Before
The Ohio Senate
Energy and Public Utilities Committee
Opponent Testimony on Senate Bill 102
By
Maureen Willis, Consumers’ Counsel Acting Legal Director
On Behalf of the
Office of the Ohio Consumers’ Counsel
June 20, 2023
Hello Chair Reineke, Vice-Chair McColley, Ranking Member Smith, and Committee members. I hope you and your colleagues are well. Consumers’ Counsel Weston and I thank you and the bill sponsor (Senator Wilkin) for this opportunity to present opponent testimony on Senate Bill 102. I will address some (but not all of) OCC’s concerns with the bill.
The bill has some benefits for consumers. One benefit is constraining the PUCO from sitting on a party’s application for rehearing. (Lines 62-69) The PUCO’s delay of rulings on rehearing can interfere with a party’s right to appeal to the Ohio Supreme Court. For example, OCC was prevented from appealing an AES electric security plan for more than a year due to such PUCO delay. Another benefit is barring utilities from using cash to induce parties to sign settlements in cases, for gaining PUCO approval of a settlement. (Lines 123-130) A further benefit is clarifying that the PUCO staff is subject to discovery from parties in cases where it is acting as a party. (Line 1129) A 1983 reform law (R.C. 4903.082) contains no exception for the PUCO staff in its requirement for allowing discovery. But the PUCO has shielded its staff from discovery. That should end.
In any event, the bill’s detriments for consumers outweigh its benefits. The bill’s major feature is its replacement of the electric security plans resulting from the failed ratemaking in Ohio’s 2008 energy law. Eliminating electric security plans – or at least reforming the 2008 law’s most anti-consumer provisions for the plans – should be an important consumer protection goal for millions of Ohio electric consumers. We appreciate that Senator Romanchuk has tried for years to achieve this public interest reform.
Attached is a draft bill for fixing the consumer problems in the 2008 law for electric security plans. It does not solve every problem for consumers, but the draft bill solves major known problems, including the refund issue. It comes without the risk of SB102 in creating a new regulatory structure that utilities and the PUCO may interpret in ways not imagined.
In this key respect of reforming the law for electric security plans, the bill falls short. One problem is that the bill will not stop the current round of unfair ratemaking for consumers in electric security plans (except for Duke consumers). AES’s proposed plan is nearing the end of its process. AEP’s plan is far along. And FirstEnergy already has filed its proposed plan. These proposed electric security plans will be in effect for three to 10 years. So, even if the bill’s approach to ratemaking were good for consumers, it will not have an effect on ending electric security plans until the 2030’s for AEP and FE. That means the many riders under the plans will continue to be charged to consumers until the 2030’s. Attached is OCC’s Subsidy Scorecard, showing subsidies from such riders. Given the utilities’ penchant for seeking favorable regulatory laws, we are skeptical that the bill, even if passed, would remain intact in the 2030’s.
Another major problem is that the bill’s approach to ratemaking is inadequate for consumer protection. For example, the bill does more harm than good regarding the major issue of enabling refunds of illegal utility charges to consumers. (Lines 96-104) The bill merely enables refunds for a very limited time period – only for utility charges to consumers after a Court reversal of the PUCO. Indeed, the PUCO has already used the bill’s practice of requiring refunds after the Court’s reversal.
Thus, the bill would not prevent a recurrence of such fiascos for consumers as FirstEnergy’s so-called distribution modernization rider. FirstEnergy kept nearly half a billion dollars of so-called distribution modernization charges, without a refund to consumers. That was despite the Ohio Supreme Court ruling the PUCO-approved charge is illegal. Attached is an OCC chart showing refunds denied to consumers since 2009, despite PUCO-approved charges being invalidated.
So, in codifying the limitation on refunds, the bill is preventing the Supreme Court or a future PUCO from overturning current practice. Indeed, the PUCO ordered refund language in an AES tariff toward obtaining clarity from the Court on refunds (in a case that OCC intended to appeal). OCC did appeal and the refund issue is pending in the Court. Also, a problem for consumers is that the bill’s refund provision does not apply to rate cases.
This codification of bad refund language in the bill is similar to the utilities obtaining codification of the OVEC-related coal power plant charges in House Bill 6, to subsidize AEP, Duke and AES. That codification meant a future PUCO or the Supreme Court could not overturn their decisions in the future.
