Ohio regulators should reject Dominion East Ohio's request to increase rates because the utility has failed to prove its need, the Ohio Consumers' Counsel (OCC) said in testimony before the Public Utilities Commission of Ohio (PUCO) last week. Further, the OCC opposes a proposal to increase the proportion of distribution costs recovered from a fixed rather than a volumetric charge.
"In our tough economic times, the PUCO should be especially cautious about raising customer rates. Dominion has not justified its rate increase request, and consumers should not bear the burden of higher utility bills," said Consumers' Counsel Janine Migden-Ostrander.
In August 2007 Dominion East Ohio sought an increase in base rates, which pay for distribution services to consumers, of $75 million per year. The base rate portion of customer bills is composed of a fixed and a volumetric charge.
The OCC said Dominion East Ohio does not need a revenue increase and the company is asking for an unreasonable profit level. Further, the OCC cites differences in the methods of accounting for pensions and employee benefits and other expenses for which customers should not have to pay through rates. These issues more than offset the increase the utility seeks for delivering natural gas to its customers, the OCC said.
The level of the flat-rate customer charge is a point of contention in the Dominion East Ohio rate case as it has been in similar cases dealing with the rates of Ohio's major natural gas utilities. PUCO staff has recommended more than doubling Dominion East Ohio's flat-rate customer charge while lowering the volumetric charge. Currently customers pay $4.38/month in northwest Ohio and $5.70/month in northeast Ohio as a fixed customer charge. The PUCO staff recommended raising this charge to $17.50 for all Dominion customers. The utility had only requested to set its customer charge at $5.70/month for both service areas.
The OCC opposes raising the flat-rate customer charge because such a change in the rate structure would negatively impact customers who attempt to conserve energy and results in low-use customers subsidizing high-use customers.
"Loading more of Dominion's costs into the fixed customer charge limits the ability for consumers to control their monthly bills by being more energy efficient. With customers' budgets stretched thin, a higher flat-rate customer charge means customers would pay over $17 regardless of how much natural gas is used," Migden-Ostrander said.
However, across the nation residential gas consumption has been in decline for a number of reasons, including improved appliance efficiency and increased conservation efforts by consumers in response to higher commodity prices. Utilities have responded by seeking to reduce the amount of fixed costs they recover through volumetric charges, such as what Duke Energy Ohio was recently given approval by the PUCO to do (see related story).
The OCC also recommends that Dominion East Ohio more than double its proposed investment in energy efficiency from $6 million per year to $15.6 million per year.
Dominion East Ohio is entering the second phase of a migration to market-based recovery of costs for natural gas it buys to serve customers (see NGI, June 23).
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