A law enacted in 1999 restructured the Ohio’s electric industry by changing the way customers shop for electricity. The law, which took effect on Jan. 1, 2001, provided a five-year market development period. During this period, electric rates were frozen to allow a competitive wholesale market to develop.
As the end of the market development period neared, there was a growing concern that, due to the limited number of competitive electric suppliers and low degree of market activity, an immediate shift to market-based rates in 2006 would not be in the best interest of customers. To minimize the effects of rate “sticker shock” and gradually transition customers to market-based rates, the Public Utilities Commission of Ohio (PUCO) worked with Ohio’s electric utilities to develop rate stabilization plans (RSPs).
The RSPs, coupled with other rate modifications, eliminated market uncertainty and provided customers with stable, predictable rates. Most of these plans expire at the end of 2008. In 2007, Gov. Ted Strickland and legislative leaders worked to pass Senate Bill 221 to keep electric rates stable going forward, create jobs and expand Ohio’s green energy industry. The new law incorporates a system under which rates would be set by the PUCO beginning Jan. 1, 2009 and outlines a path for electric utilities to implement market-based pricing.
On July 31, 2008, FirstEnergy filed an application at the PUCO to establish an electric security plan (ESP) to comply with Senate Bill 221. The company’s ESP is its plan for the supply and pricing of electric generation service over the next three years. The plan allows for the recovery of costs including fuel used to generate electricity, electricity purchased wholesale, emission allowances, and federally mandated carbon taxes. The goals of the plan include price stability, ensuring an adequate supply of electricity, maintaining and improving the company’s distribution system, and promoting economic development, job retention, energy efficiency, and conservation.
According to the company’s application, the ESP would result in minimum increases in total customer rates, including generation, transmission, and distribution. These increases would average 5.32 percent in 2009, 4.01 percent in 2010, and 5.99 percent in 2011. In addition, the companies' application proposes investment in its energy delivery systems, energy efficiency and demand response initiatives, and economic development and job retention programs.
On March 25, 2009, the PUCO today approved an agreement that establishes an ESP for FirstEnergy through May 31, 2011. Under the ESP, FirstEnergy customers will benefit from stable and predictable rates, and the company will continue to advance economic development, energy efficiency and smart grid initiatives.
Electric generation rates from June 1, 2009 through May 31, 2011 will be determined through a competitive bid process conducted by an independent bid manager. Until then, rates will continue at 2008 levels, plus the cost of fuel. Beginning on June 1, 2009, the PUCO will have the option of phasing-in the new generation rates from the competitive bid process, if deemed necessary. FirstEnergy’s distribution rates will be frozen through Dec. 31, 2011.
FirstEnergy will commit $25 million to economic development in Ohio through 2011. The company will also work to expand energy efficiency and demand-side management programs and will develop a proposal to apply for federal funds available for smart grid infrastructure investment. In addition, FirstEnergy will continue its existing green resource program that allows customers to purchase renewable energy credits each month.
Yes, the PUCO held nine local public hearings throughout FirstEnergy’s service territory to give concerned customers the opportunity to express their views.
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