FirstEnergy bid brings concern for deregulation

11/20/2002

A FirstEnergy Corp. proposal to reduce the rate discount granted to customers who buy their electricity from other suppliers has local officials worried that burgeoning electricity competition in the region will be undermined.

The Akron utility, parent company to Toledo Edison, has asked the Public Utilities Commission of Ohio for permission to reduce its “shopping credit” from about 4.6 cents per kilowatt-hour to about 4.2 cents.

Ralph DiNicola, a FirstEnergy spokesman, said the change has been proposed because the current credit to consumers who use electricity generated by competing firms effectively creates a subsidy for those firms.

But Harry Barlos, a Lucas County commissioner and spokesman for the Northwest Ohio Aggregation Coalition, said PUCO approval of FirstEnergy's application would effectively wipe out the $20 to $30 annual electric-bill savings that Toledo area residents had been led to expect from participating in a power-buying pool.

“This action would be a stake right in the middle of the heart” of electricity competition in northern Ohio, Mr. Barlos said.

Mr. Barlos and other NOAC leaders have scheduled a news conference for 10:30 a.m. today at Government Center to detail their objections to the FirstEnergy rate application. Toledo Mayor Jack Ford and Peter Gerken, chairman of Toledo City Council's utilities committee, also are scheduled to participate.

Last year, Toledo contracted with FirstEnergy Solutions, an unregulated FirstEnergy subsidiary, to supply electricity to its aggregated electricity consumers at a rate of 4.35 cents per kilowatt hour. In doing so, the city split off from NOAC, a consortium of seven suburban communities and Lucas County, which negotiated a similar price from WPS, Inc., of Green Bay, Wis., to supply electricity.

Under deregulation, electricity has been broken down into three components: generation, transmission, and distribution. Only generation has been opened to competition in Ohio; the transmission lines and distribution facilities FirstEnergy and other utilities operate here continue to be operated as regulated monopolies.

By reducing the generation credit deducted from Toledo Edison bills to customers of WPS or FirstEnergy Solutions, FirstEnergy effectively would raise the transmission and distribution charge to those customers, said Mark Frye, president of Palmer Energy, a consultant who has worked with local officials on their aggregation plans. Still paying 4.35 cents per kilowatt-hour to their suppliers, those customers would end up paying more for electricity than those who continue with Toledo Edison's regulated-rate service, he said.

“What we're likely to see is a mass exodus from the market provisions” of deregulation, Mr. Frye said.

Mr. DiNicola said, however, the nearly 850,000 customers of FirstEnergy's three Ohio utilities who have joined aggregation groups or otherwise begun “shopping” for power represent about 40 percent of its previous 2 million customers, more than twice the participation rate that the Ohio legislature anticipated when it enacted deregulation.

He said the reduced “shopping credit” still provides a 1-cent-per-kilowatt-hour spread between FirstEnergy's rate and the bargain rate the utility agreed to offer on a pool of electricity it is selling to other suppliers to stimulate local competition.

“Our goal here is to balance the ability of the customer to shop with not having them subsidizing our competition,” Mr. DiNicola said.