Natural gas decision a mixed bag for Columbia customers

12/11/2008

ON DEC. 4, The Blade published an article examining the Public Utilities Commission of Ohio's recent decision in the Columbia Gas distribution rate case, a matter that involved hard work by the Office of the Ohio Consumers' Counsel to protect the interests of residential customers.

As the residential utility consumer advocate, the OCC was able to reach an agreement with the utility, the staff of the PUCO, and other parties. This agreement included many positive features our office helped negotiate, including lowering Columbia's proposed $87.8 million annual revenue increase by nearly half to $47.1 million. In addition, negotiations produced commitments to provide conservation incentives as well as assistance to low-income customers struggling to pay their utility bills.

While the settlement resolved most issues, the OCC is still contesting how Columbia designs the rates; i.e., how they charge customers in order to collect their revenues. It is important to note that the rates affected by the PUCO's decision are the distribution charges that make up approximately 20 percent of a customer's bill. These costs include use of the utility's pipelines to distribute the gas, metering, and other expenses the utility has when delivering natural gas to your home. The cost of the natural gas itself was not at issue in this case and is a separate charge on your bill.

Columbia's distribution rates include: a flat-rate monthly charge and a usage-based charge, which varies depending on the volume of natural gas an individual customer uses. Columbia proposed, and the PUCO approved, increases of 87 percent beginning as soon as this month and another 45 percent in December, 2009, in its flat-rate charge, while lowering the volumetric charge.

The PUCO's decision means that, within two years, all of Columbia's delivery charges will be combined into one fixed rate that everyone must pay regardless of the customer's usage. We believe that this will have a harmful effect on low-income customers struggling to pay their utility bills during difficult economic times and that people in increasingly tough circumstances will be faced with hard choices about which necessity they can least afford to do without. This is because customers will no longer be able to control the size of their distribution bill by using less.

The rate hike will appear to customers in two phases. Effective immediately, the monthly customer charge will almost double, from $6.50 to $12.16. The usage-based charge will be $0.7911 per thousand cubic feet of natural gas (Mcf). The customer charge will increase again a year from now to $17.81 per month. The usage charge will be completely eliminated.

Another concern that our office has is that for every dollar the flat-rate charge increases, that is another dollar consumers cannot avoid by taking steps to improve their home's energy efficiency. A flat-rate charge discourages a customer's incentive to lower their natural gas bill by turning down the thermostat or making energy-efficient improvements. It also results in low-usage customers subsidizing high-usage customers.

During the hearing process, the OCC provided expert testimony against the rate design, the disproportionate effect it will have on lower-usage consumers and the effect on conservation efforts.

Also, the PUCO took public testimony at eight public hearings, including Nov. 12 at Bowsher High School in Toledo. A recurring theme from customers, particularly those on fixed incomes, is that the increase of their utility bills and other living necessities is occurring at a much higher rate than their incomes.

The OCC will continue to advocate that residential consumers receive rates structured in ways to maximize the impact of making wise energy efficiency decisions and promote fairness for those at all income levels.

Janine Migden-Ostrander is Ohio's Consumers' Counsel, the state's official utility watchdog.