COLUMBUS — The Public Utilities Commission of Ohio recently determined that AEP-Ohio operating company Columbus Southern Power generated $42.6 million in significantly excessive earnings in 2009, which will be refunded to customers through bill credits and the elimination of deferrals.
“The decision in this case of first impression has reasonably balanced the complex economic and financial factors required by the significantly excessive earnings test,” stated PUCO chairman Steven D. Lesser.
Under the terms of today’s order, AEP-Ohio will apply the $42.6 million in significantly excessive earnings first to eliminate deferrals estimated at $16 million that would otherwise have been recovered from Columbus Southern customers in 2011.
As a result, any carrying costs associated with the estimated $16 million will also be eliminated. Columbus Southern will credit the remaining excessive earnings, estimated at $26.6 million, directly to customer bills.
Over the course of an 11-month period from February to December 2011, the average Columbus Southern customer who uses 1,000 kWh of electricity per month will receive a credit of $14.76. The credit will be applied to customers’ bills at approximately $1.34 per month.
Under electric restructuring legislation passed in 2008, the PUCO is required to evaluate whether Ohio’s electric utility rate plans produce significantly excessive earnings.
Utilities are required to make annual filings at the PUCO demonstrating whether or not significantly excessive earnings were made. These filings are subject to PUCO review and analysis using a significantly excessive earnings test (SEET) adopted by the Commission.
Significantly excessive earnings are measured by whether the earned return on common equity of the utility is significantly in excess of the return on common equity during the same period by other companies that face similar business and financial risk.
AEP-Ohio filed its SEET application Sept. 1, initiating the Commission’s review proceeding. Various parties including the Office of the Ohio Consumers’ Counsel, Industrial Energy Users-Ohio, Ohio Partners for Affordable Energy, the Ohio Manufacturers Association and the Ohio Hospital Association intervened in the proceeding and presented testimony.
AEP-Ohio, PUCO staff, OMA and OHA and other parties, filed Nov. 30 in the case an agreement that was later withdrawn by AEP-Ohio.
Using a return on equity threshold of 17.6 percent for comparable companies and an adjusted 2009 return on equity of 19.73 percent for Columbus Southern Power, the Commission concluded that the utility generated 2.13 percent, or $42.6 million, in excessive earnings for the year.
The Commission also determined that AEP-Ohio’s other operating company, Ohio Power, did not generate significantly excessive earnings in 2009.
A copy of today’s Commission opinion and order is available at www.PUCO.ohio.gov. Click on the link to DIS and enter the case number 10-1261-EL-UNC.