The Supreme Court of Ohio has upheld a decision by the Public Utility Commission of Ohio (PUCO) that AEP Ohio is not recovering costs for providing generation service through its distribution rates.
This ruling rejects an appeal by Interstate Gas Supply (IGS), a competing electricity generator, which argued that AEP was improperly subsidizing its generation services with funds from non-generation customers.
Key Points of the Ruling
- Challenge and Allegations: IGS alleged that AEP Ohio was using money from non-generation customers to subsidize its competitive electric generation services.
- Court’s Decision: In a unanimous decision, the court found that IGS did not prove that the PUCO acted unreasonably when it approved AEP’s 2020 rate plan.
- Justice Brunner’s Opinion: Justice Jennifer Brunner wrote that IGS failed to demonstrate that the rates and charges were unjust, unreasonable, or unlawful. IGS had presented an AEP staff study suggesting $4.7 million might have been used to offset costs for AEP customers who did not choose competing electricity generation suppliers, but IGS had previously disputed the reliability of this study during PUCO proceedings.
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Background
Ohio lawmakers restructured the electric utility industry in 1999, separating electricity generation, transmission, and distribution. While generation was made an unregulated service open to competition, distribution and transmission remained regulated. Utility companies were prohibited from using money collected for distribution to subsidize competitive generation services.
PUCO Proceedings and Findings
- AEP Ohio’s Rate Plan: AEP Ohio requested PUCO approval for a generation service rate plan from 2018 to 2024. As part of this, AEP agreed to file for new distribution rates by 2020. Concerns about potential subsidization led to a directive for AEP to determine costs associated with customers choosing alternate electric suppliers versus those selecting AEP’s standard offer.
- Proposed Riders: AEP proposed two riders on electric bills to adjust costs if subsidization was found. PUCO, however, found no evidence of such subsidization but mandated an extensive study.
- 2020 Study and Objections: AEP’s study identified $4.7 million possibly used for serving non-shopping generation customers. PUCO staff and other parties objected, citing flaws in the cost determination. IGS argued the figure was too low, proposing $64 million should be returned to shopping customers, an argument PUCO ultimately rejected.
Justice Brunner concluded that IGS could not use the disputed AEP study to prove the rates were unjustified based on known generation costs realized through distribution rates. The Ohio Supreme Court affirmed that PUCO’s approval of AEP’s distribution rates was reasonable, dismissing IGS’s legal challenges.
This ruling reinforces the PUCO’s regulatory decisions and clarifies the standards for proving unjust or unreasonable rates in utility regulation. It also highlights the complexity of separating costs in a restructured electric utility market.
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