PUCO STAFF LINE EXTENSION REPORT SUMMARY
The PUCO issued its staff report last week in the “Commission Ordered Investigation” of the electric utilities’ line extension policies. The purpose of the staff report is to recommend a solution to the ongoing battle between the electric companies and the development community regarding the cost to developers for extending electric lines to new properties.
The proposal, which is subject to approval by the PUCO Commissioners, provides payment options for three classes of residential projects (single-family, multi-family and scattered lot). It also addresses commercial/industrial projects.
Single Family Projects
The staff recommended that the PUCO recognize and honor OHBA’s agreement with AEP in its entirety.
As you will recall, the AEP agreement provides:
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Builders and Developers who submitted projects to AEP in calendar year 2000, which were ready for installation of electric infrastructure by 12-31-01 are charged for electric infrastructure under AEP's former application of its line extension policy;
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Projects tendered to AEP from 1-1-01 to 6-1-01 and ready for installation of electric infrastructure by 10-1-02 are priced under AEP's former application of its line extension policy;
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Builders and Developers who request electric infrastructure not covered by 1 or 2 above will pay a one-time, flat fee of $375 per single-family lot.
As for First Energy, the staff recommended that the PUCO recognize and honor the majority of its agreement with OHBA, including the following provisions:
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Residential builders and developers pay $300 per lot for single family developments;
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The $300 per unit would be reduced by $200 if a geothermal space heating application has been included in the construction of the project;
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The cost of fixed price services is reduced and the escalation of those costs is capped;
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Preference for front lot line construction with an exemption option for customers in the Toledo Edison Area;
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Developers who have paid for line extensions under the First Energy policy effective 1-1-01 shall be entitled to a credit for the difference between the amount that was already paid and the $300/lot agreement.
The only part of the First Energy agreement that was rejected by the staff was a provision that would have allowed First Energy to defer its costs for full recovery in its next rate case.
Although OHBA did not have an agreement with Mon Power in southeastern Ohio, the Commission Ordered Investigation did include that company. Accordingly, the staff suggested that customers in Mon Power’s service territory pay $350 per lot for single family line extensions.
In addition, the staff recommended that each of the utilities be permitted to charge their customers who request new line extensions an additional $8/month surcharge. The monthly surcharge would last until the end of each company’s distribution rate freeze period (12-31-05 for Mon Power; 12-31-07 for Ohio Power, Ohio Edison, CEI and Toledo Edison; and 12-31-08 for Columbus Southern Power). Should the customer prefer, it would be permitted to make a one-time payment (approximately $660 grossed up for taxes) rather than monthly payment. The staff suggested that it should be the responsibility of the “home developer” to inform the new homebuyer about these fees and their options for payment. Furthermore, the staff recommends that if a “home developer” fails to implement a suitable process for informing its customers, the “home developer” will be accountable for the full cost of future line extensions.
Multi-family development
For multi-family projects, the staff recommended that OHBA’s agreement with First Energy be accepted and applied to AEP and Mon Power territories as well. Under that plan, developers would pay $100 per unit. However, just as with single family, the staff recommended that the utilities be permitted to charge a monthly surcharge of $4 per meter per month until the end of the rate freeze period.
Scattered lot development
The staff recommended that individual home builders and owners that request line extensions for new houses on scattered lots in each of the utilities' service areas pay a minimum monthly distribution charge of 2% of the line extension costs for four years.
Commercial and Industrial Users
In making its recommendations for commercial and industrial energy users, the staff distinguished between companies using high-voltage and low-voltage electricity. The low-voltage consumers would pay 25% of line extension costs up front and the remaining 75% subject to a 2% per month carrying cost for four years. Staff said the utilities and high-voltage consumers should continue to follow policies adopted by utilities after the state's electric restructuring law, S.B. 3, took effect.
Conclusion
After reviewing this staff report, interested parties will be given the opportunity to file objections to the report. After all involved parties have weighed in, the PUCO Commissioners will make their final decision, which will likely come in April or May.
OHBA, working with its special counsel, will be considering an official reply. Please contact us ASAP with any concerns you may have. A copy of the staff report may be obtained at
http://dis.puc.state.oh.us/ under case number 01-2708-EL-COI.