New energy law gets mixed reviews

COLUMBUS (AP) — A new energy law designed to avert large price spikes is getting mixed reviews from Ohio’s consumer advocate and regulators as new utility rates take effect.

Ohio Consumers’ Counsel Janine Migden-Ostrander said the law, which lawmakers have praised, has resulted in higher increases than expected.

“My guess is that folks didn’t expect this kind of increase,” she said, referring mainly to a proposed 20 percent average increase over three years for Ohio customers of American Electric Power. “They knew they were coming but didn’t quite expect the magnitude of them.”

But Alan Schriber, chairman of the Public Utilities Commission of Ohio, said the law was maintaining stability in rates that would have ballooned had no changes been made.

Last year, lawmakers and Gov. Ted Strickland approved the new law to undo a previous law that would have removed regulatory rate caps and enabled power companies to set their rates on the open market. They pointed to skyrocketing rates in other states that had gone to the market approach.

The new Ohio law gives companies the choice between regulation and the market. If the market rates are determined to be lower than regulated rates, they can go to the open market.

The major utility companies have initially elected to keep regulated rates under the new system.

AEP Ohio, which serves about 1.5 million customers in 61 of Ohio’s 88 counties and in the northern panhandle of West Virginia, originally asked the utilities commission for a 52 percent increase over three years but was denied. Instead, the increase would be about 20 percent, or about $15 a month on the average bill of $80 by 2011.

The company has not yet accepted the commission’s plan.

The consumers’ counsel said it will file an application for a rehearing of the rate increase in the coming weeks. The AEP plan was the only one of four rate agreements with utilities that Migden-Ostrander didn’t sign on to.

But Schriber and AEP said the company’s rates have historically been too low and it now needs to recoup its investments.

“AEP was particularly difficult because that particular company hadn’t had a rate increase for ages, and even after their increases they are still the lowest-cost utility in the state,” Schriber said.

FirstEnergy Corp. had asked the commission for a 5.3 percent rate increase in 2009, a 4 percent bump in 2010 and a 6 percent hike in 2011. The average bill would have gone from about $94 to $109 over the three years, representing a 16 percent increase overall.

But the commission knocked those increases down to a level the company found unacceptable.

The new law gave utilities the right to reject the commission’s rate plan, which FirstEnergy did. The two sides have now agreed to let the utility select its generation rate through a competitive bid process in May.

“It’s like a defendant coming in and saying ’Gee, judge, I don’t like the sentence’ or ’I don’t like the guilty verdict so let’s do this over,”’ Migden-Ostrander said.

But Schriber and FirstEnergy said the competitive bid process is likely to lead to no increase from current rates, and perhaps a decrease.

“What we’ve tried to do with our plans we’ve proposed is figure out how to bring the price customers pay for electricity on par with the costs it takes to produce it,” said spokeswoman Ellen Raines.

FirstEnergy operates the nation’s fifth largest investor-owned electric system with 4.5 million customers in New Jersey, Ohio and Pennsylvania.

Largely because of decreased fuel costs, Duke Energy Corp.’s Ohio customers saw a modest rate declines in the first quarter of this year under the new energy plan. But it remains to be seen what will happen over the rest of the year.

State Sen. Jon Husted, the Kettering Republican who had a big hand in the energy bill as House speaker, said it has largely maintained the status quo.

“The law avoided what the doomsday crew was saying,” Husted said. “It remains to be seen what the future will hold.”