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Ohio Regulators Approve Duke Distribution Rate Case

The Public Utilities Commission of Ohio (PUCO) has adopted a stipulation that allows Duke Energy Ohio (DEO) to increase the rates it charges for natural gas distribution service. It is DEO's first distribution rate increase since 2001.

The "levelized" residential distribution rate structure better reflects the fixed-cost nature of delivering natural gas, commissioners said. The new rate structure breaks the link between DEO's earnings and customer consumption by moving a greater portion of the rate into a fixed monthly charge. Customer bills will balance out between the summer and winter, allowing customers to better predict and budget for bills from month to month.

"Historically, distribution rates have been designed with the majority of costs billed based upon the amount of natural gas a customer uses," said PUCO Chairman Alan R. Schriber. "With Duke's new levelized rate structure, residential customers will pay for the fixed costs of delivering natural gas to their homes more evenly throughout the year, instead of paying a higher portion during the winter heating season when their bills are already the highest."

The new residential rates will be phased in over two years. Customers will pay a flat monthly charge of $15 through September and $20.25 per month thereafter, and a usage-based gas delivery charge of 10.7 cents/hundred cubic feet (ccf) of natural gas used. In year two the monthly fixed charge will increase to $25.33 and the gas delivery charge will drop to 4.1 cents/ccf. The average residential customer will see his or her bill increase $3.40/month in year one and an additional 60 cents/month in year two, DEO said.

While as many as 10,000 low-income customers could be eligible for a pilot program to reduce their flat monthly charge, the Office of the Ohio Consumer's Counsel (OCC) said the approved increase "disproportionately impacts low-income customers in smaller homes and low-usage residential customers who try to be energy efficient." The OCC plans to ask the PUCO to reconsider its decision.

"We opposed loading more of Duke's costs into the fixed customer charge because it limits the ability for consumers to control their monthly bills by being more energy efficient," said Consumers' Counsel Janine Migden-Ostranderl. "At a time when both the governor and the legislature are encouraging customers to be more energy efficient, a higher flat-rate customer charge is a disincentive."

Last year DEO said it was seeking a natural gas rate increase of $34 million, or 5.8% overall (see Daily GPI, June 19, 2007). In January the Office of the OCC filed testimony with the PUCO claiming that DEO's proposed rate increase for natural gas customers was "unreasonable" and "should be rejected" (see NGI, Feb. 4). The OCC said Duke's rate plan could cost residential, commercial and industrial customers $500 million over the next several years. In February PUCO staff, DEO, the OCC and the city of Cincinnati filed a stipulation agreeing to a 3% revenue increase for the company.

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