FirstEnergy threatens to withdraw plan to extend rates

2/26/2004

COLUMBUS - FirstEnergy Corp. repeatedly threatened yesterday to withdraw its controversial plan asking regulators to extend its current electricity rates three more years.

The Akron-based parent of Toledo Edison, reacting to opponents of the revised plan, said it doesn't appear the Public Utility Commission of Ohio will meet the company's deadline of March 31 for a decision.

Anthony Alexander, company president and chief executive officer, told lawyers for groups opposing the plan that it is only a matter of time before reality sets in for Ohio's energy consumers.

"I believe they are saving money short term, but long term not necessarily because we are deferring the highly incentivized shopping credits and they're going to pay for it in time," he said. The company has presented two options to the PUCO.

The first would freeze the company's rates at current levels through 2008 and continue temporary charges the company has been permitted to pass on to customers through Dec. 31, 2005, for debt the utility took on prior to the electricity supply's being opened to competition.

The second option would lead to annual auctions for a single supplier to serve FirstEnergy's entire northern Ohio territory, a move it argues could subject customers to price spikes in a market that has yet to draw much interest from outside electric suppliers.

FirstEnergy submitted a revised rate plan on Monday to state regulators that Mr. Alexander said was crafted to address some opponents' concerns.

The company dropped a provision allowing it to unilaterally terminate the rate freeze if it permanently loses 250 or more megawatts of power because a power plant is shut down due to environmental mandates.

The new version would require the commission

to approve the termination if it found the shutdown would "materially or adversely impact" the company.

The plan also increases the so-called "shopping credits" for consumers by 10 percent a year during the three-year extension over the prior proposal. These credits are used by consumers to shop for better deals.

That's not good enough, said Leslie Kovacik, attorney for Toledo and the Northwest Ohio Aggregation Council, which pools the buying power of residential and small-business consumers to negotiate better deals.

The council currently buys power at 4.33 cents per kilowatt hour. The revised shopping credit for Toledo Edison would be 4.13 cents in 2006 under the plan, 4.36 in 2007, and 4.59 in 2008.

Also at yesterday's hearing, an electricity user questioned whether FirstEnergy had provided a hint that it was up for sale in its filing Monday with the U.S. Securities and Exchange Commission.

Hearing examiners would not allow the questions to be addressed to Mr. Alexander.

In preparation for its annual shareholders meeting May 18, FirstEnergy filed a preliminary proxy with the SEC, which spelled out some severance packages for executives.

Glenn Krassen, attorney for Northeast Ohio Public Interest Council, a Cleveland-based pool of energy buyers, questioned what that meant.

"It is vitally important for the commission to understand whether this is all a prelude to the company being acquired by another company, and what effect that would have on the ratepayer," he said.

Putting all or part of the company for sale, however, requires a specific notification to the SEC, which the utility has not done.

Severance packages for management often are included in proxy statements, which disclose company compensation of all forms to executives.