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PUCO denies FirstEnergy's market-based electric rate plan
Published on Wednesday, Nov 26, 2008
From staff and wire reports
FirstEnergy Corp.'s (NYSE: FE) proposal for market-based electricity rates was rejected by Ohio regulators, clearing the way for the state to extend cost-based rates.
The Public Utilities Commission of Ohio denied the proposal at its regular meeting Tuesday in Columbus.
As an alternative, the Akron-based utility had proposed fixed rate increases over three years for its 2.1 million customers in the state in its Electric Security Plan. No action was taken on that proposal.
Ohio joined about half of U.S. states in deregulating power rates in the 1990s, betting that competitive markets would improve efficiency and lower prices. Instead, customers in states including Illinois and Maryland faced a surge in bills.
This year, Ohio extended a Jan. 1 deadline for market-based rates, ordering utilities to submit cost-based alternatives.
Under FirstEnergy's Market Rate Option plan, power prices would have been set annually by competitive bidding. Its alternative, the ESP, would increase total rates by 5.3 percent next year, 4 percent in 2010 and 6 percent in 2011, according to a company statement.
FirstEnergy spokeswoman Ellen Raines said the utility has maintained all along that the ESP was the ''more favorable option to customers.''
The company issued the following
statement: ''It is clear from [Tuesday's] order that the Commission is not interested in supporting an MRO for providing generation service to customers an option included in law that was enacted by the Ohio General Assembly and signed by the Governor. The legislature carefully crafted the provisions needed to implement an MRO. [Tuesday's] order adds criteria that are not in the law and requires compliance with rules that are not yet in effect. The rules also seek to add criteria that are not in the law. The Commission's role is to follow the law, not create new law.''
Commission staff and Ohio consumer advocate Janine L. Migden-Ostrander said in filings that the market-price plan failed to protect customers against possible price-gouging.
Current rates in Ohio expire Dec. 31. Gov. Ted Strickland, a Democrat, persuaded legislators to replace a law that required market-pricing of power beginning Jan. 1, 2009. The new law allows regulators to choose a method for setting rates.
The commission has yet to act on proposals by American Electric Power Co. and Duke Energy Corp. to extend cost-based rates for their Ohio customers.
Staff writer Betty Lin-Fisher and Bloomberg News contributed to this report.
Get the full article here.

