Consumers' Counsel Calls for Regulators to Dismiss American Electric Power Rate Proposal

May 24 - PRNewswire

State regulators should throw out an American Electric Power (AEP) proposal because it violates the law and would lead to higher, more volatile rates, the Office of the Ohio Consumers' Counsel (OCC), the residential utility advocate, said today.

"This plan violates the letter and the spirit of our state's electric choice law, breaks prior commitments by AEP and will lead to higher rates. For these reasons, we have asked the PUCO to dismiss the case," said Janine Migden-Ostrander, Consumers' Counsel.

The OCC filed its Motion to Dismiss today at the Public Utilities Commission of Ohio (PUCO), arguing that AEP's proposal violates the following provisions in Ohio's electric choice law:

- Post-2005 electric rates must be based on market conditions and an

auction system must be used to achieve the lowest possible prices for

consumers. Instead, AEP has asked for automatic generation rate

increases and argues the auction is unnecessary. The law requires both

a market-based "standard service offer" and a competitive bid.

- The company must follow the PUCO-approved electric choice transition

plan. The law mandates that company-specific transition plans dictate

how each electric company, including AEP, moves from a fully regulated

to a competitive market. The AEP transition plan was approved by the

PUCO in 2000 and does not allow for generation rate increases. The PUCO

should be prohibited from approving AEP's proposal, which would allow

generation rates to increase by as much as 33 percent from 2006 through

2008.

- Residential consumers must be provided a 5 percent generation rate

discount through 2005, unless specific conditions are met. In order to

end the rate discount early, as AEP has proposed, the PUCO would need

to find that the discount is "unduly discouraging" electric

competition. The OCC does not believe that eliminating the discount

would help develop a competitive market. Ending the discount 18 months

early could cost AEP's customers an estimated $40 million.

- Customers' rates must be capped through the end of 2005. Ohio's

electric choice law states that AEP's total rate - including the

generation, transmission and distribution components - must be capped

through the transition period. However, AEP's proposal would allow the

company to begin deferring costs incurred during the rate cap, with

interest, and charge customers at a later date. The OCC believes this

is a clear violation of the mandated rate cap.

In addition, the OCC argued that AEP's proposal would break its previous commitment to freeze distribution rates through 2007. By adding exceptions to the rate freeze beyond what was agreed to under the transition plan, customers could see significant distribution rate increases based on such factors as increased security costs or government-mandated operations and maintenance expenses.

About the Office of the Ohio Consumers' Counsel

The Office of the Ohio Consumers' Counsel (OCC), the residential utility advocate, represents the interests of 4.5 million consumers in proceedings before state and federal regulators and in the courts. The state agency also educates consumers 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 consumers may call 1-877-PICKOCC (1-877-742-5622) toll free in Ohio or visit the OCC website at http://www.pickocc.org/ .

Office of the Ohio Consumers' Counsel

CONTACT: Ryan Lippe of Ohio Consumers' Counsel, +1-614-466-7269

Web site: http://www.pickocc.org/