FirstEnergy Electric Distribution Rate Case
PUCO Case No. 07-551-EL-AIR

Ohio Edison Company, Cleveland Electric Illuminating Company and Toledo Edison Company (collectively “FirstEnergy”) filed an application for authority to increase its electric distribution rates by $340 million.

Several parties, including the Ohio Schools Council, the City of Cleveland, Industrial Energy Users-Ohio, Utility Workers Union of America, Ohio Partners for Affordable Energy, the Office of the Ohio Consumers’ Counsel, Ohio Home Builders Association, the communities in the Northwest Ohio Aggregation Coalition, the Kroger Company, the Ohio Energy Group, OMA (Aug. 25, 2007), Nucor Steel Marion, Inc., and Constellation NewEnergy have filed to intervene in the case.

It is rumored that the Staff Report will be issued in a matter of weeks if not days.

FirstEnergy Competitive Bid Process
PUCO Case No. 07-796-EL-ATA and 07-797-EL-AAM

PUCO Staff filed comments on Sept. 21, 2007, recommending that the Commission reject FirstEnergy’s application for approval of a competitive bidding process (“CBP”). The CBP would be designed to procure supply for the provision of Standard Service Offer electric generation service to retail electric customers who do not purchase electric generation service from a competitive retail electric service provider beginning Jan. 1, 2009. FirstEnergy also seeks approval of accounting modifications to implement a proposed reconciliation mechanism and tariffs for generation service. FirstEnergy requested that a decision be issued by Nov. 1. However, no decision had been made yet.

Along with the OMA, numerous companies filed to intervene in the case, including Constellation New Energy, Citizen Power, American Electric Power, the Northeast Ohio Public Energy Council, the Cleveland Foundation, Industrial Energy Users-Ohio, Utility Workers Union of America, Ohio Partners for Affordable Energy, Ohio Hospital Association, the Office of the Ohio Consumers’ Counsel, the communities in the Northwest Ohio Aggregation Coalition and the Ohio Energy Group.

Again, PUCO Staff filed its comments on Sept. 21, 2007, recommending that the Commission reject FirstEnergy’s application. The Staff's comments were highly critical of the present condition of the electric marketplace, both retail and wholesale. The following excerpts from the Staff’s comments provide an accurate summary of its position with respect to FirstEnergy's filing:

• The restructuring of Ohio’s electric generation business has thus far failed to produce an efficient, competitive retail market that can meet the needs of the state’s economy in an affordable, reliable and sustainable manner. Likewise, the PUCO Staff questions the fairness and efficiency of the wholesale market that should support and enable retail competition and customer choice.

• Neither retail nor wholesale electricity markets have developed sufficiently to warrant confidence in a CBP that relies on fairness or efficiency of those markets. Accordingly, the staff recommends that the Commission reject the CBP as a means of establishing the price of a standard service offer for its customers.

OMA filed reply comments on Oct. 12, 2007 in support of the Staff’s recommendations. Although FirstEnergy requested that a decision be issued by Nov. 1, no decision had been made yet.

Columbia Gas of Ohio New Stakeholder Process

Because Columbia has made the settlement of the Gas Cost Recovery (“GCR”) litigation a precondition of a settlement of the post-2008 operating environment, the parties have been attempting to settle the case over the past several weeks. While these discussions are currently ongoing and highly confidential, significant progress has been made by the parties and a settlement, though to be impossible this past spring, now appears to be achievable.

If a settlement is reached in the next several days, then the larger stakeholder process to discuss the post-2008 operating environment will begin again. A major topic of discussion will be the costs and operation of Columbia’s banking and balancing services that its transportation customers have enjoyed under the 2003 stipulation.

The background of this case dates back to May 2007, when Columbia Gas of Ohio invited a broad array of stakeholders to discuss the future of its operational structure, including its GCR supply portfolio, its CHOICE program and its General Transportation Services (“GTS”). The need for this discussion is driven by the fact that the current structure of these programs is based on a 2003 stipulation that expires Oct. 31, 2008. GTS customers on the Columbia system have benefited from Columbia’s banking and balancing services, as well as improved Operational Flow Order and Operational Matching Order rules, all of which were developed during the governance of the current stipulation. These stakeholder discussions will impact these important features of Columbia’s transportation services for years into the future beyond the expiration of the current stipulation.

