Strickland Plan for Re-Regulation

Utilities rip Strickland's plan
Biggest companies say competition exists for energy deregulation
Friday, October 5, 2007 4:17 AM
By Paul Wilson
THE COLUMBUS DISPATCH
Electricity customers in Ohio could face much higher bills if Gov. Ted Strickland's energy plan is approved, the leader of the state's largest utility said yesterday.
Tony Alexander, president and chief executive of Akron-based FirstEnergy Corp., said there's enough competition for electricity customers to keep prices from rising sharply when markets are set to be deregulated in Ohio at the end of next year.
"The push to change Ohio law should be driven by facts, not fear -- fear that competitive markets don't exist for electricity, which simply isn't true," Alexander said in testimony before the state Senate Energy and Public Utilities Committee.
Strickland and others say the governor's plan would keep rates from skyrocketing. Under the plan, utilities would be forced to prove they have competition for selling electricity before they could move to market-based pricing.
Ohio and many other states have moved to deregulate their electricity markets. The hope was that customers could buy electricity from independent power providers instead of just the utilities whose wires are connected to their homes.
Proponents believed that competition would lower prices. But Strickland and others -- including some manufacturers, labor leaders and the Ohio Farm Bureau -- say competition never emerged in states where deregulation already has taken place. They also fear what might occur when full deregulation is set to take effect in Ohio in 2009.
"I don't know of anyone other than the utilities that are saying it's a competitive market," Strickland said. "That's a difference of opinion. What we're saying is (the utilities) have got a responsibility to demonstrate that there is a competitive market, and if they can do that, then they can go to market."
Calling it a "hybrid approach," Strickland wants to give utilities the choice of returning to a regulated environment by having the Public Utilities Commission of Ohio approve their rates or opting for market pricing -- but only if they can prove to the PUCO that a competitive market exists.
Columbus-based American Electric Power joined FirstEnergy this week in saying that Strickland's proposal doesn't provide utilities with that choice. Craig Baker, AEP's senior vice president of regulatory services, told legislators that the option was "illusory and, in reality, represents merely another regulated price option."
"AEP Ohio submits that this approach is shortsighted and prematurely abandons the decision to pursue market-based competition for Ohio customers," Baker said. FirstEnergy and AEP are the largest and second-largest electric utilities in the state, with about 3.5 million customers.
But not all of the state's utilities are in lock step on this issue. Dayton Power & Light and Duke Energy support Strickland's hybrid approach, although they asked for some changes. Their position pleased the Ohio Coalition for Affordable Power, a group affiliated with the Ohio Manufacturers' Association.
DP&L and Duke, in contrast to AEP and FirstEnergy, also support Strickland's proposal to diversify how electricity is generated in Ohio. Strickland wants 25 percent of electricity to come from "advanced" sources, such as wind and solar power, by 2025.
Dispatch reporter Mark Niquette contributed to this story.
paul.wilson@dispatch.com
"I don't know of anyone other than the utilities that are saying it's a competitive market."Gov. Ted Strickland