By John Byczkowski
The Cincinnati Enquirer

SETTLEMENT

• Read the settlement (PDF file)

Electric rates for Southwest Ohio customers would rise for the first time in 12 years if a deal announced Thursday among Cincinnati Gas & Electric, the Public Utilities Commission of Ohio's staff and groups representing consumers and industry is approved.

CG&E's 640,000 residential customers in Southwest Ohio would see an increase in their power generation bills of about 13 percent in 2006, if the five-member commission approves the plan. For an average home customer, who uses 1,000-kilowatt hours of electricity per month, monthly bills would rise by more than $10.

That's just the start of a string of potential rate hikes over the next few years, for a company that hasn't won a rate increase since 1994.

Under the settlement, rates for power generation could rise up to 7 percent in 2007 and 8 percent in 2008. Power generation charges make up roughly 60 percent of a residential customer's electric bill.

In addition, CG&E is likely to propose increases in transmission and distribution charges - the cost of sending electricity from the generating stations to homes - beginning in 2006.

Rates will also rise for nonresidential customers such as businesses and hospitals: 6 percent in 2005, with increases between 6 percent and 8 percent in 2006 through 2008. Any distribution rate increases approved by the commission would also be tacked on.

"This plan accomplishes the PUCO's goal of providing rate certainty to customers during a period of unprecedented volatility in the energy markets," said CG&E president Greg Ficke.

The Ohio Consumers' Counsel, however, which represents the state's residents in utility rate cases, will oppose the settlement. Counsel Janine Migden-Ostrander said implementing rate deregulation as planned would save consumers money.

"It violates the law, and it's going to cost consumers a lot more money," she said. "The only beneficiary is CG&E, at the expense of consumers." She said the settlement would add a total of $527 to the average consumer's bill through 2008.

The commission's staff is recommending approval of the settlement. Eleven other groups signed the agreement, including Kroger Co., AK Steel and the Ohio Hospital Association, as well as consumer groups such as People Working Cooperatively and Citizens United For Action.

Jock Pitts, president of People Working Cooperatively, which performs maintenance work on houses for low-income families in Cincinnati, called the agreement "a fair negotiated settlement." He said CG&E hasn't had a rate increase in 10 years, and the utility would be hurt if that continued. "It doesn't help anyone for our electric utility to go out of business," he said. The settlement improves funding of energy conservation work performed by PWC, he said.

Testimony on the settlement before the commission began Thursday and will likely continue through next week. The five-member commission will vote on the deal sometime this summer.

Commission chairman Alan Schriber of Cincinnati, calling from a conference in Florida, hasn't seen the settlement, but said approval isn't certain. The commission could approve or reject the plan, or suggest modifications, and those changes might cause the compromise to die.

Ohio is struggling with deregulating its electric utilities - a shift that was designed to foster competition, thus improving service and keeping costs down.

Electric utilities were to be fully deregulated in 2006, but competition has yet to take hold. Only 5 percent of residential customers in CG&E's territory have picked another supplier, for example. That's left regulators in a quandary on how to let utilities recover higher costs - but not expose residents to higher rates without having alternative suppliers.

The commission asked the state's four major electrical utilities for "rate stabilization plans," which would keep electric rates and supply on a predictable path at least through 2008.

Dayton Power & Light's plan was approved last year by the commission, with modifications. In addition to CG&E, First Energy in Akron and American Electric Power in Columbus have submitted plans that await approval.

Migden-Ostrander, the consumers' counsel, said rate stabilization plans are illegal because the deregulation law made no provision for them. "We think the better solution is for (CG&E) to follow the law and file a competitive bid. We think a competitive bid would result in a lower rate for customers," she said.

CG&E on May 7 filed a plan to raise distribution charges by 6.5 percent beginning in 2005, or about $5 a month for average customers. The utility will withdraw that request as part of the settlement, but can resubmit it next year, for implementation in 2006.

The rate increases wouldn't affect Cinergy customers in Northern Kentucky or Southeastern Indiana.

E-mail johnb@enquirer.com