Columbia has proposed a high-level outline for a settlement structure that would essentially extend the current level of service for GTS customers through 2010 while a discussion of an overall realignment of its gas supply portfolio takes place among the stakeholders. The proposal includes a base rate case filing in February 2008, a settlement of the issues in Columbia’s hotly-contested GCR review proceeding, Case Nos. 04-221-GA-GCR and 05-221-GA-GCR, and a possible settlement of Columbia’s current riser/service line replacement program.

Each of the issues that Columbia has included for discussion in its outline has the potential to negatively impact the cost of gas transportation services currently enjoyed by OMA members. Columbia’s proposal brings a significant measure of orderliness to the discussion of these issues. Consequently, the OMA has gone on record in these discussions as supporting Columbia’s settlement structure proposal and intends on remaining active in these discussions as they move forward in order to protect the well-functioning gas transportation program that currently exists on the Columbia system.

Duke Energy Ohio Rate Stabilization Plan Remand from the Ohio Supreme Court
PUCO Case Nos. 03-93-EL-ATA, et al

1. Ohio Supreme Court Decision

   On Nov. 22, 2006 the Ohio Supreme Court unanimously affirmed in part and reversed in part the PUCO’s Order on Rehearing of Sept. 29, 2004, in Case No. 03-93-EL-ATA, et al. This case established Duke Energy – Ohio’s (f/k/a CG&E) (“Duke”) rate stabilization plan (“RSP”). The court remanded this matter to the Commission for further clarification of all modifications made in the first rehearing entry to the order approving the stipulation. On remand, the Commission was required to thoroughly explain its conclusion that the modifications on rehearing are reasonable and identify the evidence it considered to support its findings.

   The Court determined that the Commission could not rely merely on the terms of stipulation but must determine if there was sufficient evidence that stipulation was in fact the product of serious bargaining. Therefore, the Court concluded that the Commission had “abused its discretion” in barring discovery of side agreements and remanded the matter to the Commission with directions to compel disclosure.

2. PUCO Proceeding on Remand

   The remand proceeding had an immediate impact on a series of pending dockets involving the various riders that have their origin in the RSP case, and which were due for adjustment on Jan. 1, 2007. The OCC had requested that the RSP riders be abated while the matter was on remand. Instead, the Commission issued an entry on Dec. 20, 2006, that either froze the rider amounts, suspended the rider, or allowed the rider to expire.

   By entry dated Feb. 1, 2007, the Attorney Examiners assigned to the case set a consolidated procedural schedule for by the remanded RSP case as well as the various other pending cases involving the Commission’s review of the RSP-related riders. This entry divided the case into Phase 1, dealing with the issues on remand, and Phase 2, addressing the other RSP rider-related issues.

3. PUCO Order on Remand

   On Oct. 24, 2007, the Commission issued an order on remand finding the stipulation should not have been approved, and affirming the RSP, as modified in the Commission’s initial entry on rehearing, which Duke has been operating under for the past couple of years. However, this time the Commission set forth the reasons for the modifications. The Commission also found that side agreements and documents discussing such side agreements shall be maintained on a confidential basis and kept under seal for 18 months from March 19, 2007.

   By order issued Nov. 20, 2007, the Commission approved a stipulation signed by Duke, the Commission staff, Ohio Energy Group, Ohio Hospital Association, City of Cincinnati, and People Working Cooperatively resolving the RSP rider-related issues. The Commission directed Duke to work with staff to determine a reasonable period over which the amounts of the various riders should be trued-up and collected.

AEP Application to Increase Rates
PUCO Case No. 07-1132-EL-UNC

On Feb. 9, 2004, Columbus Southern Power Company (“CSP”) and Ohio Power Company (“OP”) (collectively “AEP”) filed an application for approval of a post-Market Development Rate Stabilization Plan (“RSP”) (Case No. 04-169-EL-UNC). AEP proposed to substitute its plan for a post-market development period market-based standard service offer and to eliminate a competitive bidding process from 2006 through 2008. On Jan. 26, 2006, PUCO issued an order approving a RSP, which resulted in a 3 percent generation rate increase for CSP worth $77 million annually by 2008, and a 7 percent increase for Ohio Power worth $194 million annually. The Commission also authorized AEP to adjust their generation rates and related riders to their Standard Service Offer (“SSO”) schedules beyond the generation rate increases to account for changes in rules and regulations related to environmental requirement, security, taxes, and any new generation-related regulatory requirement.

