August 1, 2008

FirstEnergy Seeks to Hike Area Electric Rates

By Jim Provance, The Blade, Toledo, Ohio

Aug. 1--COLUMBUS -- The typical Toledo Edison customer could see a barely noticeable drop in his electric bill next year under a proposed rate plan filed yesterday with state regulators.

But the longer-term outlook for the next three years would be higher prices.

"Considering our costs to produce and deliver electricity have increased dramatically since our last base-rate cases were decided more than a dozen years ago, we've designed a plan that provides for modest increases in electricity prices over the next three years," Anthony J. Alexander, president of Toledo Edison's Akron-based parent, FirstEnergy, said.

A new law reasserted the state's regulatory authority over electric utilities, slamming the brakes on the state's march toward an open electricity market that had resulted in price spikes in some other states which got there first.

The law required utilities to instead file three-year regulatory plans with the Public Utilities Commission of Ohio. Those plans invariably included requests for rate hikes for the three major utilities whose rate plans expire on Dec. 31.

Under FirstEnergy's proposal, the average rates for customers across all of its subsidiaries would climb 5.3 percent next year, 4 percent in 2010, and 6 percent in 2011.

But in the higher-cost Toledo Edison territory, the monthly bill for the typical residential customer using 750 kilowatt hours would drop by 16 cents in 2009. The bills then would climb, however, by $3.06 in 2010 and $3.30 in 2011.

By comparison, Ohio Power's parent, Columbus-based American Electric Power, asked the PUCO to approve a rate hike of 45 percent over three years. Cincinnati-based Duke Energy's request involves an 11 percent hike over three years.

"The anticipated impact of the Electric Security Plans would be a one-two punch to customers' wallets, as any rate increases would be on the heels of the higher distribution rates proposed by most of Ohio's major electric and natural gas utilities," Ohio Consumers' Counsel Janine Migden-Ostrander said.

The new law places decisions on rates in the hands of the PUCO, which will hold public hearings before issuing final decisions within 150 days.

While the law was designed to prevent price spikes, price increases still were generally expected in Ohio after a decade of relatively stable rates. Some electricity marketers and Ms. Migden-Ostrander, however, had suggested that if any area of the state stood a chance at seeing lower bills, it would be FirstEnergy's northern Ohio territory.

The utility's rates are the state's highest, partly because of surcharges that the utilities had been allowed to tack onto customers' bills to recoup investments in such things as nuclear power plants. Those surcharges will expire with current rate plans at the end of the year.

"For those who were concerned about the very large increases seen in some states, we're hopeful this addresses those concerns," FirstEnergy spokesman Ralph DiNicola said. "If the rates were approved for [all utilities] as submitted, it would largely eliminate whatever [price] variance existed in the past."

FirstEnergy's proposal includes an alternative market plan that the PUCO could consider. The plan would involve competitive bidding among electricity suppliers to serve customers in FirstEnergy's territory. Suppliers would bid on FirstEnergy business in increments of 100 megawatts of power.

"We believe the ESP would still be a savings compared to the market," Mr. DiNicola said. "The commission has the option in the third year to see if the market is a better deal, so for customers this is best of all worlds."

David Fein of electricity supplier Constellation Energy had yet to study the proposal.

"Whatever the rate plan looks like and how it's adopted by the commission, we are hopeful that Ohio consumers, especially those in northern Ohio who have suffered with higher rates, have the ability to select a competitive supplier if they so choose."

According to its proposal, FirstEnergy would offer to reduce the increase in its base generation rates by 10 percent for those who choose to buy their power from the local utility during the three-year period instead of buying it from another supplier. That amount would be deferred and later spread out and collected during a period of up to 10 years.

FirstEnergy waited until after the stock market closed yesterday before filing its plan. It was the last of the three major Ohio utilities whose current rate plans this year to do so.

The company noted that its Toledo Edison customers are currently paying $1.70 more per kilowatt-hour of power than they did in 1996 when the utility had its last rate case. The average bill has increased more than that, however, because consumers' power consumption has increased 21 percent in that time.

For AEP's Ohio Power, which also serves portions of northwest Ohio, the average customer's monthly bill could climb $12 next year. The utility blamed the spike on higher fuel costs.

"The fact is that coal has doubled in cost in the last year alone, dramatically affecting AEP Ohio's cost," AEP Ohio President Joe Hamrock said. "The tools given to us by the state's new energy plan allow us to phase in those fuel price increases over time so that, unlike the spikes Ohioans see in so many products, AEP Ohio's rate increases are spread out to be made more affordable."

Contact Jim Provance at: [email protected], or 614-221-0496.


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