High court strikes down FirstEnergy program

The Public Utilities
Commission had approved the plan.

COLUMBUS (AP) — The FirstEnergy utility company can no longer use a program approved by regulators to recoup future increased fuel costs from its customers, the Ohio Supreme Court ruled Wednesday.

The Public Utilities Commission of Ohio had granted a request by the Arkon-based utility allowing it to spread the cost of anticipated fuel increases over 25 years through customer credits, but justices voided the plan and sent it back to regulators for adjustments.

In the 6-1 decision, other portions of the plan — which set rates for customers of the utility’s Cleveland Electric Illuminating, Ohio Edison and Toledo Edison companies — were upheld.

In the majority opinion, Justice Evelyn Lundberg Stratton said the commission contradicted a 1999 law deregulating the state’s electric power industry by allowing FirstEnergy to build fuel costs into rates charged by its separate power distribution companies.

Under the law, power generation was declared a competitive business and distribution a noncompetitive one.

Lundberg Stratton said the law prohibited utilities from intermingling their generation businesses with their distribution networks, meaning the costs of generating power for customers can’t be offset through the rates collected from distributing it to homes and businesses. Under deregulation, about 15 percent of FirstEnergy’s customers shopped around for generation services — though FirstEnergy continued to distribute the power to their homes.

Chief Justice Thomas Moyer, and Justices Maureen O’Connor, Terrence O’Donnell, Judith Ann Lanzinger and Robert R. Cupp joined Lundberg Stratton in the majority.

Justice Paul Pfeifer dissented with his fellow jurists’ decision to approve the bulk of FirstEnergy’s rate plan. He said moving energy costs into the future, even to keep rates stable, is a bad idea.

FirstEnergy reaction

FirstEnergy spokeswoman Ellen Raines said the company believes the court misunderstood how shopping credits worked, mistakenly believing the company was using them to collect fuel costs from the fraction of its customers in its service territory who buy power elsewhere.

“If they buy from the utility companies, that cost [on your electric bill] would include fuel costs,” she said. “If they purchase generation from an outside supplier, they’re not going to pay for the fuel. It comes off their bill through a shopping credit.” Customers can then use that cost savings to pay the other provider, she said.

Raines said FirstEnergy plans to ask the Supreme Court to reconsider its ruling, and will simultaneously file a proposal with the PUCO for an alternative way of collecting its fuel costs.

She said the company will propose collecting the fuel costs up front, rather than deferring them into the future. The change would amount to “tenths of a cent” per kilowatt hour in additional charges, she said.

Gov. Ted Strickland proposed a new energy policy Wednesday revisiting that 1999 law, which had been supposed to usher in electric competition beginning in 2009.

PUCO Chairman Alan Schriber, at a briefing for reporters on Strickland’s policy, said the effect of the ruling could diminish if the Legislature approves Strickland’s plan to allow the agency to set prices for electric generation, as it did before the 1999 law took effect.

“I think that strengthens the argument of what we’re doing,” Schriber said.