Credit: Tom Small / Flickr / Creative Commons

This article is part of a joint investigative project by Eye on Ohio and the Energy News Network. Read the previous installment: How affiliate arrangements, subsidies and riders led to higher electric bills in Ohio — even as power prices declined.

With different utilities serving specific parts of the state, Ohioans’ electric bills and the tariffs that govern them vary. But they all have one thing in common: They’re hard for many people to understand. And the bills don’t clearly detail all charges to consumers.

Here’s a guide to what all the small print says — and what it doesn’t say — on a sample bill for a residential customer of FirstEnergy’s Illuminating Company. Bills from other utilities will vary. However, many of the concepts will be similar. Bills will also jump by a few dollars each month after utilities implement a new law, House Bill 6, meant to bail out two of FirstEnergy’s nuclear plants and two 1950s-era coal plants. It will also scale back the state’s energy efficiency and renewable energy standards.

Deciphering an electric bill

Rider Alphabet Soup

(based on a sample 2019 bill from FirstEnergy’s Illuminating Company)

CodeRider nameWhat it’s for
AMIAdvanced Metering InfrastructureFor smart grid metering, effective July 1, 2019.
DCRDelivery Capital Recovery RiderRecovers costs for investments in the distribution system.
DMRDistribution Modernization RiderThe Ohio Supreme Court held this rider was unlawful in June 2019, so an August 2019 order required FirstEnergy utilities to refund the unlawful no-strings-attached credit support rider for the month of July. However, earlier charges for the rider aren’t refundable.
DSEDemand Side Management and Energy Efficiency RiderUtility costs for energy efficiency and peak demand reduction programs. The charge does not reflect savings from those programs. The average has been about $5.61 per month, including about $2 monthly savings even if customers don’t take part in those programs. Going forward, HB 6 will cut these charges but guts the energy efficiency and renewable energy standards.
DUNDistribution Uncollectible RiderShifts costs for uncollectible charges so paying customers are effectively paying for others who don’t pay their bills.
PURPIPP Uncollectible RiderShifts costs of low-income customers who can only afford to pay a set percentage of their income.
SKTState kWh Tax RiderCustomers using 2,000 kWh or less per month pay about half a cent per kWh. Rates fall for entities using more electricity.
USFUniversal Service Fund RiderAdministrative costs for low-income programs and consumer education programs.
EDREconomic Development RiderEconomic incentives from the utility shift costs to other customers, including various industrial and commercial users.
NMBNon-Market-Based Services RiderGenerally covers costs from grid operator PJM for using the bulk transmission system and related services.
PIRPhase-In Recovery RiderDebt service for refinancing costs for fuel and purchased power, much of which was initially bought at least a decade ago.
RERResidential Electric Heating Recovery RiderShifts costs for FirstEnergy discounts to certain customers who have all-electric heating in their homes.
Stay tuned!House Bill 6 ridersStill to come are charges to cover subsidies for two FirstEnergy nuclear plants and for coal plants, and to reflect HB 6’s changes to the energy efficiency and clean energy standards.

Sources: PUCO and FirstEnergy

This guide to deciphering bill rider charges would apply to a sample 2019 residential bill for FirstEnergy’s Illuminating Company. The first eight items are included in the bill’s Distribution Related Component, according to FirstEnergy spokesperson Christopher Eck. The next four items fall within the Cost Recovery Charges, Eck said.

Other utilities’ electric bills may have the same or different riders and may group them under different parts of the bill. Even where charges have the same names, amounts may vary. For the sample used for the Illuminating Company, the Customer Charge was $4.00, but AEP Ohio customers paid $8.40

Some current costs also reach back to earlier generation activities. For example, FirstEnergy’s Rider PIR pays debt service on fuel and purchased power that apparently were first acquired more than a decade ago. AEP Ohio’s customers also pay a Phase-In Recovery Rider for “fuel that was consumed but not billed to customers from 2009 to 2011.” 

How cross-subsidies affect customer bills

Ohio’s law to deregulate sales of electricity generation passed in 1999, but it took roughly a decade before utilities actually spun off their power plants. Duke Energy sold almost all of its generation assets early on. AEP, FirstEnergy and Dayton Power & Light transferred their utilities’ former power plants to affiliates. 

By the time that finally happened, lawmakers passed Senate Bill 221. Among other things, that 2008 law allowed “electric security plans” with various bill riders. That increased opportunities for cross-subsidies, said energy analyst Noah Dormady at Ohio State University. He and his colleagues reported on their analysis of PUCO price data in the Energy Journal last year.

The point for policymakers isn’t to jump back to regulating retail electricity, Dormady and his colleagues wrote. Rather, they suggest, the study shows the impact of political and regulatory processes on what Ohioans pay for electricity.

A: Some cross-subsidies shifted industrial costs at the expense of consumers or commercial customers. Others let utilities eventually funnel funds from regulated utilities to unregulated affiliates.

B: Cross-subsidies on Ohio residential customers’ bills rose by more than 500% since SB 221, Dormady and colleagues found, to about 1.88 cents/kWh versus 0.31 cents/kWh before the law’s effective date.

C: “Some territories were harder hit than others,” Dormady noted. For example, cross-subsidies in AEP Ohio’s territory jumped from 0.15 cents/kWh before deregulation to as high as 4.4 cents/kWh after. For a household using 1,000 kWh per month, that would be nearly $45 per month in cross-subsidy charges for supposedly arms-length generation affiliates, Dormady said.

D: Because Duke “functionally divested” by selling almost all its generation for the Cincinnati metro area, it didn’t have “the same need to seek cost recovery to cross-subsidize the losses of a legacy coal fleet in an era of low gas price[s],” Dormady said. Customers saved money. 

Read more: Calculate your utility bill: How deregulation affects Ohio electricity charges

Keeping score

As of June 2019, consumers had paid more than $15 billion in utility subsidies since deregulation began, according to the Office of the Ohio Consumers’ Counsel.

Early payments reimbursed utility companies for the costs of separating generation from distribution. Utilities also got payments for “stranded” assets they might otherwise have had trouble selling. Duke managed to sell most of its Ohio generating plants by 2009, but other utilities or their affiliates continued to own all or part of various power plants.

Later payments were justified as ways to keep prices steady, so consumers wouldn’t see swings from the market. Utilities have continued to make those arguments as they sought yet more subsidies for noncompetitive coal and nuclear power plants.

Source: Office of the Ohio Consumers’ Counsel, 2019. (click to enlarge)

Kathi is the author of 25 books and more than 600 articles, and writes often on science and policy issues. In addition to her journalism career, Kathi is an alumna of Harvard Law School and has spent 15 years practicing law. She is a member of the Society of Environmental Journalists and the National Association of Science Writers. Kathi covers the state of Ohio.