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Columbus Dispatch...
New AEP rates stun small businesses

01/27/12 

The PUCO has fielded about 25 complaints about rates from small businesses this week. 

Some small-business owners are furious about a sudden rise in electricity costs, the result of a new American Electric Power rate plan that took effect this month. 

With immediate increases of up to 40 percent, business owners said they are faced with cutting workers, reducing investment and making other changes as they struggle to deal with an increased expense that many of them did not see coming. 

“Honestly, am I going to put my next machine here or in my plant in Tennessee?” asked Patrick Castro Jr., vice president of Electro General Plastics in Grove City, whose electricity costs have risen 35 percent. 

“Tennessee is looking a little bit more business-friendly.” 

AEP says the new rates reflect the cost to provide service, and that what might seem like a big increase is because the previous rates were unusually low for certain types of customers. 

The Dispatch reported last month that the AEP plan would lead to large rate increases for small businesses, much larger than the average rates disclosed by the utility. The story cited internal emails from a Public Utilities Commission of Ohio staff member who raised concerns that the rates were unfair and would be harmful to many businesses.

At Plastic Packaging Technologies on the Northwest Side, executives are reconsidering plans to expand. The company is based in Kansas City, Kan., and could shift its resources elsewhere. 

“This is very dangerous and very damaging,” said David Potter, the vice president and general manager. “We’re in a very competitive market, and to slap us with a $28,000 (annual) increase is just outrageous and could definitely dampen expansion plans.” 

The PUCO has fielded about 25 complaints about rates from small businesses this week, said commission spokesman Matt Butler. 

“We certainly do understand the impact this has had on certain small-business customers,” he said 

Jeff Rennie, an AEP spokesman, said the new rates are the result of a compromise between AEP, the PUCO and many other companies and groups. The plan calls for AEP to change gradually to prices set by market forces. 

“In the past, those rates might have been subsidized by other rate classes, but now those rates will reflect the cost to provide service to that customer,” he said. 

The PUCO and several other groups crafted the rates in a way that provides a discount for large manufacturers, one that essentially is paid for by rate increases for others, including small businesses. Supporters of the plan say it helps the economy by reducing costs for the largest employers. 

The largest rate increases are hitting businesses in the “General Service 2” rate class, which represents about 15 percent of AEP’s customer base in Ohio. Within that rate group, the average increase is less than 10 percent in AEP’s Columbus Southern Power service territory and less than 20 percent in AEP’s Ohio Power territory, according to the PUCO. 

The end result: Electricity costs are rising for many small businesses but falling for many large ones. 

Debbie Taranto, owner of Taranto’s Pizzeria in Lewis Center, said this approach is unfair. She said she might have to raise prices or lay off workers. 

“While the small-business owner is struggling to hold their head above the quicksand of the national recession that torpedoed us, our fine state has allowed this increase, thus showing how ‘ pro-business’ they are and working to help the middle class,” she said in an email. 

But some customers are seeing even-larger increases. They are: 

• Companies that buy their electricity-generation service from a company other than AEP. The new rate plan increases AEP’s distribution charges, the part of the electricity bill that everybody pays, and decreases the generation charge for small businesses that get this service from AEP. This leads to a disproportionately large increase for many of the customers that have chosen an alternative provider...

Read the rest of this articles, and others at the Columbus Dispatch


 
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