Claiming that the proposed rate increase for Duke Energy Ohio's natural gas customers is "unreasonable" and "should be rejected," the Office of the Ohio Consumers' Counsel (OCC) filed testimony last week at the Public Utilities Commission of Ohio (PUCO). The OCC said Duke's rate plan could cost residential, commercial and industrial customers $500 million over the next several years.
"Under Duke Energy's proposal, consumers could pay annually increasing fees for replacing pipes as well as a nearly tripled customer charge. By the ninth year, a typical customer could be forced to pay $345 annually before using any natural gas," said Janine Migden-Ostrander, consumers' counsel. "These proposed rates would harm consumers by increasing customer charges that must be paid and cannot be offset by using less energy. As a policy matter, this hurts customers' ability to control the size of their bills through conservation or energy efficiency."
In June of last year Duke Energy Ohio said it was seeking a natural gas rate increase of $34 million, or 5.8% overall. The increase would be effective in early to mid-2008 and is the utility's first general rate filing since 2001.
The utility said that over the last six years it has invested more than $460 million to expand its gas delivery system to meet customer growth and make other safety, reliability and efficiency improvements. It has also experienced increases in operating costs for delivery service consistent with inflation. Delivery service rates cover the cost of building, operating and maintaining the system that delivers gas to customers.
Based on the OCC's analysis, nearly all of the proposed rate increase should be rejected because customers should not have to pay for many of the increased costs cited by the utility. The OCC noted that within the utility's request are increases associated with the base rate -- including the customer charge -- and an extension of the accelerated main replacement program, which is designed to replace steel pipes with plastic.
One of the OCC's complaints is with the customer charge portion of the rate increase filing. The OCC noted that customers currently pay Duke $6 per month ($72 per year), but under Duke's request, the customer charge would nearly triple to $15 per month ($180 per year). The OCC also believes that the rate proposal would disproportionately impact residential customers that try to be energy efficient because the proposal would shift certain costs into the existing customer charge, which is a flat fee paid regardless of how much natural gas is used each month.
Another bone of contention is with the utility's accelerated main replacement plan. Duke has proposed a nine-year continuation of the program, which was originally set up in 2001 as an add-on to customer bills. The continuation of this program would raise customer bills by as much as $480 million over the next nine years, the OCC believes.
"While this program was touted as an effort to cut maintenance costs and improve efficiencies, Duke has shown during the first six years of the program customers have paid $137 million but only $8.5 million has been saved in maintenance costs," the OCC said.
Currently Duke customers pay $5.77 per month (approximately $70 per year) toward this program. According to the OCC, under Duke's request, the utility would impose charges leading to as much as $13.77 per month (approximately $165 per year) by 2017.
The OCC's third issue with the request focuses on the increase in base rates, which customers pay for the maintenance of pipes and other local equipment. Under Duke's proposal, base rates would go up by as much as 33%, the OCC said. Under Duke's request, the utility seeks $34.1 million per year in additional revenue. After analysis, the OCC said it believes the utility should receive an increase of no more than between $1.4 million and $6.5 million per year.
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