On Thursday, the Public Utilities Commission of Ohio pushed “the reset button” in its controversial rate case involving American Electric Power. Todd Snitchler, the commission chairman, explained that starting over would “ensure that we have a complete picture of any proposal, and balance the interests of all customers and the utility.” He stressed that Ohio would continue moving toward a competitive marketplace for electricity.
Again, his words and those of other commissioners sounded reassuring. Then, there is the reality of what the commission does.
In December, the panel approved a rate plan for AEP that soon proved a colossal embarrassment. Many customers opened their January bills to discover stunning increases, some exceeding 40 percent. The burden fell mostly on small businesses, local governments, school districts and nonprofit organizations. They felt blindsided. They immediately howled.
One executive in Grove City told the Columbus Dispatch: “Honestly, am I going to put my next machine here or in my plant in Tennessee?”
Worth tracking is the evolving response of the commission as the outrage gained momentum, leading to the reversal last week. The response suggests the commission has yet to face squarely its decision-making. It indicates how far the panel must travel to regain lost credibility.
Initially, the commission argued that the soaring bills reflected costs long deferred and now delivered to customers. Yet, as the Dispatch discovered in its reporting, the much larger factor was cost-shifting, from large businesses to smaller ones, the product of behind-the-scenes negotiations, in which the eventual victims had little, if any, voice.
The commission also insisted that the increases reflected a transition to the marketplace. The flaw in this explanation is that electricity prices have been declining in the market.
Consider that the commission recently conducted a rate case involving Duke Energy that resulted in a market-triggered reduction of 17 percent for customers. FirstEnergy long has followed this course, the market driving down its prices, too.
Perhaps most telling, AEP has participated in competitive bidding in FirstEnergy’s service territory, even winning at prices substantially below those it charges in its own area.
Next, Chairman Snitchler blamed AEP. He noted that “our decisions are only as good as the company billing information they are based upon.” In other words, the utility wasn’t forthcoming, and “now that we have a full understanding,” commission members will develop a better plan.
The truth is, the PUCO did have adequate information. The Columbus Dispatch obtained commission email messages that show the staff member in charge of the AEP case sharing his concern about the rate plan. He predicted precisely the coming events, the huge price increases, the blowback, the red faces for commissioners.
Worth stressing is the crucial role of the Dispatch and its request for public records. The utility and the commission resisted. When the newspaper finally got its hands on the documents, it revealed more than thinking inside the commission. It delivered an analysis that confirmed the doubts about the rate plan.
In a matter of days, the commission gave AEP its approval. The chairman and his colleagues missed the reporting? Actually, Snitchler responded in a letter to the editor, arguing the potential problems had been addressed.
He had a full understanding or not?
Of late, Snitchler has emphasized the limits of the record on which the commission must base its decision. Uh-oh. Is he slipping close to sounding like one of those bureaucrats his boss, Gov. John Kasich, so detests?
For his part, the governor offered a glimpse this month into the motive of the commission. He told a Columbus television station that “sometimes when you do these things, you don’t see the upfront benefit, but what’s most important, do we become a lower-cost energy state over time?”
Clearly, AEP desires a cushion in moving to a competitive market. Many customers haven’t seen “the upfront benefit.” The utility bids elsewhere, but in a key element of the plan, other utilities are barred from competing in AEP territory, the utility reaping the benefit of higher rates.
That leaves one problem.
The electricity restructuring bill enacted four years ago created something of a hybrid. A power company can opt for more traditional regulation or leap directly into the competitive market. AEP chose the former, or an electric security plan. Yet, with customers in mind, lawmakers insisted that a utility follow whichever route resulted in the lower price.
So, the rates in more traditional regulation would be tested in the market, ideally, through bidding in a competitive auction, as FirstEnergy and Duke have done. That hasn’t happened in the AEP case. The commission has used an “administratively determined” market price, or a device that provides convenient flexibility.
A test for Todd Snitchler and the commission: Will they do customers the favor of measuring the AEP plan in a competitive auction?
Douglas is the Beacon Journal editorial page editor. He can be reached at 330-996-3514, or emailed at firstname.lastname@example.org.