COLUMBUS - The Ohio Supreme Court yesterday received a crash course on electricity competition as it pondered the question of whether FirstEnergy Corp. was illegally granted approval to surcharge customers $2.9 billion over the next three years.
The Ohio Consumers' Counsel, Lucas County, Toledo, Maumee, Sylvania, Oregon, Perrysburg, and Holland argue that the Public Utilities Commission of Ohio simply renamed and extended the "stranded costs" utilities have been allowed to pass on to customers since 2002 to recoup the cost of nuclear power plant and other improvements.
"The commission has approved a $2.9 billion insurance premium," Assistant Consumers' Counsel Kimberly Bojko said. "This premium fails to offer any insurance for protecting consumers. The so-called rate stabilization plan does not stabilize rates. In fact, it allows increases in rates."
She said the plan could cost a residential customer $15 to $20 each month. The surcharge would apply to customers to whom the Akron parent of Toledo Edison delivers power, often regardless of whether the customer purchased that power from another supplier.
At issue is whether the 1999 law partly deregulating the electricity industry authorizes the PUCO, which was convinced a competitive electricity marketplace had yet to materialize, to ask utilities to submit alternative plans offering consumers stable rates.
In exchange for approval of the surcharge, FirstEnergy would freeze its current rates through 2008, with the exception of possible increases for rising fuel costs. FirstEnergy already has such a request before the commission, although deals have been worked out with some northwest Ohio mayors to defer those billings until 2009.
"As citizens, we were scratching our heads when [lawmakers] were doing this because the whole California fiasco was unfolding as they were going full speed ahead," Justice Paul Pfeifer said.
"I think some of the public utility companies even advised against it."
PUCO attorney William Wright countered, "But for this plan, FirstEnergy could charge what it wants . They didn't have to come forward ."
"You told them to," said Justice Pfeifer, who at one point referred to the rate stabilization charge as "a little extra booty."
Chief Justice Thomas Moyer said opponents to the rate plan have a "high hurdle" to clear to convince the court to break from precedent of deferring in such matters to the expertise of the commission.
To test whether competition was out there, the PUCO ordered a competitive auction last December in FirstEnergy's territory, which has the highest rates in the state. The resulting bids were higher than the generation rate offered by FirstEnergy.
"The OCC is standing here today and telling you: 'We wanted a competitive bid auction. We want our customers to pay more,' " Mr. Williams told the court. "That's a nonsensical argument."
The Consumers' Counsel, however, countered that the commission has taken away a consumer's choice between FirstEnergy's rate of 4.6 cents per kilowatt hour, a rate that could rise with fuel costs, and the closest bid of 5.5 cents that would be locked in for three years.
"They have a right to that choice," said Kerry Bruce, attorney for the Northwest Ohio Aggregation Coalition, which seeks bulk electricity rates for 130,000 residential and small-business customers in Lucas and Wood counties.
All seven justices presided over the arguments, despite a request from government watchdog Ohio Citizen Action that five of them, all Republicans, remove themselves from the case.
Chief Justice Moyer and Justices Evelyn Lundberg Stratton, Maureen O'Connor, Terrence O'Donnell, and Judith Lanzinger accepted a total of $125,000 in campaign contributions from FirstEnergy's political action committee, executives, and employees over the last 10 years.
Of the three contested court seats on the ballot last year, at least two, Chief Justice Moyer and Justice O'Donnell, attended an Aug. 6, 2004, fund-raiser at the home of FirstEnergy CEO Anthony Alexander at which roughly $61,000 was raised. Court spokesman Chris Davey, however, said court rules dictate they would not have been present when checks changed hands.
Justice Lanzinger was unsure if the Alexander event was among many fund-raisers she attended, but she indicated she was likely there.
"She said she wouldn't know Tony Alexander if she passed him on the street," Mr. Davey said.
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