Duke Energy Bill Study: An Interview With Vince Welage

BY NICK ROGERS

CHARDON - Smart Meters are slowly taking hold of homes throughout the state. But as the digital trend trickles ever upwards so too are customers' energy bills, sometimes seemingly without cause. Local technology expert Vince Welage has been investigating the root causes for these anomalies sweeping the state and believes he may have the answer to explain the worrying trend. Welage has worked closely with organizations such as SW Ohio for Responsible Technology and agreed to answer questions pertaining to his research on the issue.

Hi, Vince. Thank you for agreeing to talk to The Ohio Roundtable.

My pleasure.

So, you and I got connected through activist and SW Ohio for Responsible Technology (SWORT) board member Monique Maisenhalter. The three of us share deep concern over HR 3557 and dozens of other wireless deregulation bills making their way through Congress. Your main endeavor in recent years has been a study/analysis of Duke Energy customers’ bills after the deployment of Smart meter infrastructure. Duke Energy is the primary utility in SW Ohio, correct?

Correct.

While investigating Duke customer charges in general, a key focus of yours has been the fees imposed upon those who refuse the new 2-way “AMI” Smart technology. But, before we dive into that, please give us a little more insight into your professional background and how it relates to this study.

Sure. My early work experience included database application software development in areas covering accounting, inventory control, energy, and healthcare. In a more recent position, I was both an occupational health administrator and medical IT analyst for 10+ years supporting manufacturing plant operations for a large consumer products company. I managed data access privileges to employee medical and disability records for all 32 manufacturing plant health care units in North America. I provided any required employee medical history and/or trend reporting for the plant managers and nurses.

For the Duke study, did you employ the help of an assistant(s), or have you shouldered the entire burden yourself?

It was a standalone operation from the start.

How many personal energy bills have been submitted to you for analysis and comparison?

I have utilized 600+ monthly statements from the years of 2018-2023, covering 15 zip codes in SW Ohio for homes between 1,275 and 3,500 square feet.

What were your initial findings?

My study found an average monthly kilowatt-hour (kWh) usage of 628 as the median value among the study panel members. The majority of panel study members who selected to opt-out of Smart meters at some point in time were given a digital opt-out meter while some others on the panel still retain the AMI Smart meter. The Energy Information Administration (EIA) – the statistical agency of the Department of Energy – found an overall United States kWh/monthly average of 895; 904 for Ohio, covering the 2022 reporting period.

628 in SW Ohio vs. 904 for the state? That’s a rather large discrepancy.

The EIA 2022 value for Ohio is in the normal range for a state with a history of moderate energy consumption, whereas states like Texas, Louisiana, etc. have a long history of much higher levels of energy consumption. The SW Ohio discrepancy is more about the fallacy that a Smart meter home installation is an automatic indicator of cost savings. For a homeowner to maintain a 12-month kWh average under the 750 kWh recognized energy efficiency standard, the consumer must maintain very conservative home cooling temperatures during the non-heat months (May-Sept) of the year as well as very low levels of electric kWh usage during the 2PM-8PM time period that tracks On Peak kWh hours Monday-Friday weekdays. It isn't fair for consumers who are maintaining these conservative operating controls during those periods to be charged the same distribution rates as customers tracking at much higher energy consumption levels.

What compelled you to embark on this study?

Ongoing complaints from SW Ohio Duke Energy consumers about overcharges on the monthly bills prompted the study which I began in 2021.

Please provide some additional detail of how the study has been constructed and organized.

The study is, as I mentioned, a panel study, which consists of a group of residential customers (primarily SWORT members) who provided at least one year’s bill – some two years – covering 2018-2023. Each panel member is assigned an anonymous account number. Any billing information submitted is kept in strict confidence. To enter a customer account into the study, I just needed a copy of the latest bill to determine if the actual usage fits within the study qualifiers for gas and electric consumption. Data collection for the study is ongoing in order to track the most recent Duke Energy customer rate increase. The December 2022 rate increase both amended and continued several existing delivery riders (tariffs) as well.

What is a typical monthly bill from the panel you have studied?

Among the billing statements submitted by panel members, results have shown a dramatic 54% of customers with fees greater than $90 and 84% greater than $75. For those customers who selected to Smart meter opt-out, the total customer fees are well over $100 per month which has been the case for the past 3+ years as part of Public Utilities Commission of Ohio (PUCO) approvals on rate increases since 2018. Also, according to study results, the persistent high overcharges result in homeowners paying more in fixed fees versus actual energy usage charges in many months of the year.

