Did You Know

Ohio PUC Orders Competitive Bidding Process for FirstEnergy’s New Electricity Supply; Market Test Will Ensure Best Deal for Customers

Reflecting a growing trend among states seeking to get the best deal for consumers by including competitive supply options in utility procurement decisions, the Public Utilities Commission of Ohio (PUCO) has ordered FirstEnergy Corp., the electric utility system that serves parts of Ohio, Pennsylvania and New Jersey, to establish a competitive bidding process as part of its rate stabilization plan and associated legal obligations under Ohio’s existing electric industry restructuring law, Senate Bill 3. The competitive procurement aspect of the rate plan will provide a market test to determine whether a competitive generation price exists that will benefit FirstEnergy customers, according to PUCO Chair Alan R. Schriber.

“It is important that we evaluate the market to determine if a viable wholesale rate is available,” Schriber said, in a PUCO news release. “If a competitive rate is available, we will be able to move toward market prices for generation as envisioned in Senate Bill 3.”

Senate Bill 3, signed into law in 1999, provided for a five-year market development period to allow time for a well-functioning and competitive wholesale market to develop. Since then, the 2000-2001 California energy crisis, the collapse of Enron, and issues at the federal level have slowed the development of a competitive wholesale market in Ohio and the Midwest, thereby necessitating PUCO’s actions in this case.

If the results of the competitive auction are not accepted by PUCO, FirstEnergy must implement the rate stabilization plan, as modified by the commission. The modified rate stabilization plan balances rate certainty for FirstEnergy’s customers, provides financial security for FirstEnergy, and promotes further development of competitive markets, according to the commission. Schriber said that if a competitive rate is not available, “customers will be guaranteed rate stability under the modified rate stabilization plan.”

The auction process must cover FirstEnergy’s total customer demand requirements, and the bids must cover provider of last resort service for the 2006-2008 period. The bids must be made available to PUCO staff for analysis by Dec. 1, 2004. According to the PUCO order, the commission envisions that the bid evaluation process will be completed in a reasonably short time frame – days, not months.

The commission modified the rate stabilization plan to maintain generation and distribution charges at their current levels. The modified plan allows FirstEnergy to adjust the generation rates during 2006-08 for cost increases related to material changes in tax regulations or laws. The plan also provides for $8.75 million in funding to energy efficiency programs and $10 million to economic development initiatives over the life of the plan.

For more information, contact Jack Hawks at jhawks@epsa.org. A copy of the PUCO order is available at www.puco.ohio.gov.