Soaring rates for electric feared Valley plants warn of increases of 100%

By DON SHILLING

VINDICATOR BUSINESS EDITOR

YOUNGSTOWN — Local steel producers are fearing large increases in electricity rates in 2009.

They say you should, too.

FirstEnergy Corp. officials say the comments are scare tactics designed to maintain artificially low rates for industrial companies.

The give-and-take comes as the state is set to move to a deregulated energy market at the end of 2008, meaning electricity users would have to buy power at whatever price the market bears.

Officials from WCI Steel in Warren and V&M Star in Youngstown met Monday with The Vindicator to explain their belief the industry will be threatened by the change.

Based on what has happened in other states, prices could increase by 50 percent or even 100 percent, said Roger Lindgren, V&M president.

V&M spends about $15 million a year on electricity, while WCI spends between $18 million and $20 million.

Tim Roberts, a WCI spokesman, said even a 50 percent increase would wipe out the profit the mill has from operations in a good year.

Lindgren said large increases would threaten many area businesses.

“Industrial businesses here are not flush with profits and cash,” he said.

If profits are cut, companies won’t have the money to invest in their operations, and they won’t be able to compete, he said.

Residential users also should be concerned about what will happen to their rates, said Rocco Tondo, superintendent of energy operations at WCI.

“You have the guy who just spent $60 to fill up his SUV and then had to pay a $400 natural gas bill. Now the electric company is knocking at the door,” he said.

Ralph DiNicola, a FirstEnergy spokesman, said these predictions sound like the same ones that industrial companies made in the late 1990s when they were pushing for deregulation.

At the time, large electric users were hoping a market-based system would bring down prices.

“They are using scare tactics to get support for a position,” DiNicola said.

Special deals

Industrial companies are paying rates that are just one-quarter or one-third of residential rates, he said.

Big users should get a price break, but those rates are hard to justify because residential users are having to pay more to cover them, he added.

Ellen Raines, another FirstEnergy spokeswoman, said no one can predict what prices would be in an unregulated market. She added, however, that she doesn’t expect a substantial increase in residential rates based on current market prices.

The debate stands to heat up now that Gov. Ted Strickland has proposed an energy plan for Ohio.

The local steelmakers have joined with the Ohio Coalition for Affordable Power in supporting suggestions made by the governor. The coalition is affiliated with the Ohio Manufacturers’ Association.

The plan calls for a return to regulated rates unless the utilities can prove that a competitive market exists.

Tondo from WCI said deregulation won’t work because competition hasn’t developed. Suppliers haven’t stepped in with new electricity-generating capacity because they can’t be assured of a return on the investment, he said.

Tondo said he would like to see the Legislature adopt an energy bill that supports Strickland’s ideas by the end of the year, so regulated rates could be in place by the end of 2008.

FirstEnergy officials said the debate on the issue is just beginning and many possibilities exist, including phasing in rate increases or negotiating an extended-rate plan. The company has been operating under such a plan since 2006, when the start of deregulation was delayed.

DiNicola said one option that is not acceptable is returning to the former system of utilities submitting rate cases to the Public Utilities Commission of Ohio for approval.

Based on the last law change, utilities created separate companies to operate their power generation plants. FirstEnergy holds that it would be unconstitutional to pass a law that would take those assets without compensation and place them back under a regulated utility.

shilling@vindy.com