As author of the study, what was your primary goal?

My primary goal was to first determine the cost drivers for the hidden charges (gas and electric delivery riders) on the Duke Energy monthly bill. These values are actually group charges that are comprised of the individual billing tariffs defined as rate codes. A secondary goal was to determine the energy usage median value by using the 12-month kWh average provided in the snapshot section of the monthly bill as a key indicator for actual energy efficiency in the home and not the narrative promoted by PUCO and the legislators. The 12-month average value can help determine how practical it is for that homeowner to lower his or her monthly energy consumption.

Is there a monthly kWh usage “cutoff” that PUCO deems “energy efficient”?

Utility commissions across the country recognize 750 kWh as the standard 12-month average for energy efficiency. However, most legislative proposals will only equate income (federal poverty guidelines) with energy efficiency rather than a 750 kWh standard.

One would think there would be a clear agreement between PUCO and legislators on this issue. Why do you think that discrepancy exists?

Based on my study findings, I believe this omission is by design to avoid any discussions about possible consumer discounts. The energy usage/low-income connection that is part of the service rule that allows a distribution rate reduction for a rate category such as RSLI (Residential Service-Low Income) is an important concession by the utility companies that low energy usage means that less distribution resources are needed for that group of consumers. The same energy usage connection persists using the 12-month average 750 standard. This disparity in the rate categories requires some much-needed legislative oversight of PUCO rate approvals that are causing the current unbalanced amounts as overcharges on many customer accounts.

Smart meters haven’t made this “unbalanced amounts” situation any better, have they?

Smart meters provide no cost saving benefits to consumers with monthly average usage levels well below that 750 standard in terms of energy efficiency.

Do all Ohio utilities use the same billing blueprint?

The actual electric tariffs approved by PUCO can vary among the different Ohio utilities, but the concepts are similar. In many cases, the tariffs are identical in name and scope; especially those specific to Smart meters. For example, certain electric delivery riders include their own kWh usage calculation methodology connected to Smart Meter distribution.

Please explain what new rider tariffs came about post-Smart meter rollout.

For all the utility companies, there are at least two riders specific to Smart Meters: Distribution Capital Investment Rider (DCI) – defined as “Costs of AMI replacement project” (smart meter costs only) and Power Futures Initiative Rider (PF) – defined as Costs of AMI replacement project communication infrastructure supporting costs. Those customers who have chosen to Smart meter opt-out still absorb these extra costs. The delivery riders are derived from customer usage-based distribution charges.

To the best of my knowledge, all Ohio utilities – such as my provider, FirstEnergy – currently offer customers the “choice” of opting out of Smart meter installation, or for their current Smart meters to be replaced with the former analogue meters (if available) but, as you’ve described, there’s a sizable catch, isn’t there?

Ohio utility opt-out fees are determined by the utility and PUCO. The Smart meter opt-out fees have always been a punitive measure. In many cases, the Smart meters were installed without homeowner permission or consent. Aside from the accounting story that supports the elimination of the opt-out fees, there persists an important part of the medical story as well. In 2017, a letter signed by 3 doctors was submitted to PUCO asking that there be no fees approved for Ohioans who wanted to opt-out of electric, gas, and water Smart meters.

Are a good number of residents becoming aware of health effects caused by the installation of Smart meters?

Yes. By the time the aforementioned doctors’ letter was written, many residents were already aware of the health hazards and other dangers from Smart meters.

It seems, then, that Smart meter-concerned Ohio energy consumers – many of whom are living paycheck-to-paycheck – are faced with a really difficult choice…or perhaps no choice at all, really.

Yes. They are faced with an added cost burden aside from the fixed monthly fees. It has created a real undue hardship for many Ohio energy consumers. The lynchpin that keeps the Smart meter replacements in place is the $30/month opt-out fee. However, real evidence is needed to justify canceling the AMO rider (Advanced Meter Opt-Out) since the fee has been in place for a long time. My panel study results provide evidence that nobody can dispute about the financial hardships it has created since the original PUCO approval in 2016. That kind of strategy is usually how something can be changed; if you show real financial harm done from an existing PUCO-approved regulation.

How are utilities justifying these riders?

