After years of offering among the lowest electricity rates in the state, American Electric Power this month became the costliest.
In December, the Columbus company began charging more than any other investor-owned utility, according to a monthly rate survey by the Public Utilities Commission of Ohio.
A household with standard service in AEP’s Columbus Southern Power territory is paying $109.64 this month, $2.04 more than the next-most-expensive provider, Dayton Power & Light.
The lowest bill is in the Cincinnati area, where Duke Energy households are paying $86.22. The figures are for the use of 750 kilowatt-hours.
The AEP bill is up 68 percent from the oldest available survey, from January 2004.
“With the bills the way they are, it’s hard to make it out here,” said Jerry White, 49, of Lancaster, an AEP customer who has expressed concern to state regulators about rising rates.
White describes the current rates as “just outrageous.” After struggling with his bills for much of this year, he has signed up for a discount program for low-income households.
Contentious case
AEP’s rate is the product of a contentious and complex case that has been litigated for much of the past two years.
The upshot is that regulators are allowing the utility to raise rates during a three-year transition to a new, market-based pricing system.
Terri Flora, an AEP spokeswoman, said several of the charges that contribute to the current rate had been deferred over the past decade.
In other words, customers had the benefits of those items without paying for them, but now they must pay more.
She also noted that a comparison of costs for 750 kilowatt-hours “omits a benefit that is reflected on most actual customers’ bills.” She is referring to a discount of sorts that Columbus Southern offers for the use of more than 800 kilowatt-hours.
From October to May, the use of additional electricity is charged at a lower rate. Because of that, Columbus Southern would not have the highest bill if the survey looked at the cost of 1,500 kilowatt-hours, for example.
Customers in AEP territory might be able to reduce their costs by signing up to get their electricity-generation service from an unregulated supplier.
About 10 suppliers are active in the region, offering plans that would reduce the bills of most households by $10 to $20.
Everybody pays
Most of the recent rate increases, though, are in the parts of the AEP bill that everybody pays. That includes delivery service and a series of special fees that together amount to nearly half the bill.
The monthly survey shows the regulated price of utilities in 16 cities, covering areas served by four investor-owned electric companies: AEP, FirstEnergy Corp., DP&L and Duke. It does not include prices for municipal or cooperative utilities, which are not regulated by the PUCO.
In January 2004, AEP charged $65.22 in central Ohio for 750 kilowatt-hours. The only places with lower rates were predominantly rural areas. For example, in Marietta, then served by Monongahela Power, the bill was $49.83.
Back then, the highest bills were across the northern part of the state at FirstEnergy’s three operating companies, topped by Ohio Edison at $85.48.
FirstEnergy in middle
Today, Akron-based FirstEnergy’s prices are in the middle, and Duke’s are the lowest. The two companies use auctions to set prices for standard-service customers, which means their prices are closely tied to the market price of electricity.
“That low market price should translate into low electric rates for Ohioans today,” said Amy Kurt, spokeswoman for the Office of the Ohio Consumers’ Counsel, the state’s consumer advocate on utility issues.
“Unfortunately, AEP is charging more for its electricity than a market price, and that is costing customers money.”
AEP is gradually changing to an auction-based system, but customers won’t see the shift for a few more years.
Until then, its price is based on regulators’ estimates of the cost to provide the service.
“It’s not that AEP’s prices are high; it’s that the market rates are low right now,” said Sherri Loscko, co-owner of Commercial Rate Services of Dublin, a company that helps businesses manage their energy costs.
Rate increases
When AEP households were charged low prices compared with their peers statewide, it was because the utility could produce power for less than the market rate.
That changed with a series of AEP rate increases that began in 2009; the utility said it needed the money for new equipment and to repay deferred costs.
The market price of power plummeted as AEP’s price was rising.
Because of that, competing suppliers can offer savings in AEP territory for the first time.
As of September, 42 percent of the utility’s customer base had signed up with a competitor; that percentage is based on volume of power, not customer count.
The current prices, and AEP’s status as having the highest price, are a mere snapshot, Loscko said.
Everything could change, depending on the market, regulatory actions, court cases and many other factors.
“This is all temporary,” she said.