FirstEnergy upheld on passing on line charges

8/12/2004

COLUMBUS - A utility can charge all its customers when it extends power lines to new subdivisions, the Ohio Supreme Court ruled yesterday in a 6-1 decision.

Toledo, Maumee, Lucas County, and the Ohio Consumers' Counsel had challenged a 2002 decision of the Public Utilities Commission of Ohio to allow FirstEnergy, parent of Toledo Edison, and several other utilities to pass most line-extension costs on to all consumers rather than collect solely from developers.

After the General Assembly's deregulation of the supply side of electricity in 1999, the utilities commission froze rates during a five-year market development period. As part of that plan, those requesting line extensions, typically developers, would bear the cost.

But the utilities and the Ohio Home Builders Association negotiated an alternative allowing part of the cost to be borne by the first occupant of the new construction. Any cost above that could be spread over all commercial and residential customers.

Local governments and the consumers' counsel cried foul.

"Senate Bill 3 kicked off electric choice in Ohio on Jan. 1, 2001, and promised consumers a rate freeze," said Carah Brody, spokesman for the consumers' counsel. "The PUCO decision allowing increases for line extensions during the market development period is a violation of that rate freeze."

The Supreme Court disagreed, saying the utilities commission left the door open to revisit the issue. It also found that expecting only the customer originally requesting the line extension to cover its full cost would be unreasonable.

"If it were otherwise, customers subsequent to the first customer requesting new line-extension

facilities would receive an unfair free ride, being absolved of any sharing of the cost recovery " wrote Justice Terrence O'Donnell.

Justice Paul Pfeifer dissented, saying line-extension charges were subject to the rate cap.

FirstEnergy spokesman Ellen Raines noted that before deregulation, the company typically charged nothing or little for line extensions because it knew it could recover the costs over time from its new customer.

That's no longer true now that customers can choose to buy power from a competing supplier.

"In order to find a middle ground that would work for the customer and work for the company, we were willing to negotiate," she said. "This allows the company to receive some kind of up-front payment and a smaller carrying charge with the opportunity to recover any deferred balance later."

Under the plan, a family moving into a new single-family home in FirstEnergy territory would pay a one-time fee of $300, although the cost of a line extension usually runs in the thousands of dollars.

That family, or any family following it into that home, would pay $8 a month in addition to the electricity bill through 2007. After that, the utility could ask the PUCO to allow it to increase charges to all its customers to make up the balance.

Contact Jim Provance at:

jprovance@theblade.com

or 614-221-0496.