On Oct. 24, 2007, AEP filed an application seeking authority to implement riders to recover additional generation-related revenues of $35,167,037 for CSP and $11,944,953 for OP beginning the first billing cycle of January 2008 through the final billing cycle of December 2008. Since many of the issues involved in this application have been resolved through Case No. 07-63-EL-UNC, AEP is requesting the Commission to promptly convene a prehearing conference to allow Staff and interested parties to discuss the matter and a procedural schedule.

Natural Gas Distribution Rate Cases and Alternate Regulation Plans

1. Duke Energy Ohio
   PUCO Case Nos. 07-589-GA-AIR, 07-590-GA-ALT, 07-591-GA-AAM

   Duke Energy Ohio filed an application in July 2007 seeking to increase its natural gas distribution rates by $34.1 million, or 5.7 percent overall. The increase would be effective in early- to mid-2008 and is the first general rate filing since 2001. Duke will seek to gradually establish rates for all customers that reflect the actual cost of providing service. The company has requested authority to continue annual rate updates for its accelerated main replacement program under a tracking mechanism approved by PUCO in 2002. This program is designed to replace cast iron and bare steel pipe in Ohio. The company has replaced approximately 560 miles, or about 47 percent, of the old mains in its system, and approximately 45,000 service lines. Duke is proposing a new metering system to save operating costs and facilitate the company's and customers' access to metering data. Duke has requested to make annual rate updates to recover the cost of the new equipment.

   Duke also seeks approval of an alternative rate plan for its gas distribution service, and approval to change its accounting methods. The PUCO Staff is in the initial stages of its investigation of the application. The PUCO has selected Blue Ridge Consulting Services to assist Staff in its investigation. OCC, Interstate Gas Supply, the Kroger Company, City of Cincinnati, Ohio Energy Group, Stand Energy Corporation, and the Ohio Partners for Affordable Energy have moved to intervene.

2. East Ohio Gas Company d/b/a Dominion East Ohio Rate Proceeding
   PUCO Case Nos. 07-829-GA-AIR, 07-830-GA-ALT, 07-831-GA-AAM

   On Aug. 30, 2007, East Ohio Gas Company d/b/a Dominion East Ohio (“DEO”) filed an application—for the first time since 1994—for authority to increase its gas distribution rates by approximately $73 million for its entire service area (including the area served by the West Ohio Gas Company). DEO expects the new rates to go into effect the second quarter of 2008. DEO also seeks approval of an alternative rate plan for its gas distribution service, and approval to change its accounting methods. Only Ohio Energy Group, Neighborhood Environmental Coalition, the Empowerment Center of Greater Cleveland, Cleveland Housing Network and the Consumers for Fair Utility Rates, Ohio Partners for Affordable Energy, Interstate Gas Supply has so far moved to intervene.

   By entry issued Sept. 12, 2007, the PUCO direct its Staff to issue a request for proposal for an independent auditor to assist the Staff in its review of the application for an increase in gas distribution rates, approval of alternative rate plan and for approval to change accounting methods.

3. Vectren Energy Delivery of Ohio, Inc.
   PUCO Case Nos. 07-1080-GA-AIR, 07-1081-GA-ALT

   On Sept. 28, 2007, Vectren Energy Delivery of Ohio, Inc. (“VEDO”) filed an application for authority to increase its gas distribution rates by approximately $29 million. VEDO also seeks approval of an alternative rate plan, which would include:

   • Distribution Replacement Rider (“DRR”) that would allow VEDO to recover (1) a return on incremental annual costs incurred under a 20-year program for the accelerated replacement of cast iron mains, and (2) individual riser replacements. The DRR would be allocated to customer classes based on distribution mains/service lines as determined by VEDO’s cost of service study. VEDO estimated the average annual amount of the DRR increase as follows: 1.4 percent for large general sales service; 1.9% for dual fuel sales service; and 1.6 percent for large volume transportation service.

   • Sales Reconciliation Rider (“SRR-B”) for the recovery of deferred amounts of the difference between the actual and approved base rate revenues.

   • System Integrity and Reliability Programs which would include:

     • Gas Distribution System Maintenance Program

     • Rights-of-Way Clearance Program

     • Aging Workforce Program

   A technical conference was held on Nov. 13, 2007 to allow interested parties to discuss VEDO’s proposed alternate rate plan.