Volumetric rates, which place much of a utility’s fixed costs in the usage (kWh) charge of a tariff, have created a number of social problems as they relate to economic efficiency and equity. The heightened interest in fixed and demand charges for residential electricity customers has sprung largely from the flaws in the prevailing rate design for residential electric service. Some riders cover costs that both utilities and various environmental advocates support. Examples include costs for improvements to maintain and modernize the grid. Customer charges under other riders are more controversial.

Can you provide an example of a controversial rider?

Sure. Ohio law currently lets utilities collect lost distribution revenue (LDR). It’s a mechanism for the recovery of costs from customers between rate cases which occurs as a result of state-mandated cuts in energy consumption. In reality, it’s a straight-up charge to compensate utilities for lost sales because people are being more efficient in their energy use.

So, in other words, the charge pays utilities to make up for electricity they didn’t sell because the customers wasted less electricity?

Exactly. This LDR kind of rider is often hidden in most of the more recent Ohio House and Senate legislative bills masked as energy efficiency initiatives. For example, rider EE-PDRR, Energy Efficiency, Peak Demand Response was added to the tariffs table in the last Duke Energy rate increase. The stated purpose is the recovery of expected costs for EE programs over a 12-month period.

Is there an individual opt-out fee for each Smart meter (gas, water, and electric) that a customer opts out of?

There is no opt-out fee specific to gas Smart meters because there isn’t a remote-control shutoff of the gas supply. In most cases, customers who request opt-out on the electric AMI Smart meter will ask for a replacement gas meter, too. That's what happened to me when I changed over, but my new gas meter is not digital. It's mechanical (analog).

How do gas riders compare to electric ones?

As far as any tariffs, the number of gas riders is much lower than electric riders. There isn’t a downloadable billing calculator program available for the gas tariffs that could itemize the hidden charges, but most of the gas riders are shared among the three states of Ohio, Michigan and Indiana. I have a handout sheet and corresponding graph that covers the details which I just recently started passing out at meetings. The current gas flat monthly charge covers the fixed distribution charges that don’t change each month based on natural gas usage including meter reading, billing, and customer service.

These “fixed rates” are presented to customers as cost-saving measures but, clearly, in many cases, they are not.

Correct. The gas fixed delivery charge was just raised in November and it contributes much to the total customer fees. This “fixed” cost imposes a type of forced even billing payment on customers without any allowance for the 12-month average usage on most recent history. Also, this method doesn’t allow for the possibility of much lower distribution resources needed during the non-heating months (May-Sept) of the year which results in gas fixed costs, on average, 10-times gas usage costs during those months.

10-times? Wow.

Yes. It’s significant. A proper alternative to the gas fixed delivery service charge is a well-defined cap limit approach to monthly home energy usage. This means the prior year non-heating months (May-Sept) would be used to establish a base natural gas energy usage for the current year.

And Smart water meters?

There is no opt-out fee specific to Smart water meters as part of any formal opt-out program to my knowledge. In a few cities, the water utility allows for the opt-out if the customer can submit a medical statement in order to get a replacement analog meter. In most other cities, it presents more as a forced migration to the Smart water meter. In some instances, an imminent threat of having the water disconnected is present because the homeowner won’t accept a Smart water meter inside the home. In a few select cities, there have been multiple reports by homeowners of logistic problems with the installation of the new meter controls on existing water lines as well as actual property damage that occurred during the Smart water meter changeover.

You told me in an email before this interview, “The breakthrough on the real implications from the study results came about after I uncovered how the hidden charges are applied to customer accounts in order for any utility to avoid forensic audits on a selected group of accounts. This billing calculator method is being used by all the large utilities in Ohio under PUCO approval.”

Yes. The electric delivery rider on the customer bill is a group charge because the individual rate codes aren’t itemized on the bill which means that the individual tariff charges are hidden from the consumer. In terms of the need for a forensic audit, without an itemized list on the bill, there is no way for the consumer to find out which rate codes are prevalent or whether the tariff charges are evenly applied to all customer accounts for that month.

And the “billing calculator method”?

I uncovered that – to avoid any conflicts – each Ohio utility company uses a shared software tool (RS Calculator) that applies the monthly kWh value as input to each line item in a predefined rider code table with an assigned rate charge. All customers are charged by this method no matter the rate category (RS – Residential Service, RSLI – Residential Service, Low Income) or the household status (rich, poor, seniors, hardship, home size).

