Gov. Strickland's utility plan fizzles out
Legislature dilutes energy rates proposal Monday, November 12, 2007John FunkPlain Dealer Reporter
What if your bank suddenly changed your mortgage rate? Bet you would do what it took to find out why.
That's kind of what's happening in Columbus. Lawmakers are trying to figure out how utilities should calculate what you pay for electricity.
A lot of people find the topic is easy to ignore. The discussion is loaded with jargon like "rate stabilization" and "electric security plan." And it practically takes college math to figure out a utility bill, anyway.
Legislature dilutes energy rates proposal Monday, November 12, 2007John FunkPlain Dealer Reporter
What if your bank suddenly changed your mortgage rate? Bet you would do what it took to find out why.
That's kind of what's happening in Columbus. Lawmakers are trying to figure out how utilities should calculate what you pay for electricity.
A lot of people find the topic is easy to ignore. The discussion is loaded with jargon like "rate stabilization" and "electric security plan." And it practically takes college math to figure out a utility bill, anyway.
What's at stake
When other states have allowed utilities to base rates on wholesale prices, consumers have immediately seen increases - as much as 70 percent higher in Maryland over the last year. That's great news for utility shareholders but a nightmare for customers and politicians who let it happen.
Rate shock in Ohio probably would be worse for consumers served by Columbus-based American Electric Power than for FirstEnergy Corp. customers, who are used to rates 20 percent to 50 percent higher than in other parts of Ohio. FirstEnergy insists consumers' rates would go up only slightly.
Ohio Consumers' Counsel Janine Migden-Ostrander said market rates could be less than what FirstEnergy would negotiate with the Public Utilities Commission of Ohio. She wants the PUCO to figure out which is less for each utility - the market rate or PUCO rate - and customers would pay that.
Hidden changes
The power companies fumed over the governor's proposal and sent an army of lobbyists, public-relations specialists and big-gun attorneys to head off the bill in the General Assembly.
After more than 50 hours of public hearings, the Ohio Senate approved a substitute bill 12 days ago. Buried in 87 pages of legal-speak are dozens of subtle amendments. Among the changes: Consumer rates - including FirstEnergy's, the highest in the state - will never decrease.
Senators added language to the bill that sets February 2008 rates as the starting point for increases, which would be negotiated with the PUCO.
That change was far different from what Strickland proposed. In his version, new Ohio rates would be determined by what it actually cost utilities to generate the power, including the value of power plants and a rate of return - the way it always was when utilities were regulated.
The thicket of Senate alterations also means manufacturers and other big industrial users would keep their deep discounts indefinitely. They had argued that without them, Ohio manufacturing would be unable to compete.
Renewable energy
Other last-minute modifications probably will dash the governor's vision of wind farms and other clean-power plants.
The original bill required utilities by 2025 to produce 25 percent of the power they sell with wind, solar and other "advanced energy" systems such as fuel cells, high-tech coal and nuclear plants. That would create "tens of thousands" of jobs in new industries, jobs that are already being created in states with similar renewable rules, the governor argued.
When senators were done with it, the bill still required the PUCO to make annual reports, but the commission couldn't set interim benchmarks.
Instead, the PUCO would be required to hold only one hearing - in 2025. If utilities drag their feet, they would not be required to expand renewable-energy sources if doing so would raise overall average rates more than 3 percent.
The city of Cleveland, environmental groups and the consumers' counsel argue that the new language means no wind turbines will be built here, no wind turbine manufacturers will come to Ohio, and no jobs will be created.
The Strickland administration counters that renewable energy would be on the table every time a utility asked the PUCO for a rate increase.
An Ohio House committee began hearings last week and plans a leisurely pace - one hearing a week - through January, a slap in the face of the governor, who asked lawmakers to approve his bill by Dec. 31.
In the end
Rates will increase in 2009 - but not skyrocket. Assuming the governor's bill is enacted, don't look for FirstEnergy to immediately bully its way past the governor and the PUCO in 2009.
Instead, FirstEnergy will negotiate rate increases while holding out the prospect to stock analysts that its negotiated rates will move closer to what it could charge by basing rates on wholesale markets. And as the gap narrows, wholesale markets will ultimately become the standard. Profits will increase.
