The Office of the Ohio Consumers’ Counsel (OCC) criticized a decision today by state regulators that failed to secure the lowest possible standard service rates for FirstEnergy’s customers by approving the utility’s rate plan.
By law, the Public Utilities Commission of Ohio (PUCO) is required to compare a utility’s rate plan with the price of power in the market (called a market rate offer) to determine which would be least costly for consumers.
The OCC, which previously called on the PUCO to reject FirstEnergy’s rate plan, is continuing to review the order to determine its impact on residential consumers’ rates for the period June 2011 through May 2014.
“The rate plan approved by the PUCO will result in higher monthly bills than under a properly approved market rate offer,” Consumers’ Counsel Janine Migden-Ostrander said. “We will likely ask the PUCO to reconsider its decision in this case.”
The outcome in this most recent case was the result of an inadequate and shortened process, including just five weeks between FirstEnergy’s application, which was based upon an agreement with only some parties, and the filing of briefs in the case. Ohio law permits a 39-week process.
“Such a short timeframe to investigate and verify the reasonableness and prudence of rate increases – including distribution rate increases in the hundreds of millions of dollars – and their long-term impact on FirstEnergy’s 1.9 million residential consumers flies in the face of consumer protections and appropriate due process,” said Migden-Ostrander.
“The order permits FirstEnergy to collect up to $390 million through quarterly increases in distribution rates over about 2 1/2 years without a process of evaluating all components of distribution rates for the reasonableness or prudence of FirstEnergy’s decision-making,” said Migden-Ostrander. “This plan is costly for residential consumers, whose budgets are already stretched thin.”
“If FirstEnergy needs an increase in distribution rates, it should file an application where it is required to justify the proposed increases as opposed to using this backdoor method.”
In 2007, FirstEnergy filed for a $340 million distribution rate increase. The OCC – as part of the 39-week process afforded in that distribution rate case – recommended a $2 million decrease for Ohio Edison, a $2.5 million decrease for Cleveland Electric Illuminating, and a modest increase of $24 million for Toledo Edison. The PUCO granted $137 million of the $340 million.
“Less than two years later, without justification or verification that it is currently needed, the PUCO is allowing FirstEnergy to increase distribution rates quarterly by up to $390 million over 2 1/2 years. This is simply not right,” said Migden-Ostrander.
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