AEP Ohio’s proposal to increase fixed charges would hurt low-income customers, the same people this powerful electric utility pretends to represent when it attacks clean energy policies, and fits into the company’s long record of poor treatment of its most vulnerable customers. 

AEP wants the Public Utility Commission of Ohio (PUCO) to approve its request to hike the monthly fixed charges on its customers electricity bills from the current $8.40 to $18.40 by the end of next year – a 120 percent increase.

Higher fixed charges can especially hurt low-income customers, according to the Consumers Union, National Association of State Utility Consumer Advocates, and National Consumer Law Center. How? These regressive charges remain the same whether they are paid by low income customers who use relatively little electricity or wealthier customers who use a lot of electricity. 

“Increasing the monthly customer charge is unfair and disproportionately burdens those who are living on low or fixed incomes and struggling to pay for food, rent, medicine and utility bills,” according to AARP.

“We need to stand united against these mandatory fees because they are a part of an insidious trend in shifting the economic and health burden of the fossil fuel economy onto vulnerable populations,” according to the National Association for the Advancement of Colored People (NAACP).

Fixed charges can limit customers’ choices by making it harder to save money on their electricity bill using energy efficiency or rooftop solar, which is another reason why they are opposed by clean energy and environmental advocates like the National Resources Defense Council (NRDC) and Vote Solar.  

AEP has tried this trick before

Other AEP subsidiaries have sought to hike fixed charges in other states with mixed success, according to a 2016 report by Consumers Union and a more recent analysis by Resource Media.

AEP SUBSIDIARY EXISTING MONTHLY FIXED CHARGES REQUESTED MONTHLY FIXED CHARGES APPROVED MONTHLY FIXED CHARGES YEAR
AEP OHIO $8.40 $18.40 TBD 2017
INDIANA MICHIGAN POWER (MI) $7.25 $9.10 $7.25 2015
KENTUCKY POWER $8.00 $16.00 $11.00 2015
PUBLIC SERVICE COMPANY OF OKLAHOMA $16.20 $20.00 $20.00 2015
APPALACHIAN POWER/ WHEELING POWER COMPANY (WV) $5 $10 $8 2015
APPALACHIAN POWER (VA) $8.35 $16 $8.35 2014

AEP is not alone in its effort. The Edison Electric Institute has been pushing various fixed charges schemes for years as part of its campaign to disincentivize rooftop solar for electric utility customers.  

Nationally, electric utility proposals to increase fixed charges totaled 33 in 2016 and 34 in 2015, according to NRDC. The vast majority of these proposals have been rejected or scaled back by the regulators who oversee utility rates.

Regulators have generally held fixed charges down around the $10 per month mark, which makes AEP Ohio’s proposal to hike fixed charges to $18 stand out as unusually high. The same is true of the $20 month that customers of AEP subsidiary Public Service Company of Oklahoma now pay in fixed charges.

AEP wants electric utility customers in Ohio to bail out dirty old coal-fired power plants  

AEP has long sought to brand reliance on coal as beneficial to low-income and minority communities. Back in the 1970’s, AEP ads that appeared in Ebony magazine called on readers to back its call for the nation to use more coal, and warned that “the American standard of living” was at stake. A 1976 AEP ad published in the New York Times claimed that, “The problems generally associated with the mining and burning of coal have been solved.”

Today, we know that pollution from coal-fired power plants is real and disproportionately impacts low-income communities and communities of color. But a bill being pushed in Ohio by AEP, Dayton Power & Light, Duke Energy, and FirstEnergy would put customers on the hook for a $256 million per year bailout of two old, uncompetitive, and polluting coal-fired power plants.

Clifty Creek (which is actually located in Indiana) is one of the coal-fired power plants AEP wants Ohioans to bail out. The plant flunked the NAACP’s test for environmental justice performance. The other, the Kyger Creek power plant in Ohio, also emits thousands of tons of air pollution per year. The area within a 3-mile radius of Clifty Creek has an average annual per capita income of $17,546. The community living within 3 miles of Kryger Creek has an average annual per capita income of $18,009.

AEP has tried a similar bailout plan before in Ohio. In 2016, the Public Utility Commission of Ohio approved a settlement that would have allowed AEP to charge customers to bail out a number of coal units. The Office of the Ohio Consumers Counsel (OCC) warned at the time that this earlier bailout proposal could cost AEP customers $2 billion.

“The settlement is contrary to market pricing of power because it would use government regulation to make consumers guarantee profits on these coal plants,” the Ohio Consumers Counsel said.

Two of the coal-fired power plants which AEP sought bailouts for in 2016 also received low grades for environmental justice performance from the NAACP. The Cardinal power plant received a D+ and the J.M. Stuart power plant a D-. The average annual per capita income in the area of these two power plants was $16,512 and $13,094, respectively.

