AEP’s Ohio customers will be discouraged from shopping for electricity f a new proposal is approved by the Public Utility Commission of Ohio (PUCO).  American Electric Power (AEP) has proposed an Electric Security Plan (ESP) that would provide the default utility with a guaranteed stream of revenue from Jan. 1, 2012 through May 31, 2014, making it more difficult for alternative providers to compete.

Residential and industrial customers located in AEP-Ohio territory have been able to shop for electricity since 2001. Nearly 1.5 million Ohio customers across the state’s utility service territories are shopping for electric generation.

Several mandatory riders are a part of the plan, which means customers who select an alternative generation supplier will still have to pay AEP for services related to generation. Some of the riders are designed to recover costs that were deferred under AEP?s current rate plan. Fuel-related costs not collected in the first ESP are estimated to reach $135 million through 2018. Other provisions propose to collect revenue for alternative energy projects, carbon capture and sequestration, power plant closures, and job retention programs.

The plan also includes an alternative long-term pricing scheme for commercial and industrial customers. If companies commit to accepting generation from AEP Ohio for about five and half years, they will receive a 15 percent discount off base generation rates. While the plan?s long-term stability is attractive, it discourages future competition because alternative provider?s rates must reflect market trends to stay in business.

Apart from discouraging customer choice, AEP?s Electricity Security Plan would significantly increase customer costs. In phase one, AEP proposes total rate increases of 4.81 percent for Columbus Southern Power and 10.55 percent for Ohio Power. During phase two, all customers would see an additional 2.71 percent increase. The total increase in rates for Columbus Southern residential customers will be 11.3 percent and 14.9 percent for Ohio Power customers.

Five hearings have already taken place to give the public an opportunity to comment. Industry leaders and consumer advocates will submit testimony by the July 15, 2011 deadline. Following an evidentiary hearing on August 15, 2011, PUCO commissioners will consider all the evidence presented and issue an order later this year explaining the rates that AEP may charge.

AEP Ohio customers should also be aware that the utility is also asking for a distribution rate increase. The proposal would increase monthly residential charges for Columbus Southern from $4.52 to $8.40 and Ohio power customers from $3.82 to $8.40.

As it currently stands, AEP?s new proposal discourages competition, but the core of the problem goes beyond any particular provision to the use of Electricity Security Plans. These long-term plans cannot react to market conditions, meaning many customers have been paying too much for electricity in the past couple of years as wholesale electricity prices dropped. Instead of negotiating rates with the PUCO, default utilities should enact incentives to encourage more shopping so that customers can benefit from today?s low energy prices and tomorrow?s energy efficiencies.