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CG&E, AEP Move Closer to Retail Choice in Ohio

CG&E, AEP Move Closer to Retail Choice in Ohio

Cincinnati Gas & Electric Co. (CG&E) and American Electric Power (AEP), two of the largest utilities in Ohio, are one step closer to implementing electric customer choice.

The Cinergy Corp. subsidiary last week announced it had reached a stipulated agreement with intervenors in its transition case, which includes a freeze on residential customer rates through 2005 and a plan that will offer shopping credits to switching customers. The Cinergy settlement is expected to be approved by the Public Utilities Commission of Ohio (PUCO) before the end of the third quarter of 2000, and would be implemented Jan. 1, 2001, according to company officials. Also last week, AEP received tentative approval from PUCO of its transition plan.

In CG&E's settlement agreement, the company came to terms with staff of PUCO, the Ohio Consumers' Council (OCC), the Ohio Department of Development, the Industrial Energy Users-Ohio, The Kroger Co., Enron Energy, the Ohio Hospital Association, the Ohio Manufacturers Association, the Ohio Council of Retail Merchants, Exelon Energy, Newenergy, WPS Energy, Dynegy, Cincinnati/Hamilton County Community Action Agency, Supporting Council of Preventive Effort, Columbia Energy Services, Columbia Energy Power Marketing, Strategic Energy, Mid-Atlantic Power Supply Association and People Working Cooperatively. The electric unbundling plan was first announced on December 28.

"The settlement expands upon the Ohio legislative framework enacted in June of 1999, and provides the roadmap that allows us to move forward and finalize our plans for the competitive electric environment of Ohio," said James E. Rogers, vice chairman and CEO of Cinergy

Under the CG&E settlement, residential customer rates will be frozen through Dec. 31, 2005, continuing a base rate freeze begun in 1994. The rates include fuel costs that are "significantly lower" in 2000 than in 1994, according to Cinergy Also, residential customers of CG&E will receive a 5% reduction in the generation portion of their electric rates beginning Jan. 1, 2001, reducing a typical residential bill by about $2.30 a month. The savings will net customers about $81 million over the five-year transition period, according to CG&E. The utility also agreed to provide $4 million over the next five years to support energy efficiency and weatherization services for its low-income customers.

To create a competitive market, the CG&E agreement provides shopping credits to switching customers. The first 20% of the load in each customer class --- residential, commercial and industrial customers --- have an additional incentive with credits to choose an alternative supplier. The settlement, however, also will create a Regulatory Transition Charge, or RTC, that will recover CG&E's regulatory assets and other transition costs over a 10-year period, a request CG&E had made in December.

Other major features of the CG&E agreement include:

  • Unbundled and separately stated charges for different components of electric service, including transmission, distribution, ancillary services and generation;
  • Authority for CG&E to transfer its generation assets to a separate, non-regulated corporate subsidiary to provide flexibility to manage its generation asset portfolio in a way that enhances opportunities in the marketplace;
  • Standard default service to ensure CG&E will be the supplier of last resort so that no customer will be without a supplier; and
  • Authority for CG&E to apply the proceeds of transition cost recovery to costs incurred during the transition period including, but not limited to, implementation costs and purchased power costs that may be incurred by CG&E to continue to maintain a sufficient reserve margin necessary to provide reliable and adequate service to its customers.
  • Although AEP did not receive full approval for its plan from PUCO, it did gain an okay --- pending public comments --- of an agreement that includes a requirement to freeze rates through either the end of the market development period, or 2005, whichever comes first.
  • "This global settlement provides great potential for developing a retail market and providing customer choice in AEP's service territory," said Kim Wissman, deputy director of the PUCO's Utilities Department.
  • The AEP agreement includes a 5% reduction in the generation component of residential customer rates beginning Jan. 1, 2001. And, like CG&E, AEP will provide shopping credits, incentives and switching procedures to allow customers to shop for alternative generation suppliers under the plan.
  • The PUCO agreement requires AEP to freeze distribution rates through Dec. 31, 2007 for Ohio Power Co., and through Dec. 31, 2008 for Columbus Southern Power Co., and to absorb $40 million for consumer education and other transition costs.
  • On the CG&E transition plan, PUCO has set a public hearing for June 8 in the Cincinnati City Hall. Two public hearings on the AEP agreement are set for June 5 and June 22 at the PUCO offices in Columbus, OH.

Carolyn Davis, Houston

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