PUCO Issues Second Order on Columbus Southern Power SEET Credit, Bypassability Still Unclear

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January 28, 2011

Yesterday, the Public Utilities Commission of Ohio issued a further order regarding the credit to be paid to Columbus Southern Power customers as a result of the determination that Columbus Southern Power over-earned under the application of the Significantly Excessive Earnings Test (SEET), but the question of whether competitive supply customers will receive the credit is still unclear.

As noted by Matters earlier this month (1/12), PUCO originally determined that Columbus Southern Power generated $42.6 million in significantly excessive earnings in 2009.  The earnings stem from rates charged under the Columbus Southern Power electric security plan, which relate to both bypassable generation and nonbypassable distribution.  It was not apparent that PUCO specified that the over-earnings related to specific charges (e.g. bypassable or nonbypassable) given the bundled nature of the costs under the electric security plan, and thus, the customers who contributed to the over-earnings were not clear.

The Commission originally ordered that the over-earnings should first be credited to customers by reducing deferrals of the fuel adjustment clause (FAC) that would have been collected from Columbus Southern Power customers in 2011.  This is anticipated to expend $16 million of the over-earnings.

In one respect, this action essentially only benefits customers taking bundled service from Columbus Southern Power, since those would be the only customers paying the fuel adjustment clause rates as adjusted to reflect the deferrals.  However, due to the cap placed on retail rates under the electric security plan, uncollected fuel deferrals may eventually become a nonbypassable charge if the cap prevents the fuel adjustment clause from being increased.  If these FAC rates were destined to become nonbypassable (which is likely due to the cap), then the deferral may actually be benefiting all distribution customers.

After the FAC deferrals, remaining over-earnings (about $26.6 million) were originally to be, "credited to CSPs customers on a per kilowatt hour basis beginning with the first billing cycle in February 2011 and coinciding with the end of the current ESP period."  PUCO's original order did not exclude, or explicitly include, competitive supply customers from this credit.

On January 21, Columbus Southern Power filed tariff sheets to implement the SEET credit.

The only tariff sheet filed to implement the credit was Original Sheet No. 87-1.  This is important because Columbus Southern Power has a separate open access distribution tariff for competitive supply customers, under which all tariff sheets are designated with a "D" (e.g. Original Sheet No. 1-1D, Original Sheet No. 2-2D, etc.),

Though unclear, implicit from Columbus Southern Power's tariff filing was that the SEET credit would only be paid to customers taking generation service from Columbus Southern Power.

The only statement of applicability in the filed Original Sheet No. 87-1 was that, "Effective Cycle 1 February 2011, all customer bills subject to the provisions of this Rider, including any bills rendered under special contract, shall be adjusted by the SEET Credit Rider of $0.001256 per KWH."  However, neither in the filing, nor anywhere else in the current tariff, is there any section describing what rate classes are, "subject to the provisions of this Rider."

Matters spoke with a Columbus Southern Power media representative on Wednesday regarding the issue.  Columbus Southern Power stated that it believed that the issue of which customers are eligible for the credit was not clearly decided by PUCO, and would likely be need to be further adjudicated in a clarifying order.  

Several competitive supply parties indicated that they also did not have any clarity with respect to customers' eligible to receive the SEET credit.  Competitive suppliers were not active in the SEET proceeding itself, although became involved, temporarily, due to a stipulation in the proceeding which also would have addressed the merger of Ohio Power and Columbus Southern Power (this stipulation was later rescinded).

Yesterday, PUCO issued a subsequent order on the SEET credit.  The main tenet of the order is that, "reasonable arrangement customers who receive service under a discount rate supported by delta revenue recovery are not entitled to both the discount rate and a SEET credit."  Reasonable arrangement customers are those customers (typically industrial customers) taking generation service from Columbus Southern Power under a negotiated rate, with any discount recovered from other customers on a nonbypassable basis.

PUCO's order does not exclude any other customers (such as those on open access distribution) from the credit.  When describing its decision, PUCO stated, "Upon further consideration of the application of the credit to all customer bills [emphasis added], the Commission clarifies that reasonable arrangement customers who receive service under a discount rate supported by delta revenue recovery are not entitled to both the discount rate and a SEET credit."

This language suggests that the only customers excluded from the universe of "all customer bills" are the reasonable arrangement customers, and no other customers.  While PUCO ordered Columbus Southern Power to file tariffs consistent with its order, the only explicit direction was to remove reasonable arrangement customers from the tariff sheet.  PUCO did not address the fact that an open access distribution SEET credit tariff sheet was not filed, nor did it explicitly direct Columbus Southern Power to file a SEET credit rider under its open access distribution tariff.

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