COLUMBUS -- FirstEnergy Corp. is offering customers the chance to freeze a portion of their electricity price for seven years, the longest contract of its type ever offered to Ohio households.
The offer comes with a $295 early-cancellation fee for residential electricity customers.
In exchange for the risk of such a high penalty, customers will pay a fixed rate of 6.99 cents per kilowatt-hour for electricity-generation service. That would lead to a typical household saving of 7 percent, or $10 a month, compared with the current American Electric Power price in central Ohio. A four-year contract will have a lower rate, 6.49 cents, and the same $295 cancellation fee, which results in a saving of 11 percent.
"With all the uncertainty in our economy today, we want to provide Ohioans with some stability," said Donny Schneider, president of FirstEnergy Solutions, the FirstEnergy subsidiary that offers electricity contracts. He announced the offer Friday at a Columbus news conference.
About 15 percent of AEP's utility customers have switched to a competitor as of June 30, according to the Public Utilities Commission of Ohio. Those customers, who include several large businesses, account for 34 percent of the electricity sold in AEP's territory.
An AEP spokesman said the company does not comment about competitors' offers. He encouraged customers to carefully review the terms of any solicitation. Several electricity suppliers other than FirstEnergy also have offers of 6.49 cents, only with shorter contracts. AEP Energy, the utility's unregulated subsidiary, is offering that price for two years; the cancellation fee is $10 for every month remaining on the contract.
As part of FirstEnergy's campaign, called "Thanks a Million," residents and businesses that sign up for service will be placed in a drawing for cash prizes. Eight households will get $25,000 each, and eight businesses will get $50,000 each.
In addition, the company will donate $50,000 each to the local school district of the eight winning households.
FirstEnergy's offer probably is record-breaking for Ohio in its length and the size of the cancellation fee, said Dave Rinebolt, executive director of Ohio Partners for Affordable Energy, an advocate for low-income consumers.
"You've got to make a judgment about whether the savings is enough to offset the [risk of the] fee," he said. Other companies offer contracts with cancellation penalties ranging from $50 to $150.
"People who sign up for a seven-year deal are betting that market prices are going to go up," Mr. Rinebolt said. That is probably a safe bet, but electricity generation is only one part of the bill.
For households served by AEP, the standard rate leads to a bill of $141 for September.
Of that, about $80 is generation costs, which suppliers compete to provide. The rest is delivery costs, taxes, and fees.