To reach this Plain Dealer reporter:
jfunk@plaind.com, 216-999-4138
What if your bank suddenly changed your mortgage rate? Bet you would do what it took to find out why.
That's kind of what's happening in Columbus. Lawmakers are trying to figure out how utilities should calculate what you pay for electricity.
A lot of people find the topic is easy to ignore. The discussion is loaded with jargon like "rate stabilization" and "electric security plan." And it practically takes college math to figure out a utility bill, anyway.
Legislature dilutes energy rates proposal Monday, November 12, 2007John FunkPlain Dealer Reporter
What if your bank suddenly changed your mortgage rate? Bet you would do what it took to find out why.
That's kind of what's happening in Columbus. Lawmakers are trying to figure out how utilities should calculate what you pay for electricity.
A lot of people find the topic is easy to ignore. The discussion is loaded with jargon like "rate stabilization" and "electric security plan." And it practically takes college math to figure out a utility bill, anyway.
What's at stake
When other states have allowed utilities to base rates on wholesale prices, consumers have immediately seen increases - as much as 70 percent higher in Maryland over the last year. That's great news for utility shareholders but a nightmare for customers and politicians who let it happen.
Rate shock in Ohio probably would be worse for consumers served by Columbus-based American Electric Power than for FirstEnergy Corp. customers, who are used to rates 20 percent to 50 percent higher than in other parts of Ohio. FirstEnergy insists consumers' rates would go up only slightly.
Ohio Consumers' Counsel Janine Migden-Ostrander said market rates could be less than what FirstEnergy would negotiate with the Public Utilities Commission of Ohio. She wants the PUCO to figure out which is less for each utility - the market rate or PUCO rate - and customers would pay that.
Hidden changes
The power companies fumed over the governor's proposal and sent an army of lobbyists, public-relations specialists and big-gun attorneys to head off the bill in the General Assembly.
After more than 50 hours of public hearings, the Ohio Senate approved a substitute bill 12 days ago. Buried in 87 pages of legal-speak are dozens of subtle amendments. Among the changes: Consumer rates - including FirstEnergy's, the highest in the state - will never decrease.
Senators added language to the bill that sets February 2008 rates as the starting point for increases, which would be negotiated with the PUCO.
That change was far different from what Strickland proposed. In his version, new Ohio rates would be determined by what it actually cost utilities to generate the power, including the value of power plants and a rate of return - the way it always was when utilities were regulated.
The thicket of Senate alterations also means manufacturers and other big industrial users would keep their deep discounts indefinitely. They had argued that without them, Ohio manufacturing would be unable to compete.
Renewable energy
Other last-minute modifications probably will dash the governor's vision of wind farms and other clean-power plants.
The original bill required utilities by 2025 to produce 25 percent of the power they sell with wind, solar and other "advanced energy" systems such as fuel cells, high-tech coal and nuclear plants. That would create "tens of thousands" of jobs in new industries, jobs that are already being created in states with similar renewable rules, the governor argued.
When senators were done with it, the bill still required the PUCO to make annual reports, but the commission couldn't set interim benchmarks.
Instead, the PUCO would be required to hold only one hearing - in 2025. If utilities drag their feet, they would not be required to expand renewable-energy sources if doing so would raise overall average rates more than 3 percent.
The city of Cleveland, environmental groups and the consumers' counsel argue that the new language means no wind turbines will be built here, no wind turbine manufacturers will come to Ohio, and no jobs will be created.
The Strickland administration counters that renewable energy would be on the table every time a utility asked the PUCO for a rate increase.
An Ohio House committee began hearings last week and plans a leisurely pace - one hearing a week - through January, a slap in the face of the governor, who asked lawmakers to approve his bill by Dec. 31.
In the end
Rates will increase in 2009 - but not skyrocket. Assuming the governor's bill is enacted, don't look for FirstEnergy to immediately bully its way past the governor and the PUCO in 2009.
Instead, FirstEnergy will negotiate rate increases while holding out the prospect to stock analysts that its negotiated rates will move closer to what it could charge by basing rates on wholesale markets. And as the gap narrows, wholesale markets will ultimately become the standard. Profits will increase.
To reach this Plain Dealer reporter:
jfunk@plaind.com, 216-999-4138
posted by Mark G Pogue at 1:51 PM
0 Comments:
Post a Comment
<< Home