COLUMBUS - The Ohio Supreme Court yesterday struck down FirstEnergy Corp.'s plan to defer up to $150 million a year in increased fuel and other costs for three years and then recoup those costs from customers over 25 years, beginning in 2009.
In a 6-1 decision, the court said it was illegal under Ohio's 1999 electric deregulation law for the Akron parent company of Toledo Edison to put off billing for higher costs for fuel, tree-trimming, and storm damage associated with generating electricity from 2006 through 2008 and then later raise the bills for customers on the distribution from 2009 through 2034 to make up for it.
"We may have to recover those costs in current bills rather than recover them in the future,'' FirstEnergy spokesman Ellen Raines said. "But we still believe we have a legal argument for the way we had originally proposed recovering the costs.''
The court sent the case back to the Public Utilities Commission of Ohio to fix the flaw. It remains to be seen how the commission will respond.
PUCO Chairman Alan Schriber didn't provide any clues yesterday, but he used the ruling to promote Gov. Ted Strickland's larger plan to at least partially reverse the state's practice of looking at power generation and distribution roles as separate animals.
"It says we need to bring back together in a more cogent form generation and distribution,'' he said. "I think it's a good argument to begin talking about them as if they were one entity as they used to be.''
The PUCO-approved rate plan that FirstEnergy has been operating on was challenged by WPS Energy Service, an electricity supplier competing with FirstEnergy, and Elyria Foundry Co.
But Ms. Raines said the court was operating under what she called the mistaken belief that those who choose to buy their power from someone other than FirstEnergy would still be subjected to the deferred distribution costs because the utility would still deliver that power to the customer over its transmission network.
FirstEnergy plans to petition the Supreme Court to reconsider the decision. Failing that, Ms. Raines said the utility may present a new plan to the commission that could result in the collection of the fuel costs now rather than later.
"This was designed to minimize the impact of rising fuel costs on customers,'' she said. "The costs would have been spread out over time and collected over time.''
In his dissent, Justice Paul Pfeifer went further than the majority, finding that delaying today's bills for tomorrow to be "bad policy."
"Although this practice may smooth out a utility's bottom line, the reality is that we are pushing expenses incurred today onto a later generation of ratepayers,'' he wrote. "It is a boon to people who leave the system, whose current rates are being subsidized by future ratepayers.
"And it is a travesty to think that a child born next year, who takes an apartment in 20 years, will be paying [however small an amount] for last year's higher-than-expected fuel costs,'' Justice Pfeifer wrote.