FE Agrees to Refund $306 Million to Customers as Part of Settlement
All electric customers of FirstEnergy’s (FE) Ohio operating companies – Ohio Edison (OE), Toledo Edison (TE), and the Illuminating Company (CEI) – will soon see credits on their monthly electric bills. The credits are the result of a settlement between FE and several intervening parties, including the Industrial Energy Users of Ohio (IEU-Ohio). Brakey Energy represents the interests of our clients in IEU-Ohio through the Brakey Energy Client Group.
As part of the settlement, FE has agreed to credit customers a total amount of $306 million over the next four years. Of that amount, $96.1 million will be in the form of refunds resulting from corrections to FE’s 2017-2019 Significantly Excessive Earnings Test (SEET) calculations. Approximately $50.8 million of the refunds will be allocated to residential customers on a one-time basis. The remaining $45.3 million will be allocated to non-residential customers and credited on a per kilowatt hour (kWh) basis over a six-month period.
In addition, FE has agreed to provide rate reductions for all electric customers of $210 million over a four-year period: $80 million in 2022, $60 million in 2023, $45 million in 2024, and $25 million in 2025. Approximately 52.9% of the yearly rate reductions will be allocated to residential customers on a per customer monthly basis. The remaining 47.1% will be allocated to nonresidential customers on a per kWh basis.
All SEET-related refunds and rate reductions will be provided to customers through a new Consumer Rate Credit (CRC) rider. The CRC rider will appear as a separate line item on customers’ monthly electric bills as early as January 2022.
The table below outlines FE’s proposed CRC rider rates. Rate 1 provides refunds to customers associated with FE’s 2017-2019 SEET. Rate 2 provides yearly rate reductions through 2025 and will be updated on an annual basis on January 1 of each year.
Table 1: Proposed CRC Rider Rates for FE Customers
If you have any questions about the credits proposed by FE or the impact the credits may have on your monthly electric costs, please contact Jennifer Lemley.
PUCO Approves Settlement in AEP Base Distribution Rate Case
Some customers of American Electric Power’s (AEP) Ohio operating company may see dramatic increases in their monthly electric bills beginning December 1, 2021. Yesterday, the Public Utilities Commission of Ohio (PUCO) issued an Opinion and Order approving new base distribution rates for AEP customers. As a result of the new rates, AEP will increase its annual revenue requirement by 45%. This is significantly less than the 61% increase that AEP originally sought in its June 8, 2020 application to update base distribution rates. The $295 million decrease in revenue requirement was the direct result of settlement negotiations between AEP and several intervening parties, including IEU-Ohio. Brakey Energy represents the interests of our clients in IEU-Ohio through the Brakey Energy Client Group.
The customers most at risk of significant distribution cost increases are those currently billed under AEP’s Subtransmission and Transmission rates that have monthly billed demands above 2,000 kilowatts (kW). (Under AEP’s new base rate structure, Subtransmission and Transmission rates are combined into a single “transmission” rate schedule.) The customer charge for these customers, which is currently $512 per month, will increase to $3,600 per month on December 1.
IEU-Ohio was successful in negotiating a much lower increase for transmission customers with monthly billed demands at or below 2,000 kW. Under AEP’s originally filed rates, the customer charge for these smaller customers would have also increased from $512 to $3,600 per month. As a result of IEU-Ohio’s intervention, the customer charge for these customers will be limited to $825 per month.
As part of the settlement, AEP also agreed to continue its Base Transmission Cost Rider (BTCR) pilot program for eligible customers and expand the number of participation slots for IEU-Ohio and other sponsoring customer groups to 15 slots each. In addition, AEP agreed to increase the current 700-Megawatt (MW) participation cap to 800 MW for 2022, 900 MW for 2023, and 1,000 MW for 2024. Sponsoring groups now have until December 15 to provide preliminary notice to AEP of an eligible customer’s intent to participate in the BTCR pilot program for the next April 1 to March 31 pilot program year.
If you are an AEP customer that would like more information about how AEP’s new rates will impact your monthly electric costs or if you would like information about AEP’s newly expanded BTCR pilot program, please contact Jennifer Lemley.
Ohio Electric Customers Now Paying for the State’s New SGF
Charges related to the recovery of costs for Ohio’s new Solar Generation Fund (SGF) began showing up this month on customers’ electric distribution bills. The SGF provides up to $20 million per year, for seven years, in out-of-market support to eligible solar generation facilities in the state.
