Surge in Edison switchovers taps discount-power supply

1/24/2001

The big discount rates for electricity are gone - at least for now - and up to 27,000 Toledo Edison customers may learn that the hard way.

Utility officials confirmed yesterday that alternative power companies have tapped out a cheap stream of power Toledo Edison is providing under the newly deregulated market.

As of yesterday, those power companies had staked claims on enough power for 74,000 average homes. Toledo Edison, however, is obligated to give up only enough cheap power to serve about 47,000 average homes.

That leaves an extra 27,000 people. Ralph DiNicola, a spokesman for Toledo Edison's parent company, FirstEnergy, said the reservations were first-come, first serve. So the only hope for the latest entries is if utility auditors find problems with the accuracy of earlier reservation claims.

“You hate to jump the gun on telling people they don't have a shot at it, because until you go through the process you truly don't know if they have a shot or not,” Mr. DiNicola said. “But if you don't already have an offer in ... there's enough people in line that the power is spoken for.”

The drama is part of the state's unprecedented venture at deregulating the electric industry. Starting Jan. 1, Ohio consumers could buy their power from anybody, and their local utility would deliver the juice.

As part of the deregulation system, state regulators agreed to let Toledo Edison keep charging all customers - even ones that switched - an average of about $20 a month to cover “stranded costs.” It is supposed to pay off big-ticket investments, such as the Davis Besse nuclear plant near Oak Harbor, that FirstEnergy didn't expect to recoup in an open market.

In exchange, Toledo Edison agreed it would sell a five-year stream of as much as 70 megawatts at wholesale prices to new power companies entering the Northwest Ohio market.

It was an effort to jump start the market, and it worked.

With access to that stream, at least three of those newly arriving companies advertised generation rates averaging about 3.5 cents a kilowatt hour, which is about 20 percent cheaper than Toledo Edison's average rate of 4.4 cents.

When combined with the stranded costs and delivery charges Toledo Edison still imposes, the savings equated to 6 percent on the average bill.

But the alternative companies' top offers were contingent on access to that power stream.

Since Oct. 19, the alternative companies have waged advertising campaigns to sign up customers. Each day, the companies electronically sent updated customer lists to FirstEnergy, which immediately reserved extra blocks of power. FirstEnergy automatically posted updates on its Internet site.

By Monday afternoon, FirstEnergy reported a glut of reservations. So, pending an audit, names submitted then or later may not make the cut.

Those in that group who don't qualify for the power will be notified in the coming weeks. Their electric supplier will remain Toledo Edison.

But they - and others who have always remained with Toledo Edison - still can save about 3 percent on their bills by switching to the FirstEnergy subsidiary, FirstEnergy Services.

FirstEnergy established the subsidiary in part to meet regulators' demands that 20 percent of its customer base switch to an alternative supplier. If they don't, regulators have threatened to reduce the amount of stranded costs Toledo Edison can pass on to consumers.

FirstEnergy Services' deal was not contingent on the power stream, and it has about 25,000 customer slots left to fill.

By yesterday afternoon, three of the four other alternative power suppliers had pulled their offers. A representative from the fourth, AES Power Direct, of Illinois, did not return a message for comment. The company's Internet site was still advertising its deal, which indicated it was contingent on getting access to that power stream.

Representatives from the other three companies - Advantage Energy of New York, Nicor Energy of Illinois, and Shell Energy of Texas - said they did not have plans for another rate offer. They cited the high cost of power on the wholesale electric market, where they would have to turn to fill orders.

“This is the worst possible time to buy electricity on the open market,” said Shell spokeswoman Julie Short.

That's bad news as well for local governments trying to secure cheap power for residents.

As part of electric deregulation, voters in 12 Northwest Ohio locales, including Toledo and many suburban cities, allowed their governments to negotiate for cheap rates and automatically switch.

The suburban Toledo locales formed the Northwest Ohio Aggregation Coalition, which includes Holland, Maumee, Northwood, Oregon, Perrysburg, Sylvania, Toledo, Waterville, and the unincorporated areas of Lucas County.

But last week the coalition announced it hadn't received a competitive bid to undercut Toledo Edison's rates for the coalition's 450,000 residences. And that was while some cheap power was still available.

The coalition's announcement helped spur heavy sign ups with alternative suppliers last week. But the heavy sign-ups led to confusion regarding when the power stream had been tapped out.