Door to power-rate boost opened

8/5/2004

COLUMBUS - FirstEnergy Corp. customers' electricity bills could rise if the utility's fuel costs climb, under a decision yesterday by the Public Utilities Commission of Ohio.

The commission voted 3-0 with two members absent to rethink part of its June ruling requiring the parent of Toledo Edison to seek competitive bids by Dec. 1 from electricity suppliers to serve customers in FirstEnergy's territory in 2006.

If the auction fails to produce a lower price for consumers, FirstEnergy's current rates would be locked in for three more years through 2008, including billions in surcharges to help the utility recover investments in nuclear power plants and other spending.

Under yesterday's revised plan, that rate freeze may not be as solid as it first appeared. The original ruling allowed automatic increases for FirstEnergy only for higher taxes. The revised ruling allows the utility to apply for PUCO permission to pass on higher fuel costs as well.

"With the price of fuel for energy going up both in coal and gas, it makes it more difficult," said Commissioner Judy Jones, of Toledo.

"People need to understand that there are some real increases that we really don't have any control over."

Ohio Consumers' Counsel Janine Migden-Ostrander said she would request a rehearing on the fuel-cost issue. She said she fears the company might include in a rate-increase application the higher fuel costs associated with the closing of the Davis Besse plant last year.

"We would be opposed to any increase whatsoever," she said. "The rates in FirstEnergy's service territory are high enough. Customers are suffering enough."

She also expressed disappointment that the PUCO did not appear to factor out FirstEnergy's special contracts with large industrial users from the base price against which potential suppliers would compete at auction.

The concern is that those lower rates would lower FirstEnergy's average bid price as well as increase the total electricity load that any competitor would have to guarantee it could supply.

The PUCO order, however, indicated that the commission plans to hire a consultant to watch over FirstEnergy's auction on the PUCO's behalf. Ultimately, the consultant will establish the parameters of the auction.

FirstEnergy had asked the commission to reconsider its June ruling and hadn't decided yesterday whether it was happy with the results.

"We're looking at all the components to see how they all fit together," said spokesman Mark Durbin.

"We got the ability to adjust for fuel cost increases. However, we don't have that ability for distribution reliability improvements. Environmental improvements weren't factored in."

The auction would be the first real test in Ohio of whether the competitive electricity market that the General Assembly envisioned when it deregulated part of the industry in 1999 has emerged.

"I'm becoming more optimistic," said Chairman Alan Schriber, who previously had expressed skepticism that a market had developed sufficiently.

Contact Jim Provance at:

jprovance@theblade.com

or 614-221-0496.