Eureka Springs, Arkansas – Martha Peine, a local electric customer and non-practicing attorney, went to the Federal Energy Regulatory Commission to challenge the transmission rates of a large, regional electric supplier. After lengthy negotiations and two trips to Washington, D.C., by Ms. Peine, regional electric customers can now expect a $4.2M refund.
In 2013, Ms. Peine decided to learn how Southwestern Electric Power Company (SWEPCO) makes money from its transmission business. Using the transparent, but complicated, processes in place to review transmission rates, Ms. Peine set to work.
After examining the expenses SWEPCO recovered in its 2013 and 2014 FERC-filed formula rate updates, Ms. Peine filed a legal challenge to SWEPCO’s recovery of certain expenses, including what she claimed were improperly recovered charitable and lobbying items. Last August, the Commission determined her challenges raised material issues and set the complaint for hearing.
As Ms. Peine and the other parties prepared for a hearing before a FERC Administrative Law Judge, discussions about settling the case were also taking place. These negotiations among Ms. Peine, SWEPCO, and FERC lawyers eventually proved successful.
On Monday, June 13, 2016, without the necessity of a hearing, Ms. Peine and American Electric Power Service Corporation (AEP), on behalf of its subsidiaries SWEPCO and the Public Service Company of Oklahoma, filed a settlement agreement with the Commission that includes a $4.2 million refund to ratepayers in the region. The agreement also limits the amount of litigation expenses related to Ms. Peine’s challenges, and clarifies that certain expenses, including charitable and lobbying related expenses, cannot be charged to ratepayers by SWEPCO in the future.
“While the end result in my case is a win for ratepayers, I will always wonder what mistakes there may be in the years to come,” said Ms. Peine. “The review process is complicated and time consuming. There is no person, entity, or agency that meaningfully reviews the rate updates on a regular basis, so there is always the potential for significant overcharges.”
”On behalf of Save the Ozarks, we congratulate Martha for her accomplishment,” said Pat Costner, STO Director. “Every SWEPCO electric customer owes a debt of gratitude to this remarkable woman, who has shown us that one person can make a big difference.”
The refund will show up as a one-time credit on ratepayers’ electric bills within 90 days of the Commission’s approval of the settlement, which should be a routine matter. A copy of the settlement can be downloaded from the Commission’s website here.
Background: The transmission of electricity in interstate commerce is nationally regulated by the Federal Energy Regulatory Commission. FERC allows regulated transmission companies to utilize what are known as “Formula Rates” to recover their cost of service from electric consumers. A Formula Rate is a mathematical formula for calculating a rate from yearly expense totals. While the formula stays the same year after year, the rate changes depending on how much a company spends. Not all company expenses are recoverable from ratepayers. FERC regulations and legal precedent prohibit the recovery of charitable contributions, as well as the cost of lobbying to influence the decisions of public officials. Formula Rate updates are informational filings. FERC does not review them for accuracy, but relies on those who pay the rates to raise the red flag if it is not calculated correctly.
In 2013, Ms. Peine decided to learn how Southwestern Electric Power Company (SWEPCO) makes money from its transmission business. Using the transparent, but complicated, processes in place to review transmission rates, Ms. Peine set to work.
After examining the expenses SWEPCO recovered in its 2013 and 2014 FERC-filed formula rate updates, Ms. Peine filed a legal challenge to SWEPCO’s recovery of certain expenses, including what she claimed were improperly recovered charitable and lobbying items. Last August, the Commission determined her challenges raised material issues and set the complaint for hearing.
As Ms. Peine and the other parties prepared for a hearing before a FERC Administrative Law Judge, discussions about settling the case were also taking place. These negotiations among Ms. Peine, SWEPCO, and FERC lawyers eventually proved successful.
On Monday, June 13, 2016, without the necessity of a hearing, Ms. Peine and American Electric Power Service Corporation (AEP), on behalf of its subsidiaries SWEPCO and the Public Service Company of Oklahoma, filed a settlement agreement with the Commission that includes a $4.2 million refund to ratepayers in the region. The agreement also limits the amount of litigation expenses related to Ms. Peine’s challenges, and clarifies that certain expenses, including charitable and lobbying related expenses, cannot be charged to ratepayers by SWEPCO in the future.
“While the end result in my case is a win for ratepayers, I will always wonder what mistakes there may be in the years to come,” said Ms. Peine. “The review process is complicated and time consuming. There is no person, entity, or agency that meaningfully reviews the rate updates on a regular basis, so there is always the potential for significant overcharges.”
”On behalf of Save the Ozarks, we congratulate Martha for her accomplishment,” said Pat Costner, STO Director. “Every SWEPCO electric customer owes a debt of gratitude to this remarkable woman, who has shown us that one person can make a big difference.”
The refund will show up as a one-time credit on ratepayers’ electric bills within 90 days of the Commission’s approval of the settlement, which should be a routine matter. A copy of the settlement can be downloaded from the Commission’s website here.
Background: The transmission of electricity in interstate commerce is nationally regulated by the Federal Energy Regulatory Commission. FERC allows regulated transmission companies to utilize what are known as “Formula Rates” to recover their cost of service from electric consumers. A Formula Rate is a mathematical formula for calculating a rate from yearly expense totals. While the formula stays the same year after year, the rate changes depending on how much a company spends. Not all company expenses are recoverable from ratepayers. FERC regulations and legal precedent prohibit the recovery of charitable contributions, as well as the cost of lobbying to influence the decisions of public officials. Formula Rate updates are informational filings. FERC does not review them for accuracy, but relies on those who pay the rates to raise the red flag if it is not calculated correctly.
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