Rate cases take a long time to process through the system. AEP submitted a Pre-Filing Notice as required by rule on April 29, 2020, with the Application to set new base rates filed on June 1, 2020. At that point, discovery started and the Staff began preparation of a Staff Report, which was released on November 25, 2020, six months later. Settlement talks started in January, culminating in a stipulation filed on March 12, 2021.

The main features of the Stipulation are as follows:

  • Rates remain fairly flat. AEP contends that the settlement represents a rate reduction, but that’s not really true. Rates are going up $295 million, but the impact is not falling directly on residential customers initially because the Office of the Ohio Consumers’ Counsel (OCC), a party to the settlement, was successful in reducing the amount of the increase allocated to the residential class. Rates will increase through a variety of riders.
  • The rate case retains a Distribution Investment Rider (DIR), which will be the primary source of rate increases for the next five years. Reset to “0” by the rate case, the Rider will increase to over $315 million by May 2024, when rates will next be reset.
  • Also continued is the Enhanced Service Reliability Rider (ESRR). $35 million for vegetation management expenses will be included in base rates annually, and AEP will be permitted to spend an additional $153.75 million through May 2024, roughly $45 million annually on a pro-rated basis. This money is used to keep lines free of trees and other vegetation.
  • AEP’s attempt to continue a decoupling rider, a mechanism designed to ensure a utility recovers its revenue requirement – think of it as a customer-paid insurance policy – was dropped in the settlement.
  • The reconnection fee for customers disconnected that have smart meters will be “0”.
  • AEP will begin charging a late payment fee of 1.5% on bills more than 21 days late.
  • The customer charge will increase from $8.40 to $10.00.
  • AEP will conduct ‘shadow billing’ which provides aggregated numbers on how much customers who have shopped have saved or overpaid by shopping. We know that Columbia Gas customers who shop have paid $2 billion more for natural gas than if they had stayed on the standard offer. This will be our first opportunity to see if electric customers are saving as a result of competition.
  • AEP withdrew its demand-side management (DSM) proposal in order to get Staff and OCC to sign the settlement. This decision prevented the AEP/OPAE Community Assistance Program from being continued.
  • A new electric vehicle (EV) subsidy program proposed by AEP was not included.

The lack of a DSM program, coupled with a reliance on fixed charges to fund the various riders, caused OPAE not to settle. Following are the issues we will be litigating:

  • According to the Staff Report, the customer charge should be $6.01, but the settlement sets it at $10. This is better than the $14 the Company requested but is far above what Staff said it should be. This base amount is important because other riders are set at a percentage of the base distribution rate.
  • The DIS is one of those fixed riders. It will vary, increasing annually. Expect it to add an additional $5-10 dollars per month to your bill and is set annually, an amount that will not change no matter how much you reduce your energy use.
  • The same is true for the ESRR, though it will cost somewhat less per month. Again, it is a fixed charge that you cannot avoid by reducing energy use.
  • The Smart Grid and Smart City riders are also fixed charges as are several other riders. Many of you know that gas customers pay a fixed charge of between $19 and $37 per month before they use any natural gas. Electric bills are moving in that direction, with customers facing a potential total of fixed charges over $20 per month. This hurts the cost-effectiveness of energy efficiency improvements because it extends the payback of the savings. (NEAT doesn’t take this into account.)
  • The late fee lacks any justification, it simply punishes people without enough money to pay the bill. Delaying implementation until April 2022, doesn’t change the fact that the fee is punitive. It is not cost-based, nor is the any evidence that it improves payment performance. This will actually increase costs by increasing bad debt, which is recovered from all customers.