The SGF was authorized through the passage of House Bill 128 (HB 128) in March 2021. HB 128 repealed the nuclear generation fund and decoupling provisions of previously enacted Amended Substitute House Bill 6 (HB 6) and amended the renewable generation fund provision of HB 6 (renamed “SGF” by HB 128) to reduce the relevant customer cost caps associated with the fund.
Costs associated with the SGF will be recovered from all customers of Ohio’s investor-owned utilities – OE, TE, CEI, AEP, AES (formerly Dayton Power and Light), and Duke Energy (“Duke”) – through a new SGF rider. The current SGF rider rate for all residential customers is 10¢ per month. The current SGF rider rate for all nonresidential customers is 0.0285¢ per kWh for usage up to 833,000 kWh per month.
If you have any questions about the new SGF rider, please contact Jennifer Lemley.
USF Rates Increasing for 2022
Universal Service Fund (USF) charges will be increasing on January 1, 2021 for all customers of Ohio’s investor-owned utilities. The USF provides funding for the state’s Percentage of Income Payment Plan (PIPP) program and low-income customer energy efficiency programs. Rate increases would have been higher if not for the $115 million payment that FE was required to make to the PIPP program as part of its Deferred Prosecution Agreement with the United States Attorney’s Office.
The USF will continue to be collected through a two-tier rate design in 2022. This design benefits customers that consume over 833,000 kWh per month. The table below shows 2020 and proposed 2021 USF rates for Ohio customers served by AEP, AES, Duke, CEI, OE, and TE.
Table 2: 2021 and 2022 USF Rates for Ohio Electric Customers
If you have any questions about the proposed USF rider rates, please contact Jennifer Lemley.
The highly competitive generation offers we have been able to highlight for residential customers have disappeared. We are now recommending customers with expiring contracts default to the Standard Service Offer (SSO) until further notice. The SSO is the default price customers pay that are not competitively sourcing power. This rate varies by electric distribution utility but is likely below current market conditions. To the extent you are in expiring contract, make sure you provide notice to your supplier that you would like to default back to the SSO as to avoid being swept up in extremely costly holdover provisions.
Brakey Energy has long and often found defaulting to distribution utilities’ Standard Choice Offer (SCO) a prudent strategy for natural gas supply. We encourage our readers to employ this strategy if they’re comfortable riding the highly volatile natural gas market. While this strategy has performed extremely well for years, customers who are employing this strategy are in store for notably higher winter heating bills.
Natural Gas Market Update
The NYMEX settlement price for November is $6.202 per Million British Thermal Units (MMBtu), up 6.2% from October’s price of $5.841 per MMBtu. This settlement price is used to calculate November gas supply costs for customers that contract for a NYMEX-based index gas product.
The graph below shows the year-over-year monthly NYMEX settlement prices for 2018, 2019, 2020, and 2021 to-date. Prices shown are in dollars per MMBtu of natural gas. These are the highest natural gas prices we’ve seen since January 2009.
Figure 1: NYMEX Monthly Natural Gas Settlement Prices
Electricity Market Update
The graph below shows the Around-the-Clock (ATC) 12-month price strip for electric generation and how it has changed over the past 36 months for three Ohio utility service territories: AEP, FirstEnergy (the ATSI zone), and AES-Ohio (formerly Dayton Power & Light (the DAY zone)). Prices have increased slightly since October in response to similar increases in natural gas prices.
Figure 2: 12-Month Energy Price Strip
*ATC pricing as of November 19, 2021. Data provided by Direct Energy Business.
The graph below provided by Direct Energy Business shows the November 19, 2019 through November 19, 2021 ATC forward prices for calendar years 2022, 2023, 2024, 2025, and 2026 for the AD hub. Forward calendar year strip prices for all years are at two-year highs. Calendar year 2022 is continuing to trade at an increasingly extreme outsized premium to all other years.
Figure 3: AD Hub Calendar Year Strip Prices
*ATC pricing as of November 19, 2021.
Calendar of Events
26TH ANNUAL OHIO ENERGY SAVINGS & MANAGEMENT CONFERENCE AND VIRTUAL INSTITUTE
The Columbus Renaissance Hotel
50 North Third Street
Columbus, Ohio 43215
Tuesday, February 22, 2022 - Wednesday, February 23, 2022
This is Ohio’s premier conference on energy rates, regulations, and efficiency. Make plans to attend this conference and receive priceless insights into energy prices, trends, savings opportunities, and the forces that influence the price and quality of power in Ohio.
This year’s conference will be a hybrid event. Attendees will have the option to participate in-person at the Columbus Renaissance Hotel or online using the virtual conference platform & mobile app, Whova.
A complete agenda with a list of presentation topics, speakers, and times will be available on the event website by Friday, December 3, 2021.