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Manufacturers want stable electricity prices
By Eric Burkland
Published on Sunday, Feb 24, 2008
COLUMBUS: Ohio is no longer a finalist for a new steel mill and the $1 billion investment it would bring. An executive who is helping Steel Development LLC decide where to locate said uncertainty over the plant's power costs tipped the balance to Ohio's competitors.
This dismal news is just the latest example of why state lawmakers must promptly complete work on a bill that would bring affordable and reliable electricity to Ohio. Passage of Senate Bill 221 would guarantee price stability by allowing a state board — rather than today's dysfunctional marketplace — to decide how much electric companies can charge their customers.
But this important legislation is stalled in the Ohio House of Representatives. In the 1990s, Ohio joined Maryland, Illinois and 14 other states that voted to let the market set the price of electricity. The logic seemed simple: Deregulation would lower prices by spurring competition and investment. Instead, prices soared. Electric bills for customers in Maryland rose 71 percent — almost overnight. In Illinois, they shot up 55 percent.
In market states, customers of all kinds — from homeowners to hospitals to electricity-hungry aluminum and steel companies — have paid $48 billion more each year for power than they would have paid in states where government boards set electricity rates, according to figures compiled by the Energy Information Administration.
Even more troubling is growing evidence that today's so-called ''market'' is subjected to manipulation. In Illinois, Exelon Corp. — a utility services holding company — agreed to pay the lion's share of a $1 billion settlement amid allegations of price fixing; in Texas, state regulators want a utility to pay $171 million in penalties for allegedly withholding power to drive prices skyward; and PJM Interconnection's own market monitor unearthed evidence of ''excess'' profits by generators.
Ohio has avoided the price spikes, so far, because price caps have been in place since 1999. Knowing that those caps will begin to expire at the end of this year, and mindful of the chaos in other states, the Ohio Manufacturers' Association joined with consumer groups, other business leaders and labor to craft a solution that would bring price stability to Ohio, while still treating all consumers and all utility companies fairly.
Because SB 221 would lock in profits earned by the utilities as of Feb. 1, 2008, Ohio's investor-owned utilities would continue to earn hefty profits for their shareholders. Because it would lock in rates paid by electricity customers, consumers would be shielded from the immediate price hikes seen in market states.
Any utility wanting to charge more would have to convince state regulators, during an open process, that additional charges are reasonable and justified. The bill also seeks to address another unintended consequence of deregulation: A severe decline in the quality of service provided by Ohio's electric companies.
As Akron's FirstEnergy disclosed last October, it earned $1 billion in the first nine months of 2007 — nearly as much as it did in all of 2006. But as its profits soared, reliability plummeted. Even after its role in the blackout of 2003, the most extensive in North American history, FirstEnergy's overall service quality has declined.
On one key measurement, the average number of service interruptions per customer, FirstEnergy missed its target in the Northeast Ohio region each year from 2003 through 2006, the last year evaluated, according to a December 2007 report by the Public Utilities Commission of Ohio. On a second measurement, the average time it takes the utility to restore service to customers who experience outages, FirstEnergy missed its target each year from 2000 to 2007.
Senate Bill 221 would give the PUCO additional tools to redress reliability issues. As voters evaluate the merits of SB 221, they should closely examine who has lined up for and against it. More than 100 businesses, consumer groups and trade associations support this bill.
Supporters include the Cleveland Clinic, which experienced an average of seven power outages per quarter last year; DuPont, where persistent power failures prompted the company's Global Business Director to take a portion of the Circleville facility out of consideration for future expansion; Alcoa, which closed an aluminum smelter in Maryland after skyrocketing electricity prices made the plant no longer cost effective; and Ohio Partners for Affordable Energy, a group that helps low-income residential customers with their heating bills and is watching demand for its services hit an all-time high.
The much shorter list of opponents consists mainly of two groups that stand to make even more money if the rate caps expire: Ohio's politically potent electric utilities, and their allies, the electric marketers. Senate Bill 221 is backed by Gov. Ted Strickland, a Democrat. It passed the Republican-ruled Ohio Senate by a vote of 32-0.
It awaits action by the Ohio House. Time is running short because the PUCO will need months to handle the expected onslaught of cases, should the bill win final approval. If the bill does not pass, Ohio consumers and businesses will likely find themselves paying a lot more for the same power while watching a continued erosion of service quality. House leaders can help Ohio's families and its business climate by passing this urgently needed legislation.
COLUMBUS: Ohio is no longer a finalist for a new steel mill and the $1 billion investment it would bring. An executive who is helping Steel Development LLC decide where to locate said uncertainty over the plant's power costs tipped the balance to Ohio's competitors.
Get the full article here.
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