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Ohio OKs SFV Design

The Ohio Public Utilities Commission has approved a settlement agreement that authorizes Vectren Energy Delivery of Ohio to increase its annual distribution rates by $22 million. The company initially sought an increase of $34 million. The stipulated ROR is 7.48%., which includes a rate of return on equity of 10.75%.

The Commission also approved a proposal by the utility to keep its current straight fixed variable (SFV) rate design, rejecting claims that the methodology works to the disadvantage of lower income customers. Opposing parties had argued that the strict SFV rate design—in which all distribution costs are included in a fixed charge as opposed to funneling some distribution costs through a volumetric component—skews the burden of rate increases toward low-use customers.

The commission noted that beginning with a 2007 rate case, it had found that the SFV method is the appropriate rate design for natural gas company distribution rates and recognized that SFV rate design provided a more equitable cost allocation among residential customers because the costs of providing distribution service are principally fixed and each residential customer should bear an equal proportion of the distribution costs. It said that parties challenging the SFV design had conflated low-usage customers with low-income customers.  Re Vectren Energy Delivery of Ohio, Inc., Case Nos. 18-298-GA-AIR et al., Aug. 28, 2019 (Ohio P.U.C.).

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