PUCO Rules AEP Subsidiary's Earnings Excessive; Orders Refunds

By Business First of Columbus

The average American Electric Power Company Inc. customer in central and southern Ohio will pay about $15 less this year as the utility kicks back $26.6 million of what state regulators called excessive profit earned in 2009.

The refund will apply to Columbus Southern Power Co. customer bills from February through December after the Public Utilities Commission of Ohio on Tuesday determined the AEP (NYSE:AEP) subsidiaryâ¿¿s 2009 profit of nearly $272 million was excessive to the tune of $42.6 million. A $16 million chunk of that will be settled with customers by Columbus Southern Power not recovering costs deferred to customer bills this year.

The remaining $26.6 million divvied up will mean $14.76 to the average customer this year, or $1.34 a month, the PUCO said.

As debate over the utilityâ¿¿s bottom line raged, parent AEP Ohio offered to settle the issue by forfeiting a previously approved rate increase up to 6 percent in 2011 for customers of Columbus Southern Power. AEP Ohio would have foregone up to an estimated $114 million in revenue this year under the freeze. The utility last month withdrew that settlement offer, citing delays with the PUCO.

PUCO officials determined the amount Columbus Southern Power overstepped in earnings by comparing its rate of return to similar companies. The $42.6 million figure is still far smaller than the $150 million the Office of the Ohio Consumersâ¿¿ Counsel said should be returned to customers.

AEP Ohioâ¿¿s other subsidiary in the Buckeye State, Ohio Power, also was subjected to a significantly excessive earnings test but passed regulatory muster.

The excessive earnings test is required of utilities following the 2008 passage of a comprehensive energy bill under former Gov. Ted Strickland. PUCO Chairman Steven Lesser in a statement said the commission⿿s AEP ruling ⿿reasonably balanced the complex economic and financial factors required by the significantly excessive earnings test.⿝

Copyright 2011 American City Business Journals

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