumers about electric, natural gas, telephone and water issues and resolves complaints from individuals. To receive utility information, brochures, schedule a presentation or file a utility complaint, residential consumers may call 1-877-PICKOCC (1-877-742-5622) toll free in Ohio or visit the OCC website at www.pickocc.org.