A law enacted in 1999 restructured 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, the utilities’ rates were frozen to allow a competitive resale 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, Duke Energy Ohio (Duke) 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 requested the recovery of costs for 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, promoting economic development, job retention, energy efficiency and conservation. On Dec. 17, 2008, the Commission approved Duke’s ESP. The plan will be in effect through Dec. 31 2011.
The ESP establishes fair and reasonable price increases in the base price of generation. The base price of generation will increase approximately 2 percent in 2009 and 2010 for Duke’s residential customers. There will be no base generation increase for residential customers in 2011. For Duke’s commercial and industrial customers, the base price of generation will increase approximately 2 percent each year of the ESP.
The implementation of the ESP, including the updated riders and the quarterly adjustment of Duke’s fuel costs, will result in a decrease in electric rates for all customers for the first quarter of 2009 beginning on Jan. 1, 2009. The decrease for a typical customer is explained below.
During the ESP, Duke will provide funds for low income assistance programs. Duke will increase funding for home energy and weatherization contracts during the ESP, provide funding for the distribution of fans or air conditioners for qualifying customers, provide assistance for customers at or below 175 percent of the poverty level that do not participate in the Percentage of Income Payment Plan and provide funding for an energy education program.
Yes, the PUCO held local public hearings in Cincinnati and Middletown to give members of the public an opportunity to express their opinion in the case.
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