The Federal Energy Regulatory Commission ultimately rescinded AEP’s 2016 coal bailout plan, and framed the issue as one of potential “affiliate abuse,” whereby AEP sought to charge “captive” customers to ensure its profits and benefit company shareholders.

AEP funds opponents of higher minimum wages

While many businesses have been advocating for raising the minimum wage to $12.00 per hour and as high as $15, AEP has been silent on the issue, even though raising the minimum wage could benefit some of the utility’s low-income customers. The Department of Labor has long noted that minimum wage increases can help make utility bills more affordable for low-income households, and even enable them to save money through energy efficiency. A 2014 study by the Urban Institute concluded that a plan to raise the District of Columbia’s minimum wage to $11.50 per hour in 2016 could reduce Low Income Housing Energy Assistance Program caseloads and benefits by 3.4% and save $710,000. “LIHEAP is a federal block grant; program savings here could be used to extend additional assistance to families that remain eligible,” according to the report.

Actions speak louder than silence, and AEP’s actions include funding industry groups that oppose raising the minimum wage. For example, AEP contributed over $1 million to the U.S. Chamber of Commerce just for lobbying from 2012 to 2015, and another $650,000 in 2016 alone. The U.S. Chamber’s 2016 list of policy priorities included plans to, “Oppose efforts to increase the minimum wage and to index the minimum wage to inflation or any other factor that would automatically increase labor costs.”

AEP is also active in state chambers of commerce that oppose raising the minimum wage. Joan Sloat, the president and CEO of AEP Ohio, has a seat on the Ohio Chamber’s board of directors. As a Chamber Champion, AEP is a leader in the Ohio Chamber’s efforts to fight “whatever issues anti-business interest groups propose.” In 2016, emails obtained by The New York Times exposed the Ohio Chamber’s efforts to coordinate with Secretary of State Jon Husted on opposition to a proposal to put a $12 per hour minimum wage on the ballot in the Buckeye State. Ohio Chamber officials have also spoken out against allowing cities to raise their own minimum wages.

AEP cut its spending on a low-income home weatherization program during a two-year freeze on Ohio’s clean energy standards

In 2014, AEP supported a two-year freeze on Ohio’s renewable energy and energy efficiency standards. With the freeze in place, AEP cut its spending on the Home Weatherization Assistance Program in half, according to a report by Policy Matters Ohio.

According to the report, the Home Weatherization Assistance Program is “a program designed to permanently lower utility bills through air sealing, insulation, furnace and appliance replacement and repair, and other related measures — helps end this cycle of energy poverty for low-income households.”

AEP’s spending on the programs fell from just over $12 million in 2014 to just $6.7 million per year for 2015 and 2016.

AEP has used low income customers as cover for its attacks on net metering incentives for rooftop solar

AEP frames its current attacks on net metering for rooftop solar an effort to protect low income customers. According to a company website:

Due to the original incentives established under NEM, certain DG customers aren’t fully paying for the services they receive from the grid. Thus, these costs are shifted to the overall costs to serve all other non-DG customers including low-income and other vulnerable customers. This shifting is unfair and, ultimately, unsustainable to all consumers.

AEP has been on the offensive against net metering policies that helped to power the dramatic growth of rooftop solar in the U.S in recent years. A 2015 report by Environment America described AEP as “one of the most aggressive backers of anti-solar legislation,” pointing to AEP’s attacks on net metering in states like Ohio and West Virginia.

Who AEP really represents

AEP boasts a market value of over $30 billion and one of the electric utility industry’s highest paid chief executives. CEO Akins made $11.5 million in 2016.

Bob Powers, AEP’s executive vice president, has been frank about the fact that his company’s approach to management involves, “Balancing investments with customers’ ability to pay and investors’ demand for annual earnings growth.”

The company’s track record, from environmental injustice, to its trade associations’ agendas, to its latest push for fixed charges – show that  its claim to represent the interests of low-income customers just doesn’t hold water.

*An earlier edition of this article mistakenly included a fixed charge increase request from the Southwestern Public Service Co., a subsidiary of Xcel Energy, among the table of AEP subsidiaries’ fixed charge increase requests. It has been removed. 

Posted by Dave Anderson

Dave Anderson is the policy and communications manager for the Energy and Policy Institute.

Dave has been working at the nexus of clean energy and public policy since 2008. Prior to joining the Energy and Policy Institute, he was an outreach coordinator for the climate and energy program at the Union of Concerned Scientists. He is also an alumnus of the Sierra Club and the Alliance for Climate Protection (now the Climate Reality Project).

Dave’s research has helped to spur public scrutiny of political attacks on clean energy and climate science by powerful special interests, such as ExxonMobil and the American Legislative Exchange Council (ALEC). His work has been cited by major media outlets, such as CBS News and the Wall Street Journal, and he has served as a speaker on panels at national solar industry conferences.

Dave holds a MA in Political Science from the University of New Hampshire, where he also received a BA in Humanities.

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