Duke Energy Ohio Announces Settlement in Gas Rate Application February 28, 2008
Duke Energy Ohio announced today that it has reached a settlement agreement with the Staff of the Public Utilities Commission of Ohio (PUCO) and all intervening parties on its request for an increase in natural gas base rates.
The settlement calls for an annual revenue increase of $18.2 million overall, or 3 percent, compared with the company’s original application of $34.1 million, or 5.8 percent. In addition to the Staff, intervenors joining in the agreement are the City of Cincinnati, Direct Energy, Integrys Energy Services, Interstate Gas Supply, the Kroger Co., the Office of Consumers’ Counsel, Ohio Energy Group, Ohio Partners for Affordable Energy, People Working Cooperatively and Stand Energy.
The agreement will permit continued recovery of costs through 2018 for Duke Energy Ohio’s accelerated main replacement program, which will improve the reliability and safety of the natural gas delivery system by replacing cast iron and bare steel mains, some of which were installed more than 130 years ago. The settlement also allows for recovery of costs of an additional safety program to replace certain types of risers that connect the gas service line to the gas meter.
“This application was required to continue the existing funding mechanism for investment in the gas delivery system so that we can improve its reliability and safety,” said Sandra Meyer, president of Duke Energy Ohio. “We are about halfway through our accelerated main replacement program and have already seen a 21 percent reduction in leaks on our system.”
The settlement does not resolve the proposal of the company and PUCO Staff to move the fixed charges of providing gas service, such as capital investment in pipes and regulating equipment, billing and meter reading, to a monthly fixed charge rather than including them in the per unit charges. This design helps lower costs associated with usage and will minimize bills during times of extreme weather. This issue will be litigated in an evidentiary hearing at the PUCO in March.
For a residential customer using 10,800 cubic feet of natural gas, the proposed movement of the fixed charges out of the usage rate results in no increase to the current bill of $145.71. The actual amount of the bill will depend on the cost of natural gas at the time the increases take effect and the final rates approved by the PUCO. Natural gas costs are billed to customers at the company’s cost or at the customer’s agreed upon price with an alternative supplier, in either case without profit to Duke Energy Ohio.
“Duke Energy Ohio provides several resources to help customers manage their energy bills,” said Meyer. “These include rebates on high-efficiency gas furnaces, energy audits, conservation tips and payment assistance programs.” Under the settlement, funding for the low-income weatherization program would increase by 50 percent from $2 million to $3 million annually. More information is available on these programs at www.duke-energy.com.
If the settlement is approved, a pilot program will provide a $4 credit against the monthly fixed charge for low income customers at or below 175 percent of the federal poverty guideline who do not participate in the Percentage of Income Payment Plan. The credit would result in most of these customers seeing a reduction from their current bill. The pilot will be limited to the first 5,000 income-qualified customers to enroll.
Another benefit to customers under the settlement is that Duke Energy Ohio will take over responsibility for the individual service line from the gas main in the street to the meter. Previously, customers were responsible for the costs of repairing any leaks or damage that occurred to the service line. With this new approach, Duke Energy Ohio, rather than customers, will handle such repairs.
To foster gas customer choice, Duke Energy Ohio has also agreed to move approximately $5 million of carrying costs associated with gas inventory from the base rate to the Gas Cost Recovery mechanism. This prevents customers who have switched to alternate suppliers from paying these costs twice, once to their suppliers and a second time to Duke Energy Ohio, because all customers pay the base delivery rate. Currently, more than 94,000 Duke Energy Ohio customers receive their gas supply from an alternate supplier.
The settlement is subject to the review and approval of the PUCO. Duke Energy Ohio and the parties to the agreement may withdraw it if the PUCO alters the settlement in a manner unacceptable to them.
Duke Energy’s Ohio operations deliver safe, reliable and competitively priced electricity to more than 680,000 electric customers and natural gas service to approximately 420,000 customers.
Duke Energy, one of the largest electric power companies in the United States, supplies and delivers energy to approximately 4 million U.S. customers. The company has approximately 36,000 megawatts of electric generating capacity in the Midwest and the Carolinas, and natural gas distribution services in Ohio and Kentucky. In addition, Duke Energy has more than 4,000 megawatts of electric generation in Latin America, and is a joint-venture partner in a U.S. real estate company. Headquartered in Charlotte, N.C., Duke Energy is a Fortune 500 company traded on the New York Stock Exchange under the symbol DUK. More information about the company is available on the Internet at: www.duke-energy.com.