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

The Cinergy Corp. subsidiary yesterday announced it had reacheda stipulated agreement with intervenors in its transition case,which includes a freeze on residential customer rates through 2005and a plan that will offer shopping credits to switching customers.The Cinergy settlement is expected to be approved by the PublicUtilities Commission of Ohio (PUCO) before the end of the thirdquarter of 2000, and would be implemented Jan. 1, 2001, accordingto company officials. Also on Tuesday, AEP received tentativeapproval from PUCO of its transition plan.

In CG&E’s settlement agreement, the company came to terms withstaff of PUCO, the Ohio Consumers’ Council (OCC), the Ohio Departmentof Development, the Industrial Energy Users-Ohio, The Kroger Co.,Enron Energy, the Ohio Hospital Association, the Ohio ManufacturersAssociation, the Ohio Council of Retail Merchants, Exelon Energy,Newenergy, WPS Energy, Dynegy, Cincinnati/Hamilton County CommunityAction Agency, Supporting Council of Preventive Effort, ColumbiaEnergy Services, Columbia Energy Power Marketing, Strategic Energy,Mid-Atlantic Power Supply Association and People WorkingCooperatively. The electric unbundling plan was first announced inDecember (see NGI, Dec. 29, 1999).

“We are very encouraged by this settlement, which bringselectric customer choice to our Ohio service area,” said James E.Rogers, vice chairman and CEO of Cinergy. “The settlement expandsupon the Ohio legislative framework enacted in June of 1999, andprovides the roadmap that allows us to move forward and finalizeour plans for the competitive electric environment of Ohio.”

Under the CG&E settlement, residential customer rates willbe frozen through Dec. 31, 2005, continuing a base rate freezebegun in 1994. The rates include fuel costs that are “significantlylower” in 2000 than in 1994, according to Cinergy Also, residentialcustomers of CG&E will receive a 5% reduction in the generationportion of their electric rates beginning Jan. 1, 2001, reducing atypical residential bill by about $2.30 a month. The savings willnet customers about $81 million over the five-year transitionperiod, according to CG&E. The utility also agreed to provide$4 million over the next five years to support energy efficiencyand weatherization services for its low-income customers.

To create a competitive market, the CG&E agreement providesshopping credits to switching customers. The first 20% of the loadin each customer class — residential, commercial and industrialcustomers — have an additional incentive with credits to choosean alternative supplier.

“As a company that has been a leading advocate of electricindustry competition, we wanted to encourage the early developmentof a competitive market,” said CG&E President James L. Turner.”We recognized that our traditionally low rates could serve todiscourage competition in the short term, so we worked with ourcustomers and future competitors to develop a creative way toincrease our customers’ interests in other suppliers.”

The settlement also will create a Regulatory Transition Charge,or RTC, that will recover CG&E’s regulatory assets and othertransition costs over a 10-year period, a request CG&E had madein December.

Other major features of the CG&E agreement include:

Though AEP did not receive full approval for its plan from PUCO,it did gain an okay — pending public comments — of an agreementthat includes a requirement to freeze rates through either the endof the market development period, or 2005, whichever comes first.

“This global settlement provides great potential for developinga retail market and providing customer choice in AEP’s serviceterritory,” said Kim Wissman, deputy director of the PUCO’sUtilities Department.

The AEP agreement includes a 5% reduction in the generationcomponent of residential customer rates beginning Jan. 1, 2001.And, like CG&E, AEP will provide shopping credits, incentivesand switching procedures to allow customers to shop for alternativegeneration suppliers under the plan.

The PUCO agreement requires AEP to freeze distribution ratesthrough Dec. 31, 2007 for Ohio Power Co., and through Dec. 31, 2008for Columbus Southern Power Co., and to absorb $40 million forconsumer education and other transition costs.

On the CG&E transition plan, PUCO has set a public hearingfor June 8 in the Cincinnati City Hall. Two public hearings on theAEP agreement are set for June 5 and June 22 at the PUCO offices inColumbus, OH.

CG&E is Cinergy’s largest operating company along with PSIEnergy Inc. Both serve more than 1.4 million electric customers and478,000 gas customers in Indiana, Ohio and Kentucky. AEP operatesseven operating utility subsidiaries, including Appalachian Power,Columbus Southern Power, Indiana Michigan Power, Kentucky Power,Kingsport Power, Ohio Power, and Wheeling Power. In March, it gotthe go-ahead from FERC to merge with Central and South West Corp.(CSW), which would create the biggest investor-owned utility in theU.S.

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