A high-stakes poker game over whether to re-regulate the
state's electric utilities gets under way today. Gov.
Ted Strickland will deal the opening hand, unveiling
legislation to fix deregulation, which everyone agrees has
failed to create competition and lower consumers'
bills. Electric rates in Ohio, statewide, are average for
the nation, but they are certain to go up. The question is:
How much? All of the players in this game hope the cards
fall their way. However they fall, the game ends Dec. 31,
2008, when the state loses control over retail rates unless
the current law is amended.
The industrial users
Chief among the players in this big-money contest are large
industrial users, who pushed a previous generation of
lawmakers into deregulation a decade ago.
Led by the Ohio Manufacturers’ Association, they want to
return to classic regulation — provided that they be allowed
to continue to “shop” — that is, to buy from outside
suppliers. The largest industries already enjoy
significantly lower rates — paying about a fourth of what
consumers face — but they warn that any increases could
drive them out of business.
Or at least out of state. The industrials argue that without
a return to regulation, the utilities will not be able to
afford the construction of new power plants. Under classic
regulation, utilities are able to raise money to finance
power-plant construction because Wall Street knows that
rates set by states will guarantee a revenue stream. No
large plants have been built in Ohio since deregulation
began Jan. 1, 2001, manufacturers note, and continuing on
the present course will lead eventually to power shortages.
The utilities
The Ohio Electric Utility Institute, a trade and lobbying
group, quietly proposed in July that utilities be allowed to
increase rates to pay for new power plants. The proposal
also would give them the option of using auctions to set
market-based rates, or state regulators could set prices for
them. The utilities then separately espoused their own
proposals. FirstEnergy Corp., whose three distribution
companies have the highest rates in the state, got a head
start in July by behaving as if current deregulation laws
would not be amended.
The Akron-based utility announced it was ready to go to a
free market and filed a plan with the Public Utilities
Commission of Ohio to use a series of wholesale auctions to
set prices in 2009. The utility asked the PUCO to rule by
November, which would be lightning speed for the agency,
indicating this might have been a tactical maneuver.
But what FirstEnergy did without fanfare over the last two
years turns out to be the most significant - and it's
why the state cannot simply reverse deregulation.
FirstEnergy moved ownership of its power plants - and
associated debt -from the old distribution companies such as
Cleveland Electric Illuminating Co. to a new, unregulated
subsidiary called FirstEnergy Solutions. None of the
state's other utilities did this. Columbus-based
American Electric Power supports FirstEnergy's auction
idea.
The greens
On the edge of the poker game are the environmentalists and
efficiency proponents who have argued that the state must
require the utilities to generate a portion of their total
electrical production with so-called renewables, chiefly
wind turbines and perhaps solar panels.
Environment Ohio cranked out yet another jobs study arguing
that forcing utilities to generate 20 percent of their total
production with wind turbines by 2020 would create the
equivalent of 3,000 permanent jobs, increase wages paid by a
cumulative net total of $3.7 billion and prepare Ohio for
global warming.
A coalition of green groups has already appealed to
lawmakers to set a 20 percent renewable energy standard and
require utilities to allow more small-scale power generation
by consumers, including homeowners.
The group also advocates broad legislation setting
electrical efficiency standards and requiring utilities to
help customers meet them. The Ohio Consumers’ Counsel nearly
a year ago suggested the state use an auction system to set
market prices in 2009 rather than reregulate.
The counsel still argues that any new law ought to include
the flexibility to allow market rates. The agency also
strongly backs efficiency standards, a renewable mandate and
more power generation by customers.