A “one size fits all” approach, huh?

Indeed.

Your study has been isolated to Duke Energy, but the overcharging is going on with all Ohio utilities. PUCO ruled that FirstEnergy refund its customers for overcharging that occurred between 2017 and 2019, to the tune of an average of $85.71 per customer (based on “significantly excessive” profits [$306 million] as designated in 2008’s Senate Bill 221). AEP was found guilty of a “significant” excess of $43 million in profits over a decade ago. This overcharging is clearly not a new phenomenon.

For a little background on the overcharges, it seems that when new retail energy companies emerged after deregulation of the electricity industry some twenty years ago, consumers were promised that the change would result in cuts in their power bills.

And it didn’t.

No, it didn’t. The opposite has happened because many consumers who signed up with the alternate suppliers paid more than if they kept existing connections with incumbent utilities. Many “hardship” households get their electricity from retail supplier companies. An electric utility by itself doesn’t control the contract rates, but they are responsible for collecting unpaid residential customer bills under a rule adopted by many state regulators a few years ago called “purchase of receivables” or POR.

So, POR relates to the FirstEnergy ruling?

Yes. Under this rule, retail electric suppliers are indifferent to the credit risk of certain customers, and that includes low-income neighborhoods. The retail supplier pays a small fee for the service. This explains the PUCO ruling against FirstEnergy as the owner of the customer accounts.

Have the FirstEnergy and/or AEP refunds been issued?

I have no information on the current status of the refunds.

PUCO is reported to have been investigating FirstEnergy for bribing ex Ohio Speaker of the House Larry Householder and former PUCO chairman Sam Randazzo. Despite claiming ignorance of the charges, FirstEnergy admitted to this conduct in a 2021 deferred prosecution agreement. Can the public expect PUCO to honestly investigate a scandal that involves their former top executive?

PUCO continues to authorize renewals for delivery riders that fund specific programs. Ohio legislators move forward to pass laws which permit or require the utilities to take certain action on cost recovery. Just a few examples: both AEP and PUCO got to review and edit an "independent audit" of the OVEC coal plant subsidies that were part of the corrupt House Bill 6 before the audit was released. PUCO also wanted “reduced subjectivity” and less detail on the auditor's statements about the HB 6 scandal and allegations about FirstEnergy and others. The General Assembly may specify whether an audit can be completed by an independent auditor or by PUCO staff. However, as far as oversight, in addition to PUCO, the General Assembly, the Ohio Supreme Court, and other parties that intervene in cases all have oversight over utility riders to some degree.

You and Ms. Maisenhalter at SWORT – along with people like Odette Wilkens at the National Call for Safe Technology – have been meeting with various state district representatives in an attempt to get Smart meter choice legislation introduced, but so far Rep. Sedrick Denson is the only one to respond with a willingness to introduce it. How optimistic are you that Mr. Denson or other state district representatives will follow through to get the ball rolling on legislation? SB 181 was introduced in 2013, but the bill died. Are any other groups working on spearheading this type of legislation?

It’s hard to tell at this point about any action forthcoming in the legislature. Many current state district reps in SW Ohio have been briefed on the Smart meter issues multiple times in the last three years at meetings and on conference calls with SWORT members, but no bill has been submitted to any committee for possible hearings. However, my understanding is the recent meeting with Rep. Denson went well. He showed real interest in some kind of opt-out legislation, but he cautioned that he needs a lot more support for this idea than just the SWORT group. He wanted to know about other “allies,” meaning what other organizations in Ohio are going to get behind this Smart meter legislation. I’ve reviewed many of the other state meter proposals as part of my research for a SWORT draft bill. The most common tactic to stop a bill on AMI Smart meters has been a proposal to create a study on any possible health consequences from the Smart meters.

While the topic of Smart meter health effects exists as a legitimate concern by itself – deserving of great scrutiny – it clearly plays in directly to the subject of opting out which, as you’ve thoroughly laid out, pertains to the issue of overcharging. It would seem that the billing evidence you’ve produced – on its own – would be enough to cause any state representative of sound mind and conscience to feel compelled to give serious consideration to the creation of Smart meter choice legislation, along with more stringent PUCO rate increase approval oversight. Thank you, Vince, for the extensive work you’ve done, and thank you for taking the time to speak to the Ohio Roundtable.