Another problem is that, at the same time the bill is calling for greater use of traditional rate cases, the bill is harming consumers by impairing certain key elements of the rate case process. Traditional rate cases would become a lot less traditional under the bill, and mostly not in a good way for consumers.
For example, the bill allows utilities to use a projected test year, for determining their expenses and revenues. Perhaps worse, the bill allows a projection for whether utility property is “used and useful,” thus undermining one of the most important consumer protections in ratemaking. Consumers have not necessarily done well when ratemaking is based on utility projections. These ratemaking projections prevent the verifying that can be done by stakeholders when the utilities’ proposal is based at least on actual information. The bill does have a true up after thirteen months; however, there is no defined process and the true-up adds a level of complexity to rate cases that would approach the magnitude of a second rate case, if done fairly.
Furthermore, the bill is upending the rate case process. The bill would limit the use of written discovery. (Lines 1112-1120) That favors and protects lawyered-up utilities over consumers because the utilities have most of the information that needs to be discovered for case preparation. Instead, there ought to be a focus on protecting non- utility parties from utility delaying tactics and non-responsive answers on discovery. Even worse, the bill limits the use of the most effective discovery tool, depositions. (Lines 1130-1134) The bill prohibits depositions unless the PUCO finds “extraordinary circumstances” and also limits the scope of depositions if allowed. Depositions are an ordinary (not extraordinary) case preparation tool that are part of our American system of justice. The PUCO already has a process allowing utilities and others to seek protection from unreasonable discovery. The 1983 reform law allows for “ample” discovery and that law should only be improved, not decimated. An improvement would be to give OCC its own subpoena power.
Additionally, the use of rate cases should be associated with an end to the add-on charges, aka the riders, that are a problematic feature of electric security plans. But under the bill, riders unfortunately are here to stay as add-on charges for consumers. An example is the bill’s Interim Distribution Mechanism. (Lines 709-808) Other issues with new riders include the lack of traditional regulatory standards for their approval. As example of this problem is the economic development-related rider for natural gas utilities. (Lines 2823 -2830) This provision should also be removed because utilities have been given overly generous infrastructure riders, to the detriment of consumers, in the Senate’s recently passed budget bill (HB33).
Another ratemaking problem in the bill is a harm to the utility standard service offer. The most protective element of competition for utility energy consumers is the utility standard service offer. It is a market rate determined by competitive auctions, which benefits Ohioans who use it for their service. The standard offers also provide an important comparison for consumers considering energy marketer and aggregation offers.
But unfortunately, the bill caters to marketers regarding the standard offer. (Lines 1818- 1822) The bill would override decisions by the PUCO that have protected standard-offer consumers from marketer claims. The PUCO rejected marketer claims about double recovery of standard-offer costs, claims that would have, in essence, increased the standard offer price for consumers. This pro-marketer provision should be rejected. Another marketer provision that is being codified includes the problem of teaser rates (known somewhat euphemistically as introductory rates). The bill requires marketers to give consumers notice if the teaser rate is being increased. (Lines 1665-1684; 2976 - 3024) Notice to consumers is fine. But this bill should give consumers much more protection against teaser rates and other energy marketer practices, such as door-to- door sales. Teaser rates and door-to-door sales should be banned. Teaser rates lead to confusion and higher charges to consumers.
Yet another ratemaking issue involves a transmission-related, reduced rate for big utility customers that seems to be addressed in the bill. (Lines 1837-1841) There is controversy over this rate that favors big business customers, given a concern that the benefit may be at the expense of a subsidy from smaller consumers. This provision in the bill seems designed to override a long-delayed PUCO inquiry, for consumer protection, into a pilot program from a FirstEnergy electric security plan. (PUCO Case 22-391) The program is known as the Non-Market Based Rider. The PUCO committed years ago to determining if smaller consumers are being made to subsidize the bigger customers. Most recently the PUCO attributed the delay in the audit to delays in responses from FirstEnergy. This provision should be removed from the bill, given the issue at the PUCO.
In sum, the consumer risks in SB102 greatly outweigh the consumer benefits. For consumer protection, please do not enact SB102 as currently drafted. Thank you for your consideration.
See below for the following attachments:
