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Published: Wednesday, 6/25/2003

Edison parent in talks with state on rate freeze

BY BLADE BUSINESS WRITER

The parent of Toledo Edison is in discussions with state regulators about extending its current rate freeze beyond 2005, when it was to be free of regulation. However, specifics of what the company wants in return are unclear.

The outcome would affect hundreds of thousands of northwest Ohio residents. Utility officials predicted that without a freeze, rates could rise 50 percent after 2005.

FirstEnergy Corp., of Akron, has been talking with staff members of the Public Utilities Commission of Ohio because the outset of electric deregulation three years ago was supposed to bring numerous competitors to the state that would offer cheaper electricity. But that hasn't happened.

“We have total uncertainty with respect to our energy policy in the future ... so we're all trying how to identify how can we buy some time,” said Robert Tongren, the Ohio Consumers' Counsel, a state watchdog agency.

FirstEnergy spokesman Ralph DiNicola said volatile price situation in the energy market nationally is a concern for the company.

“Rather than take our power to market at the higher price where there will be some uncertainty ... we're looking to keep our plants dedicated to Toledo Edison customers, so we have a more predictable revenue stream,” he said.

When deregulation of the electric industry in Ohio began, Toledo Edison's rates were frozen from Jan. 1, 2001, through 2005, providing time for competitors to enter the market. In return, FirstEnergy was permitted to bill customers to recoup $8.8 billion in debts for its nuclear power plants.

Whether the utility hopes to recoup more of its debts in return for an extended rate freeze is unknown. Mr. DiNicola would say only that the company is seeking a more steady “revenue stream” for investors and shareholders.

FirstEnergy officials warned this year that the company's rates were likely to rise sharply, perhaps as much as 50 percent, producing “rate shock,” after 2005.

Partly influencing the price volatility are standby power plants that produce electricity during peak demand times but at high costs, using natural gas fuel.

Those plants have drained some of the country's natural gas supplies, which are considered very low for this time of year, and that in turn has boosted the cost of the gas, and thus the cost of using the standby power plants.

Since deregulation began three years ago, 850,000 of FirstEnergy's 1.8 million customers in northwest and northeast Ohio have switched to another company to purchase electricity. FirstEnergy's Toledo Edison still transmits the energy, however, to homes and businesses and bills customers for that.

Elsewhere in the state, other utilities have not had much choice, and even in the metro Toledo area, the choices for homeowners are mostly restricted to one competitor offering a rate marginally lower than Toledo Edison's.

The Akron utility has been in talks with the PUCO staff for some time, but there is no timetable to present something to the commission, Mr. DiNicola said. A PUCO spokesman said the agency talks with many companies about concerns, and offered no specifics about the FirstEnergy talks.

Mr. Tongren said he hopes FirstEnergy will agree to a deal similar to one recently reached by Dayton Power & Light. That company's rate freeze was to end this year, but it agreed to a further decrease next year on the rate set when deregulation started and then to a freeze on that new rate through 2008.

But, the agreement pending PUCO approval would permit Dayton Power & Light to boost rates by up to 11 percent if fuel costs or environmental mandates require it.

“I see this as an insurance policy to see whether or not the market will develop before people say, `We've got to go back to regulating the price of a kilowatt hour,'” Mr. Tongren said.

The FirstEnergy talks have prompted a Cleveland area group of community representatives, the Northeast Ohio Public Energy Council, to ask to be represented in the discussions.

- MARY-BETH McLAUGHLIN



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