By Business First of Columbus

American Electric Power Company Inc.â¿¿s new electricity rate proposal features several twists and turns, including higher bills for some AEP Ohio customers, lower ones for others, and discounts for businesses looking to hedge their bets on future increases.

The Columbus-based utility filed the plan Thursday afternoon with the Public Utility Commission of Ohio, which will make the call later this year on AEPâ¿¿s proposed generation rates for next year through May 31, 2014. The generation charge, which covers the cost to produce electricity, accounts for 60 percent to 70 percent of a customerâ¿¿s bill, AEP said. The rest is split about equally between electricity transmission and distribution charges.

AEP (NYSE:AEP) is proposing its generation charge increase by an average of 1.5 percent next year, 2.7 percent in 2013 and stay flat for the first five months of 2014. That would boost the average monthly bill of a residential customer in Central Ohio by $1.83 in 2012, the company said.

The increases are well below the 15 percent annual hikes that AEP sought in July 2008, the last time it submitted a rate plan to the PUCO. The commission eventually approved increases that were roughly half of what AEP had requested, including hikes that were capped at 7 percent for 2009, 6 percent last year and 6 percent for 2011 for AEP Ohioâ¿¿s Columbus Southern Power Co. subsidiary that serves Central and southern Ohio.

The PUCO determined in January that those rates contributed to an excessive profit for Columbus Southern in 2009. The commission ordered the company to refund $26.6 million to its customers.

AEP also is seeking approval to redesign its generation rate structure so itâ¿¿s more line with prices in todayâ¿¿s market, said AEP Ohio President Joe Hamrock. The companyâ¿¿s current rates are still based on some costs from the early 1990s, he said. If approved by the PUCO, the redesign could result in generation rates lowered by as much as 20 percent over the planâ¿¿s 29 months for some commercial customers and schools that have historically subsidized below-market rates for residential and certain industrial customers, Hamrock said. On the other hand, some industrial customers could see their generation rates climb as much as 10 percent through May 2014, Hamrock said.

⿿The redesign reflects the realities of the current (electricity) market we⿿re in,⿝ he said.

That includes Ohioâ¿¿s Customer Choice program in which AEP is facing increased competition for customers from retail electric service providers.

Hamrock said AEP also plans to file a request with the PUCO in February to increase its distribution charge ⿿ the cost to deliver power to customers ⿿ for the first time in 20 years. The amount of the increase has not been finalized, but Hamrock said it will be ⿿in the low single digits.⿝

Hamrock said AEP Ohioâ¿¿s rate plan includes several features aimed at improving Ohioâ¿¿s economic development climate. They include a new option that would help manufacturers and other large power users plan for their electricity costs beyond the typical three-year window of rate plans. The option would allow industrial and some commercial customers to sign up for generation service for the 29 months in AEPâ¿¿s proposed rate plan, plus an additional three years. Customers would receive a 15 discount off their base generation rate for that 5 1/2-year period, with the rate to increase 5 percent each June 1 starting in 2014.

Other features in the rate plan include:

â¿¢ Reimbursements of up to $2,500 for residential customers who install charging stations for plug-in electric vehicles.

â¿¢ A new option that will allow customers to purchase 25 percent to 100 percent of their power from renewable energy sources such as solar and wind.

â¿¢ $25 million from company shareholders to the AEP Ohio Growth Fund, which supports short-term electric rate incentives for startup and expanding companies, infrastructure investments by businesses and local, regional and state economic development efforts.

â¿¢ $15 million from AEP shareholders for the Partnership with Ohio program. It provides payment assistance to low-income customers and funding to food banks, United Way programs, education and job retraining.

Copyright 2011 American City Business Journals

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