BY MIKE BOYER | MBOYER@ENQUIRER.COM
FAIRFIELD - Retirees Pierson and Charlotte Dejager have lived
in the same two-bedroom, all-electric condominium off Mack Road for 20
years. Although they're on a fixed income, Charlotte Dejager says their
$150-a-month electric bills are manageable.
"We're pretty conservative," said Charlotte Dejager. "We regularly turn our thermostat down."
But
what the Dejagers and other Ohioans pay for electricity in the future
will be affected by an emerging debate in Columbus over the state's
8-year-old electric deregulation law.
Ohio was one of 17 states and the District of Columbia that enacted
electricity deregulation laws in the late 1990s. The theory was that
deregulating the electricity-generation portion of customer bills -
while regulators continued to monitor the cost of transmission and
distribution - would spark market competition and lead to lower rates.
For
reasons ranging from the Enron debacle to the nature of electricity (it
can't be stored), those lower rates haven't materialized. And in states
such as Illinois and Maryland, when freezes expired, prices skyrocketed
50 percent or more.
That has raised fears among utilities, large
industrial customers and others about what will happen when plans to
ease the transition to market-based rates in Ohio begin expiring at the
end of 2008.
"We've watched what's happened in other states, and
it's not good. In Maryland, prices spiked 70 percent. We don't want to
see that happen here," said Eric Burkland, president of the Ohio
Manufacturers Association.
State Sen. Robert Schuler, R-Sycamore
Township, chairman of the Ohio Senate Energy and Public Utilities
Committee, said deregulation "is one of the most complicated issues we
face ...
"But we've got to do something. If we do nothing and the
state goes to a market-based system, we could see electric rates spike
dramatically."
Not everyone wants to abandon Ohio's deregulation law.
Ohio
Consumers' Counsel Janine Migden-Ostrander, who represents residential
customers before the Public Utilities Commission of Ohio, said she's
not ready to give up on the idea of a deregulated market "because we
haven't given market-based pricing a chance to work."
Although
the law took effect in 2000, a series of price caps and transition
plans have prevented a true competitive market from developing,
Migden-Ostrander and others say.
Terry Harvill, vice president of
energy policy for Constellation Energy Inc., one of a handful of
independent energy marketers who've established a foothold in Ohio,
says: "There's a perception that the market's broken, and that's not
the case."
He argues that transition plans, which have capped
rates, and special rates granted to some large industrial customers in
northern Ohio have distorted the competitive landscape and prevented
suppliers such as Constellation from being competitive.
MANUFACTURERS NERVOUS
The Columbus-based manufacturers association has teamed with a new
coalition of some of the state's largest employers, including Procter
& Gamble Co., Ford Motor Co. and AK Steel, to push for new
legislation to re-regulate Ohio's four large investor-owned utilities -
including Duke Energy, which provides power to 680,000 customers in
Southwest Ohio.
Because next year is an election year and it will
take time to get any new rate plans through the utilities commission,
the Ohio Coalition for Affordable Power wants legislative action before
the end of 2007.
Electric rates help maintain the state's economic competitiveness, says the coalition.
"It's
a huge problem." said Alan McCoy, vice president of AK Steel and
co-chairman of the coalition with Robert Lapp, vice president of the
Timken Co. in Canton.
AK's steel plants in Ohio use 3.5 billion
kilowatt-hours of electricity each year. "Every tenth of one cent
increase in electricity costs us $1 million," said McCoy.
The
coalition's plan - which would encourage the utilities, through a
series of incentives, to go back before the utilities commission to win
approval for cost-based electric rates in exchange for granting them
exclusive service areas - isn't the only plan circulating in Columbus.
The
Ohio Electric Utility Institute, which represents Duke Energy and the
other investor-owned utilities, has its own proposal that would allow
utilities to recover the cost of new generating plants while extending
the current rate stabilization plans.
But Beverly Martin, the
institute's managing director, said, "We're not interested in going
back to a regulated (utility) model" like that proposed by the
manufacturers coalition.
"We want to make sure rates are affordable, predictable and assure that there's an adequate supply of electricity," she said.
WHO PAYS FOR PLANTS?
David Boehm, a Cincinnati utilities lawyer who helped develop the
manufacturing coalition's proposal, said one problem with deregulation
is "who pays for new generating plants?"
The state's utilities
will undoubtedly have to build new plants to meet growing demand and
replace older, less environmentally friendly facilities, he said. The
advantage of requiring utilities to come before the commission, he
said, is that it would force them to justify their prices based on
costs they incur.
Environmental advocates such as Environment
Ohio say the state needs to adopt standards requiring a certain
percentage of electric generation to be from renewable sources, such as
wind and solar, as well as requiring energy-efficiency standards to
slow the need for new generation. Amy Gomberg of Environment Ohio said
both ideas would generate new jobs in Ohio and lessen the state's
dependence on fossil fuels.
Consumers' Counsel Migden-Ostrander
said she's also concerned that the manufacturers' plan gives larger
users an option to pursue market-based rates while not giving that same
opportunity to residential consumers.
She wants a plan that would
require utilities to return to making long-term forecasts of demand to
justify new plant construction, put limits on construction costs and
require competitive bidding on new plants while requiring renewable
energy sources and energy-efficiency standards to hold down future rate
increases.
One of the incentives proposed by the manufacturers
would allow utilities to recover the cost of constructing new
generating plants while work is in progress rather than allowing them
to recover the costs only after a plant is 75 percent complete. But
Migden-Ostrander fears this could saddle consumers with unnecessary
construction costs.
Yet to weigh in on the debate is Gov. Ted
Strickland. He's promised to unveil his own proposal - which would
require utilities to generate a certain portion of their electricity
from renewable and advanced energy sources - early next month.
Charlotte Dejager, 80, says she doesn't know what to make of the competing electric proposals, but she's sure of one thing.
"I don't care what they say. I don't think my electric rates will go down," she said.
