New electric rate plan proposed

2/20/2009

COLUMBUS - There are no guarantees, but backers of a proposed rate plan submitted to state regulators yesterday are betting it will be a better deal for northern Ohio electricity customers than what FirstEnergy Corp. originally sought.

The plan, if approved by the Public Utilities Commission of Ohio, would lock in rates through May 31, 2011, at a level to be determined through a bidding process this spring. Groups representing manufacturers, heavy industry, low-income consumers, and hospitals united with Toledo Edison and FirstEnergy's other subsidiaries in submitting the plan.

"Obviously, it's going to depend on what happens with the bidding process," said Dave Rinebolt, counsel for Ohio Partners for Affordable Energy, which represents low-income residential customers.

"You can't really tell what market prices on the electricity side are going to be," said Mr. Rinebolt. "But I think anybody who makes reasonable projections about economic activity in this region will come to the conclusion that we're not going to see a whole lot of industrial demand for electricity in the near future. That's an advantage for customers in the bidding process."

After the PUCO sought prices that were much lower than FirstEnergy originally proposed, the Akron utility withdrew its three-year Electricity Security Plan. The commission, in turn, asked its staff to develop an alternative that was presented during a settlement conference.

Those talks resulted in the proposal submitted to the PUCO yesterday. While a number of players signed on, others like the Ohio Consumers' Counsel and the Northern Ohio Aggregation Coalition did not.

"This agreement is not the best outcome for residential customers," Ohio Consumers' Counsel Janine Migden-Ostrander said. "FirstEnergy should not be allowed to unilaterally reject the PUCO's order and then dictate what and how they charge customers. Ohio laws need to be followed, and after-the-order revisions without due process should not be permitted."

FirstEnergy no longer directly owns any power plants, so it recently sought bids that led to an average wholesale price of $66.68 per megawatt hour. That power, most of which comes from its subsidiary FirstEnergy Solutions, is being resold to retail customers through March 31.

If the commission approves the settlement, those rates would be extended through May 31. In the meantime, another bid process would be supervised by an independent bid manager and a PUCO-appointed overseer that would result in new prices for the next two years.

In the event the bids come in higher than expected, the plan would allow the PUCO to gradually phase in any increases.

"This provides price stability," FirstEnergy spokesman Ellen Raines said. "It also recognizes that our costs have gone up considerably since rates last changed and that our utilities don't own their own generating plants. We'll use market-based pricing mechanisms to establish prices."

Kevin Schmidt, director of public policy for the Ohio Manufacturers Association, said there's a lot more to like in this proposal than in FirstEnergy's original filing.

"It's a significant improvement for manufacturers," he said. "It allows for the option for our customers to shop if they don't like the rate and think they can buy power at a better rate in the marketplace."

Many of the pricing impediments to shopping would be removed, he said, although the plan still includes a number of bill riders and cost-deferrals.

"If the auction is done right and done to people's expectations, we should get relatively reasonable rates," Mr. Schmidt said. "There's no guarantee, but due to the unprecedented decline in the economy with plants shutting down, there's an opportunity for affordable rates for FirstEnergy customers, which have historically had the highest rates in the state."

Constellation Energy Group, an energy marketer, signed the proposal as a neutral party.

"We wholeheartedly support the portion that has FirstEnergy relying on competitive wholesale procurement for the setting of retail rates," said David Fein, vice president of energy policy.

He expressed concern, however, about how bill add-ons and deferrals included in the proposal might affect the process.

Contact Jim Provance at:

jprovance@theblade.com

or 614-221-0496.