Electric utility rate hike to benefit customers
10/11/2008THE Blade's recent editorial about Toledo Edison's rate case is missing some important information the readers deserve to know.
In the legislative debate that led to Ohio's new energy law, Senate Bill 221, all key parties agreed that electricity prices would increase mainly due to the rising costs of producing and delivering electricity coupled with the effect of long-term price caps.
For example, rates for Toledo Edison customers have remained essentially the same since 1996 while virtually every cost associated with our business has increased, in some cases substantially.
Although those caps were scheduled to end this year, the new law gave utilities and regulators the tools and flexibility they need to moderate future prices while offering a wide range of benefits to customers.
Under S.B. 221, the Public Utilities Commission of Ohio (PUCO) can approve one of two options an Electric Security Plan (ESP) or a Market Rate Option (MRO).
The first option is similar to rate plans that have served customers well during the past 12 years. The second option would result in customers paying market prices for electricity.
By law, the PUCO can only approve an ESP if, in aggregate, it provides greater benefits to customers than the MRO.
Unfortunately, recommending that FirstEnergy's ESP not be approved unintentionally promotes the other option where the market would set the price customers pay for electricity and customers would not receive any of the benefits included in our ESP.
We believe our ESP remains the best option for customers, and we want them to have all the facts about our plan:
It smooths out price increases for our customers over the next three years and defers a portion during the next 10 years a common regulatory practice used to moderate prices.
Even though increases for all customers average about 5 percent per year, the impact on the vast majority of residential customers will be less.
For example, customers using 750 kilowatt-hours per month would actually see a decrease of 16 cents in their monthly bills in 2009, followed by increases of $3.06 per month in 2010 and $3.30 per month in 2011.
Our plan would provide strong support for energy efficiency programs, as well as significant investments in economic development and job retention.
It also includes a major commitment in system reliability from FirstEnergy's Ohio utilities an investment of at least $1 billion through 2013.
It's easy to look for scapegoats when it comes to economic development, but many of Toledo Edison's large industrial customers pay among the lowest electric rates in the nation.
Also, our economic development program is consistently recognized as one of the industry's best by the leading national economic development publication, government agencies, and statewide organizations.
And, like it or not, regions with the lowest electric rates are far from the nation's hotbeds of economic development a reflection of the fact that the price of electricity is not a key determinant for most location decisions.
Reliability is a key factor, and Toledo Edison offers the most reliable service of any electric utility in the state.
Although we'd like to keep our prices at 1990's levels, we can't continue offering this level of reliability while operating at 12-year-old prices.
Few industries in the U.S. would survive under such a scenario nor would local, state, or federal governments, for that matter.
Our ESP is good for our customers.
If approved, it will keep future price increases reasonable and enable us to make the investments needed to continue providing the reliable service our customers expect and deserve.
James M. Murray is president of Ohio operations for FirstEnergy Corp., parent company of Toledo Edison.