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Which way will the power flow?
Published on Sunday, Sep 23, 2007
On Wednesday morning, about halfway through a panel discussion on the structure of the electricity industry in Ohio, I began to feel no small amount of sympathy for state lawmakers. That's right, concern for those who long neglected higher education, who have mismanaged school funding and often acted otherwise in conflict with the needs of the state.
The setting was the second annual Northern Ohio Energy Management Conference at the John S. Knight Center in downtown Akron. Mark Shanahan, the governor's energy adviser, opened the session by outlining the proposal that Ted Strickland recently unveiled for revamping the way the state regulates power companies. The governor acted in view of the state heading for a fully deregulated market at the start of 2009.
Many are squirming at the prospect of deregulation. Thus, the title of the conference: ''Higher electric rates?''
After speaking to the gathering of business owners, academics, executives and other interested parties, Shanahan joined the three others on the panel. They fielded questions prompted by the governor's plan and the looming deadline. They represented an appropriately wide array of views, David Blank for FirstEnergy, Sam Randazzo for industrial customers and Randy Corbin for municipal power systems.
Believe it or not, the exchanges bordered on entertaining amid the jabs and snaps of the towels. That is, when those of us not entirely in the know could wade through the jargon and complexities, of the technical and policy variety. It wasn't hard to imagine the headaches ahead for lawmakers as they weigh the Strickland proposal along with all the conflicting and complementary viewpoints.
The four panelists clashed repeatedly over whether the wholesale market for electricity is truly competitive. Blank insisted the answer is yes, pointing to $2 billion in hundreds of transactions each month in the territory managed by the Midwest Independent Transmission System Operator. The others scoffed, contending that such numbers reveal next to nothing, arguing that federal regulators drive the deals more than market forces.
At one turn, Blank and Randazzo used the same study to bolster their opposing points.
Practically everyone agrees on one thing: The electricity deregulation experiment launched in Ohio eight years ago has been a bust. Markets haven't developed at the retail level (for residences and most businesses).
What the governor and others fear is that when the transition phase ends and deregulation finally arrives, the state will unleash unregulated monopolies. They point in horror to recent electricity price increases of 72 percent in Maryland and 50 percent in Illinois.
They want lawmakers to act by the end of the year, allowing time for writing regulatory rules, for utilities to make their adjustments, large and small, and even for likely litigation.
Among those sounding the alarm is Randazzo. Many can barely suppress their giggles. After all, Randazzo pushed most aggressively for deregulation in the 1990s, he and allies accusing hesitant state officials of engaging in a ''parade of excuses.'' The promise was: Electricity customers would save $3 million a day in a deregulated market.
Now Randazzo talks about altering the ''default setting.''
All of the back and forth, and around and around, can seem like so much spin, and Anthony Alexander didn't exactly aid the bewildered in his luncheon speech to the conference.
The president and chief executive officer of FirstEnergy rates as the smartest one in the room almost any time the discussion turns to the power business. At the time, he rightly warned against deregulation. Virtually all of his forecasts have proved true. Yet there he was last week behind the podium challenging re-regulation, championing the marketplace, arguing that ''while you've probably heard that competitive markets don't exist for electricity, that's simply not true.''
Sam Alexander? Tony Randazzo? Want to add further confusion? Consider that Janine Midgen Ostrander, the Ohio Consumers' Counsel, sides with Alexander in this fight. She applauded the gist of the proposal FirstEnergy put forward in the summer setting a path for going to the market.
Alexander correctly explains that the elements of deregulation once set in motion cannot be easily captured and sequestered in the manner so many hope for carbon-dioxide emissions, buried and forgotten deep in the earth. FirstEnergy has dramatically restructured its operations in preparation for deregulation. It shouldn't be expected to retool again, because the state now has exclaimed: Whoops!
View Alexander in full, from one end of the past eight years to the other, and the suspicion is, his bullish speech was about bargaining more than anything else, establishing a position before lawmakers delve into the subject. The governor agrees that the state cannot recreate the past. He would allow utilities to choose between a more regulated course and a more market-oriented one. The Statehouse cast of lawmakers, lobbyists and consultants will battle over the rules and definitions.
What does it matter?
All of us pay for power. The community has an interest in FirstEnergy thriving, along with manufacturers and other businesses. Don't re-regulate? Don't go to the market?
What's a legislature to do?
How about what the state has been doing during this transition period, ''rate stabilization plans'' providing reliable and more or less affordable service? It couldn't be that easy, could it?
Douglas is the Beacon Journal editorial page editor. He can be reached at 330-996-3514, or emailed at mdouglas@thebeaconjournal.com.
On Wednesday morning, about halfway through a panel discussion on the structure of the electricity industry in Ohio, I began to feel no small amount of sympathy for state lawmakers. That's right, concern for those who long neglected higher education, who have mismanaged school funding and often acted otherwise in conflict with the needs of the state.
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