OCC Wins at Supreme Court on AEP Electric Security Plan, Protects Customers from Unlawful and Unreasonable Rate Increases Approved by the PUCO

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In a major victory for residential utility customers, the Supreme Court of Ohio today unanimously agreed with the Office of the Ohio Consumers’ Counsel (OCC) that the Public Utilities Commission of Ohio (PUCO) improperly allowed American Electric Power (AEP) to charge customers unlawful and unreasonable rates.

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Office of the Ohio Consumers' Counsel

“This is a major victory for residential utility customers. It demonstrates the value for customers to have a residential advocate at the PUCO and the Supreme Court of Ohio.”

In a major victory for residential utility customers, the Supreme Court of Ohio today unanimously agreed with the Office of the Ohio Consumers’ Counsel (OCC) that the Public Utilities Commission of Ohio (PUCO) improperly allowed American Electric Power (AEP) to charge customers unlawful and unreasonable rates. The Supreme Court ruled 7-0 in favor of the OCC on three issues the PUCO unlawfully allowed AEP to collect costs that included the utility’s perceived risk to provide default electric service to shopping customers, retroactive rates, and carrying charges on environmental investments.

“This is a major victory for residential utility customers. It demonstrates the value for customers to have a residential advocate before the PUCO and the Supreme Court of Ohio,” Consumers’ Counsel Janine Migden-Ostrander said. “Residential customers must have an adequately funded representative to advocate against PUCO decisions which may impose unreasonable and unlawful charges upon consumers.”

The Court opinion accepted the OCC’s and the Industrial Energy Users’ arguments that there was no evidence the $456 million AEP was approved to collect from customers was based on any actual costs it would incur. The OCC argued AEP was overcompensated for the risk it would possibly supply power to customers who return to the utility after shopping for an alternative supplier. This issue will now go back to the PUCO for reconsideration where the OCC will seek to prevent further collection of these charges from customers and a potential refund.

The OCC also succeeded in reversing the PUCO on a controversial decision that allowed AEP to collect retroactive rates from customers, court documents said. The Court agreed with the OCC and found that the PUCO unlawfully granted $63 million in “additional rates to make up for regulatory delay.” Unfortunately, the laws prohibiting retroactive rates also prohibit refunds, the Court said. Only posting a bond would have made a refund possible, under current law, which is not financially possible for the OCC. The legislature would have to change the bond requirement for public agencies for a refund to be possible.

The final victory the OCC achieved was related to $330 million in carrying charges on environmental investments, according to the Court's opinion. The PUCO allowed AEP to collect carrying charges for past environmental investments, contrary to Ohio law. Carrying charges include costs for a return on investments, depreciation, administrative costs, income taxes and property taxes. The Court also sent this issue back to the PUCO for reconsideration where the OCC will seek to prevent further collection of these charges from customers and a potential refund.

The OCC presented its winning argument to the Supreme Court of Ohio Feb. 2. The appeal of the PUCO’s decision on AEP’s electric security plan was made to the Court in November 2009.

Supreme Court of Ohio Case No. 2009-2022
PUCO Case Nos. 08-917-EL-SSO and 08-918-EL-SSO

About the Office of the Ohio Consumers’ Counsel

The Office of the Ohio Consumers’ Counsel (OCC), the residential utility customer advocate, represents the interests of 4.5 million households in proceedings before state and federal regulators and in the courts. The state agency also educates residential utility customers about electric, natural gas, telephone and water issues and resolves complaints from individuals. To receive utility information, brochures, schedule a presentation or file a utility complaint, residential utility customers may call 1-877-PICKOCC (1-877-742-5622) toll free in Ohio or visit the OCC website at http://www.pickocc.org.

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