On September 28, 2000, the Public Utilities Commission of Ohio approved a transition plan filed by American Electric Power ("AEP"). The PUC’s approval is the latest of several transition plan approvals, including those for Cincinnati Gas & Electric ("CG&E"), FirstEnergy and Daytona Power & Light Company ("DP&L"). These transition plans arise out of Ohio’s deregulation process. Ohio’s deregulation legislation was signed into law July 6, 1999, with most provisions becoming effective on October 5, 1999. The legislation requires each electric utility to file a transition plan with the PUC. The transition plan details the utility’s provision for competitive retail electric service in Ohio. Competition is scheduled to begin January 1, 2001.
AEP’s transition plan includes a settlement among its Ohio companies, Ohio Power and Columbus Southern Power, and the PUC and the Ohio Consumers’ Counsel. Multiple parties, including Enron Energy Services, Ohio Rural Electric Cooperatives, Inc., American Municipal Power-Ohio, Exelon Energy and National Energy Marketers Assn., participated as intervenors. According to a PUC news release, Alan Schriber, PUC Chairman commented that very complex issues were inherent in AEP’s transition plan and the settlement agreement presented to the PUC was overwhelmingly supported by the intervenors in the case.
Under the stipulation, AEP agreed to freeze rates until the end of the market development period, or 2005, which ever comes first, and to provide a 5% rate reduction off the full generation component of Ohio Power’s and Columbus Southern Power’s unbundled rates available to residential customers who do not choose a new supplier for electric generation services. AEP also agreed to freeze distribution rates through December 31, 2007 for Ohio Power Company and December 31, 2008 for Columbus Southern Power.
The settlement agreement with AEP also reduces the amount of transmission costs which were requested by its companies, as well as the time in which those costs can be recovered. The transmission costs will be reduced from the $947 million requested by AEP, to $616 million. The companies had proposed that the costs would be recovered through 2010. Under the settlement, transmission costs will be recovered only through 2007 for Ohio Power, and 2008 for Columbus Southern Power. Additionally, the first 20% of Ohio Power’s customers who switch after 2005 will not be required to pay transition costs.
The AEP transition plan created "shopping credits" to facilitate the development of the retail marketplace and, therefore, competition. As an example of a "shopping credit," under the agreement the first 25% of Columbus Southern Power’s residential retail customers who choose a new generation supplier before December 31, 2005 will not have to pay the generation component of current rates, and will receive 0.25 cents per kilowatt-hour. Any unused portion of the "shopping credit" will be used by AEP to reduce transition charges. The "shopping credits" for customers of Ohio Power will not be available until 2006 and 2007. AEP also agreed to absorb $40 million in consumer education, customer choice implementation and transition plan filing costs.
There was some disagreement between the parties as to the certification and registration requirements for suppliers which focused on whether AEP’s proposed process created additional certification requirements. The PUC directed investor owned electric utilities to participate in a task force for the development of uniform business practices and electronic data interchange ("EDI"), standards. The disagreement was resolved by a task force resolution adopting the following requirements: successful completion of supplier credit requirements to provide sufficient financial coverage in case of default, an executed Trading Partner Agreement and Certified Supplier Service Agreement, payment of registration fees and a showing that the supplier is capable of providing service within EDI standards.
According to a corporate news release issued by AEP on September 28, 2000, AEP Ohio president Floyd Nickerson commented that the company disagrees with the PUC’s treatment of gross tax receipts and will be asking for a rehearing on that issue.
The stipulation approved by the PUC involving CG&E and multiple intervenors on August 31, 2000, is similar to the AEP settlement. CG&E’s plan also requires that it extend the market development period (the time period in which adjustments for full competition become final), until December 31, 2005. During that period CG&E must waive the supplier switching fee for the first 20% of customers who switch electric suppliers. Also during that period, all customers who select an alternate electric supplier will receive a "shopping credit" of 5 cents per kilowatt-hour. CG&E’s customers will not be subject to any requirement to remain with a particular retailer for the first year of the market development period. CG&E retail customers will receive distribution service under the same terms and conditions regardless of the electric supplier. Significantly, CG&E’s residential customers who do not choose an alternative supplier will receive a 5% reduction in the generation portion of their bill.