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The House speaker unveils guidelines for electricity restructuring. They include an appropriate opening for a market option
Published on Tuesday, Jan 15, 2008
On Thursday, Jon Husted, the House speaker, added an exclamation point, issuing a set of ''guiding principles and goals.'' One principle stated: ''The best way to adequately protect electric customers . . . is a marketplace.'' Ideally, that makes sense.
The trouble is, in Ohio, eight years of electricity deregulation have not led to the robust marketplace that many envisioned. With the state scheduled to unleash fully deregulated utilities in January 2009, the governor put forward a plan to revamp the regulatory scheme, seeking to protect customers from power companies operating as virtual monopolies. The Senate largely concurred with the governor, sending to the House the legislation the speaker seeks to revise, the House now in the midst of hearings.
Without saying so directly, Husted has highlighted the shortcomings of the Senate bill. If a marketplace has not formed yet in Ohio, much change has taken place in preparation. Look at the structure of FirstEnergy, its generation element separated from the rest of its operation, among other steps.
The clock cannot be turned back easily. That is something Husted recognizes. He calls for more than waving at the possibility of a market emerging. He rightly wants the legislation to establish ''an intellectually honest, clear definition of an electric marketplace.'' He has outlined the framework of the required ''hybrid,'' power companies having two options, a path to the market or something akin to a traditional regulatory system.
Unfortunately, the governor's approach (now the Senate bill) lacks such a definition, leaving the Public Utilities Commission too much leeway to drive a result. The point of the market option isn't to let utilities have the final word on prices (a charge the governor makes). Rather, the aim is to ensure a fair comparison, leaving the state in position to gain if a legitimate market can be demonstrated.
For all the concern about the potential for soaring electricity prices, it is worth noting that the traditional regulatory approach saddled this part of Ohio with higher rates. The electricity industry is changing. Ohio would benefit from having a choice, selecting the option that suits its economic circumstances.
In that way, Speaker Husted sent an intriguing signal, advising that lawmakers ''should not automatically abandon the idea of a continued or updated version of the current system. He had in mind the ''electric stabilization plan,'' devised as the transition to deregulation stalled. These mechanisms have served as an effective ''hybrid,'' each utility negotiating rates with the Public Utilities Commission.
If the argument over what is a legitimate market cannot be resolved, Ohio would hardly suffer with new versions of electric stabilization plans, and another worthy Husted commitment: a renewable and advanced energy strategy that includes benchmarks and other incentives to attract investment and spark aspects of a new economy in Ohio.
Get the full article here.
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