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OHIO UTILITIES How much choice are electric users really offered?



Published: Sun, April 14, 2002 @ 12:00 a.m.



Ohio Edison customers have one other choice -- an offer of a 3.5 percent discount on electricity prices.

By DON SHILLING

VINDICATOR BUSINESS EDITOR

YOUNGSTOWN -- Mahoning Valley residents who are shopping for an electricity supplier have a choice -- FirstEnergy or FirstEnergy.

They can stick with Ohio Edison, the regulated utility owned by FirstEnergy Corp. of Akron, or they can go to FirstEnergy Solutions, an energy marketing company also owned by FirstEnergy.

No other companies are competing for business.

That wasn't what state lawmakers had in mind when they created a new system that allowed electricity users to pick their own suppliers, starting Jan. 1, 2001.

The goal was to reduce prices by bringing competition to the market.

Though competition has been sparse, it's too early to judge the program, said Shana Gerber, a spokeswoman for the Public Utilities Commission of Ohio.

It is just one year into a five-year market development period, she said. The PUCO issued a report last week on the program's first year and it said only that no conclusions can be drawn.

Still evolving: The Ohio Consumers Counsel, a state agency charged with protecting the state's consumers, said the program helped Ohioans but has a long way to go.

Benefits have included protections against price volatility, adequate power supplies to prevent shortages such as those in California, and the arrival of new competitors.

Key to the program has been the reduction of electricity bills, the agency said its evalution of the program last week.

The law that created the program called for a 5 percent reduction in electricity generation charges for customers who stay with utilities. The rates were frozen for five years for most utilities. In Ohio Edison's case, this has resulted in average savings of about $42 a year per household.

Residents who have switched have had additional yearly savings of between $10 and $110, the consumers counsel said.

Still, much has yet to be done to spur competition, it said.

If improvements aren't made, consumer bills will increase at the end of the five years, it said.

Suppliers have told the counsel that wholesale prices are too high for them to compete because of problems in the Midwest's power transmission grid. Creation of one organization to oversee the grid would reduce wholesale prices and make the grid equally available to all suppliers, the counsel said.

Suppliers said they also have had difficulties interacting with utilities when registering and servicing customers.

Ohio Edison had four competitors when the program started. Those companies are continuing to serve their customers, but none are accepting new ones except FirstEnergy Solutions.

No choice elsewhere: At least there is a choice in northeast Ohio. In much of the state, there is none.

Only one utility in central and southern Ohio has competition, and most haven't had any since the program began.

One reason there is less competition in those areas is that they have lower electricity prices than northern Ohio, so there is less room for marketers to make a profit, the PUCO said.

FirstEnergy's territory also attracted more interest from marketers originally because the legislation called for it to provide a certain amount of low-cost power to marketers. These companies could then turn around and offer their customers better deals.

This low-cost power was part of a deal that allowed the utility to recoup costs to cover its debt for building nuclear power plants.

About 16 percent of Ohio Edison's residential customers have switched suppliers and about 5 percent of Toledo Edison's customers have switched. Both are part of FirstEnergy.

A third FirstEnergy company, Cleveland Electric Illuminating Co., has had 55 percent of residential customers switch, which is the state's highest rate.

Overall, about 640,000 FirstEnergy customers have switched, and about 150,000 of those have chosen FirstEnergy Solutions. This subsidiary was set up to provide electricity and natural gas at discounted prices.

Its offer to Ohio Edison customers is a variable rate that is 3.5 percent less than the utility's current charge.

Utilities have recommended that customers consider switching because they don't make any money on selling electricity or natural gas. State regulations call for them to pass on the energy at their costs, while making money on distribution fees.

Aggregations groups: More customers in the Cleveland area have switched because a large aggregation group formed.

More than 100 communities passed ballot measures to join the Northeast Ohio Power Energy Council, which has contracted with Texas-based Green Mountain Energy Co. to provide power for their residents.

Warren has electric and natural gas aggregation issues on the May ballot. If they pass, city users would be joined together and the city would accept bids from suppliers. Residents would automatically be included in the program unless they opt out.

Trumbull County commissioners are considering putting a similar measure on the November ballot. The commissioners already joined NOPEC for natural gas. The measure affected only township residents.

Because it wasn't placed on the ballot, however, residents had to tell the supplier, Shell Energy, that they wanted to be part of the plan.

shilling@vindy.com




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