What is a distribution rate case?
By PUCO Office of Public Affairs
A distribution rate case is a formal proceeding before a utility regulatory body in which a utility files an application to increase its distribution rate. The distribution rate is simply that, the cost to deliver electricity, natural gas or water to customers.
A utility company files a rate case when customer rates no longer cover the cost of delivering reliable service. An increase in costs most often results from installing or upgrading infrastructure (think wires, pipes and meters), or increased operations and maintenance expenses. A company can generally file a rate case at any time and is not required to do so by Ohio law. However, sometimes a utility makes a commitment to do so in another case before the PUCO.
The application is often several thousand pages and includes information about the company’s existing delivery system, financial accounts and more. Additionally, the company will request a specific rate and must state why the rates are reasonable and necessary. The company files the application in the PUCO’s Docketing Information System (DIS), a digital filing system available to all.
Once a company files its application, a 275-day process begins. By law, if the Commission does not issue a decision within 275 days, the new rates may take effect. There is a lot of activity during that time. PUCO staff review the application, issue a staff report, draft expert testimony and participate in a formal hearing. The company also prepares expert testimony and participates in the formal hearing. A PUCO attorney examiner, who functions as an administrative law judge, holds a local public hearing and presides over the formal hearing.
At the conclusion of the hearings, the commissioners review the full case record – the application and supporting documents, comments from the public, evidence from the hearing – and issues an opinion and order.
The Commission can approve the application as is, adjust portions of the application, or deny the application. Once the Commission issues an order, parties to the case have 30 days to petition the PUCO to modify or reverse its decision, which could ultimately be appealed to the Supreme Court of Ohio. Unless overturned by the Supreme Court, the new rates take effect once the company files final tariffs with the PUCO.
Ohio Power Company (AEP Ohio) rate case
In April 2020, AEP Ohio began the process to increase its distribution rates in Case No. 20-585-EL-AIR. The company filed a pre-application notice which outlined the following details:
- The communities impacted by the rates. Ohio law requires the utility to alert each community of its application to increase rates.
- How the rates would impact each of the types of customers it serves: residential, commercial, industrial.
- The company’s new policies and procedures, known as tariffs, once the new rates are enacted.
- And finally, bill comparisons for all customer types, showing current rates compared to requested rates. For residential customers, revenue increases sought by AEP Ohio would represent a $2-3 increase per month depending on electricity usage.
In June 2020, AEP filed its formal application, totaling more than 6,000 pages.
Next steps: PUCO staff review each part of the application and issue a staff report, which serves as a recommendation to the commissioners.
Disclaimer: This content is intended for educational purposes and is not intended to comment on, alter or replace actions taken by PUCO staff, attorney examiners or the Commission.