Q: Who controls the rates I pay for public utility services such as telephone, gas, electricity, water and sewer?
A: The Public Utilities Commission of Ohio (PUCO) sets the rates for investor-owned utilities (IOUs), which provide most of the utility services in Ohio. These include companies like FirstEnergy, AEP Ohio, Duke Energy Ohio, Dayton Power & Light, Columbia Gas, Dominion East Ohio, Vectren Energy Delivery of Ohio, AT&T Ohio, Cincinnati Bell, Frontier and Embarq, and many other private companies. Some cities and villages provide utility services—usually water and sewer; their rates are set by the city or village council. The remaining utility services are provided by non-profit associations like the rural electric cooperatives (co-ops), or, in a few instances, by gas cooperatives where the customers own or are members of the cooperative. Their rates are set by their customers.
While most basic telephone services from traditional telephone companies were set on the basis of cost of service, many non-basic telephone services are based upon market conditions. Cable television providers are not regulated by the PUCO, but are or will be issued video service authorizations by the director of the Department of Commerce. The Ohio electric utilities and some natural gas utilities have conducted auctions to secure and price electricity and natural gas for their customers. Some of these auctions have resulted in Standard Choice Offers where specific competitive retail energy suppliers are supplying electricity and/or gas to specific individual customers and the utility is only charging for the use of its distribution system to bring the electricity or gas to customers.
Q: Can a customer “shop around” and buy a portion of his or her energy service from a non-utility?
A: Yes, unless a customer is served by a municipal electric or gas system, receives service from a cooperative, does not “opt out” or decline to participate in a local governmental aggregation program, or lives in an area that is not served by one of the four largest gas companies. Currently, a customer of an Ohio electricity utility or a gas customer who receives service from one of the four largest gas utilities (Columbia Gas, Dominion East Ohio Gas, Duke Energy Ohio, or Vectren Energy Delivery of Ohio) may qualify to choose his/her own third-party electric or gas supplier. The electric or gas supplier, or marketer, would charge the customer only for the electricity or gas itself. That supplier’s rates are not regulated by the PUCO. However, a comparison of such electric and gas rates contained in an “Apples-to-Apples” chart is available by logging onto the PUCO’s website (www.puc.state.oh.us) and clicking on the link for Apples-to-Apples.
These programs that allow a customer to choose his/her own gas supplier are known as “Customer Choice” or “Energy Choice” programs. Customers who participate in Customer Choice or Energy Choice programs must continue to receive the actual physical delivery of electricity or natural gas from the public utility. Customers pay the utility “base rates” to cover the cost to transport the electricity or gas to the customer’s premises. Not all gas companies offer Customer Choice programs and not all Customer Choice programs are available to every customer.
In addition, a customer may be able to be part of a “governmental aggregation group” where the customer’s local government, such as a city, village, county or township, may purchase utility services on behalf of its citizens who do not choose to opt out or decline participation in such a program. If a customer does not opt out or decline to participate in the governmental aggregation group, the local governmental unit will do the shopping for such citizens who remain the governmental aggregation group.
Q: What is the PUCO?
A: The PUCO is a state agency located in Columbus that has responsibility for regulating the rates and services of Ohio's regulated utilities. It consists of five commissioners, each of whom is appointed by the governor for a five-year term from a list of candidates provided by a special nominating council. Each commissioner is required to have experience in the fields of economics, law, finance, accounting, engineering, or sciences. PUCO commissioners are assisted by a staff consisting of accountants, economists, engineers, rate analysts, attorneys, and other support staff members. The staff not only advises the commissioners, but also has a very important role in the rate-setting process.
Q: Why do we need a PUCO?
A: Some utility services are still monopolies with no competitive market for setting prices or quality standards. To prevent these monopolies from over-charging customers, the Ohio legislature created the PUCO in 1913. The PUCO was empowered to regulate the rates and services of utilities by balancing the interests of utility customers with those of utility investors. Now, as some utility services are becoming competitive, the legislature is beginning to de-regulate them. For a utility company that is competing with others in the marketplace (much like any other company), the market would replace the need for regulation by the PUCO.
Q: How does the PUCO set my utility rates?
A: Rate cases at the PUCO usually are initiated by the public utility, although they may be initiated by customers or the PUCO itself. Generally, the utility begins the process by notifying the PUCO and the mayors of the affected areas of an intended rate increase. After the utility files a standardized application with numerous exhibits explaining why the increase should be approved, PUCO staff members analyze the information contained in the application and make field visits to review the utility's property, invoices, and accounting books.
Approximately five to seven months later, the PUCO staff files a document detailing its findings, conclusions, and recommendations. This is called a staff report. Other parties such as the Office of the Ohio Consumers’ Counsel (a state agency representing residential consumers), commercial customers, industrial customers, cities, as well as the applicant utility itself, may file objections to the staff report. Hearings are then scheduled so that witnesses supporting the positions of the parties for and against the rate increase may be cross-examined. At the end of the hearings, written arguments (briefs) are submitted. After reviewing the application, staff report, and the record of the hearing and briefs, the PUCO renders its decision to grant, modify, or deny the rate increase. The entire rate case process usually takes between ten and twelve months. Any party dissatisfied with the PUCO’s decision may appeal to the Supreme Court of Ohio. The appeal process may take more than a year.
This "Law You Can Use" consumer legal information column was provided by the Ohio State Bar Association. It was prepared by Stephen M. Howard, an attorney with the Columbus office of Vorys, Sater, Seymour and Pease, LLP.