The Dayton Power and Light Co. is asking state regulators to approve an additional charge on customers to help it transition to a competitive market for electricity — a charge the utility said some will recoup in savings.
Approving the request likely won’t come until early next year, but the utility is running into some headwinds from industry, the Ohio Consumers’ Counsel and others.
DP&L, which serves more than 500,000 customers in 24 counties throughout the Miami Valley, said it’s asking for a “service stability rider” that would lower bills for larger users like businesses and industries, but amount to a monthly $5 charge for typical households.
The charge is intended to cover the company’s transition period to adjust to a statewide competitive market by 2017 for electric providers, DP&L said. But those customers who remain with the utility as their energy provider should realize enough savings to cancel out the charge, the utility added.
Today, with market-based service, customers are free to choose among utilities providing electricity. Ratepayers will continue to pay a portion of their bills to use the delivery system provided by DP&L.
The company said in filings with the Public Utility Commission of Ohio that the charge would “ensure the company’s financial integrity.” It would generate $600 million over five years, or $120 million annually.
It’s unavoidable by customers, regardless of whether they’ve signed up with a competing electricity provider. If approved, it would be effective through December 2017.
Even with the charge, DP&L said, other parts of the rates would decrease. For example, residential customers using more than a household average would see a decrease, said DP&L spokeswoman Lesley Sprigg. Commercial and industrial customers who remain with DP&L as their electricity supplier should see a decrease of 2 percent to 6 percent, Sprigg said.
A similar request was approved by PUCO in August for AEP that the utility called a “retail stability rider,” but the Ohio Consumers’ Counsel has filed a challenge and the approval could go through another hearing. Duke Energy has also filed for a similar charge.
FirstEnergy Corp., parent company of Ohio Edison which serves Springfield, has not filed for such a charge yet. All except AEP are pending.
Hearings on the utility requests are scheduled for later this year, and PUCO could rule on them in the coming months. The utility could also arrive at some agreement with interested parties outside of PUCO’s formal procedures.
“My hope is that in the early part of next year, something gets done,” said Phil Herrington, chief executive of DP&L parent DPL Inc.
Opposing the request is Bruce Weston, Ohio Consumers’ Counsel.
“Ohioans should be benefiting right now from low prices in the electricity market,” Weston said. “This is not good news for customers.”
Counsel spokeswoman Amy Kurt said that the office doesn’t consider the charge reasonable, saying it allows utilities to insulate themselves from competition. “We should not subsidize a company that is in competition,” she said.
Kevin Murray, executive director of the Industrial Energy Users-Ohio, also opposes the charge, saying Ohioans should be benefiting from low energy prices, not being charged to help utilities bottom-lines. New discoveries of natural gas have helped push prices to 10-year lows, he said.
On Nov. 1, DPL’s parent company and acquirer AES Corp. said in a filing with the Securities and Exchange Commission that it would take a write-off on the value of its DPL assets in the range of $1.7 to $2 billion.
“Basically the charge is an accounting recognition of the challenges our company faces, it will have no impact on the way we run our business,” AES said.
The three specific challenges the company said it faces are: the declining market price for energy, a significant increase in customers switching to alternative providers, and the uncertainty of the outcome of regulatory proceeding with the PUCO.
Hans Sprohge, a professor of accountancy at Wright State University, said the filing indicates AES believes it will not be able to recover through operations the cost of some of DPL assets up to $2 billion.
The filing will not have any impact on customers, rates or the service provided by any of DPL’s subsidiaries: Dayton Power and Light, DPL Energy Resources, DP&L Energy or MC Squared Energy Services, AES said. The write-off doesn’t imply that DP&L is in any trouble at all, Herrington said.
“We are definitely growing our retail business and are interested in growing our customers,” he said.
According to the latest data, 18 percent of residential, 73 percent of commercial and 94 percent of industrial customers of DP&L have switched to other electricity providers, according to PUCO records. Some have switched to DPL Energy Resources, the unregulated generation provider of DPL. MC2, an Illinois retail electric supply service and subsidiary of DPL Resources, now has 150,000 customers.
Under other aspects of DPL’s proposed Electricity Security Plan filed with PUCO, it will transition to competitive market-based auctions to meet the electric needs of customers by 100 percent by June 2016.