COLUMBUS, OHIO (Nov. 17, 2021) – Today, the Public Utilities Commission of Ohio (PUCO) approved a settlement agreement establishing new base distribution rates for AEP Ohio. The agreement addresses several key issues for ratepayers, including reductions in base rates for some customers, reductions in rider costs and consumer pilot programs for electric vehicles and renewable generation.
“The Commission is adopting a settlement agreement that modernizes AEP Ohio’s rate structure, incorporates pilot programs for EV charging and distributed energy, and ties future utility spending to performance-based reliability standards,” stated PUCO Chair Jenifer French. “Approval of this settlement will have a positive impact towards the utility’s service without overburdening its customers.”
A typical residential customer using 1,000 kWh per month will see a rate decrease of less than $1. Bill impacts vary by customer class and monthly usage.
The settlement agreement was reached by PUCO staff, the Ohio Consumers’ Counsel, AEP Ohio, the Ohio Hospital Association, the Ohio Energy Group, Industrial Energy Users – Ohio, the Ohio Manufacturers’ Association Energy Group, the Ohio Cable Telecommunications Association, One Energy, Clean Fuels Ohio, Charge Point, EVgo, Kroger and Walmart.
The settlement reflects an annual revenue requirement of $955 million, which is $110 million lower than AEP Ohio’s request in its application and establishes a rate of return of 7.28%.
Included in the settlement is an increase of $1.60 to the fixed monthly customer charge, from $8.40 to $10. This increase will be offset in the total bill as several riders will now be recovered through base rates and therefore reset to $0:
- The Enhanced Service Reliability Rider (ESRR), which allows the utility to recover annual incremental expenses for vegetation management, is limited to $153 million from January 2021 to May 2024.
- The Distribution Investment Rider (DIR) recovers incremental investments in utility infrastructure and is limited on an annual basis. The annual limits are subject to performance-based reliability metrics and are as follows:
- $57 million in 2021
- $91 million in 2022 ($96 million if reliability standards are met)
- $116 million in 2023 (up to $126 million if reliability standards are met in both 2021 and 2022)
- $51 million for January through May 2024 (up to $57 million if reliability standards are met in 2021-2023)
- The Pilot Throughput Balancing Adjustment Rider has been eliminated.
The PUCO will review and audit any future costs to be included in any riders.
A new plug-in electric vehicle program provides an opportunity for residential customers who charge electric vehicles during off-peak hours to save through their rates. This pilot program will be available to 500 eligible customers. Participating commercial customers will also be able to avoid demand-based charges.
A distributed generation pilot program allows rate savings for customers who install on-site renewable energy generation for use during seasonal peak periods.
What are distribution rates?
Electric bills are comprised of three main parts – the cost of producing or purchasing electricity, the cost of transmitting high voltage electricity in large quantities, and the cost of delivering electricity to customers’ homes and businesses.
The distribution rate covers the cost of delivering electricity to customers and accounts for approximately 40-50% of a typical customers’ bill. This rate pays for things like the cost of installing and maintaining the electric lines that run through neighborhoods, reading electric meters, processing bills, and fielding customer service calls.
Ohio law allows regulated electric distribution utilities to recover their costs to provide service, plus a reasonable return on investment. AEP Ohio’s distribution rates were last revised in 2011.
On June 8, 2020, AEP Ohio filed its application for approval of an increase in its electric distribution rates, tariff modifications, and changes in accounting methods.
On November 18, 2020, as amended on November 25, 2020, the staff report was filed with the Commission.
On February 8, 2021, a local public hearing was held virtually regarding the application.
On March 4, 2021, the virtual evidentiary hearing was held and continued to allow for additional settlement negotiations.
On March 12, 2021, the settlement agreement was signed and filed.
On May 12, 2021, the virtual evidentiary hearing was resumed and concluded on May 18.