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Your voice is needed on state energy legislation

Legislation has been proposed in the Ohio General Assembly to address the fact that investor-owned electric utilities’ rate plans will begin to expire at the end of 2008. One issue of debate is how to effectively control the cost of electricity in the future. As currently written, Senate Bill 221 (SB 221) would allow utilities to develop an “electric security plan” – which includes current rates plus potential future increases and decreases in generation costs. A “market rate option” – based on the price of electricity in the competitive market – is another method contained in the proposed legislation. Generation charges relate to the supply of power from a power plant.

Unless changes are made to add consumer protections to this legislation, the Office of the Ohio Consumers’ Counsel (OCC) believes consumers could potentially pay billions of dollars over the long run without an assurance of a full legal process to verify that the electric utilities’ costs are justified and prudent.

The residential consumer point of view

As the residential utility consumer advocate, the OCC has concerns about the proposed legislation. The OCC believes important changes are needed to ensure Ohio’s more than 4 million residential electricity customers are protected and are provided with the lowest cost energy options, a fair and open rate setting process and more opportunities for renewable and energy efficiency technology.

First and foremost, the legislation should protect consumers through a side-by-side review and comparison of rates under an electric security plan and the market rate option to provide electricity. Unless SB 221 incorporates the flexibility to provide the lowest cost electricity to each utility’s customers, residents in some parts of Ohio will win while others will lose.

Second, the proposed electric security plan would provide utilities the ability to impose automatic increases that could cost consumers billions of dollars in areas such as environmental compliance, fuel and investments in generation. This would be permitted without the opportunity the current language, regulatory transition charges that consumers have paid in full to the utilities would continue on customers’ bills indefinitely, costing many consumers throughout Ohio hundreds of dollars per year. For example, a typical residential customer in the Toledo Edison service territory could continue to pay in the range of approximately $240-$340 per year for these charges.

the current language, regulatory transition charges that consumers have paid in full to the utilities would continue on customers’ bills indefinitely, costing many consumers throughout Ohio hundreds of dollars per year. For example, a typical residential customer in the Toledo Edison service territory could continue to pay in the range of approximately $240-$340 per year for these charges.

Areas of SB 221 that address renewable energy and energy efficiency need to be strengthened, according to the OCC. Diversity in the types of resources Ohio uses to produce electricity has tremendous potential. Renewable energy can help stabilize prices over the long term, create jobs and improve the environment. Some of these resources are competitive with and less costly than advanced technologies such as nuclear and clean coal.

Based on SB 221 electric utilities would be required to provide 25 percent of their power by 2025 using advanced energy resources. At least half of that – 12.5 percent – would come from renewable energy resources such as wind, solar and biomass, while the other half could come from other advanced energy resources such as clean coal and nuclear. However, one of the problems is that there are no benchmarks or penalties to ensure that utilities will make consistent progress. It is important to establish a strong commitment to renewable energy and hold utilities responsible for meeting this commitment by including annual benchmarks and penalties for noncompliance.

Another drawback is a provision of SB 221 that could eliminate any new investment in renewable energy by the utilities. The provision would allow state regulators to weaken a utility’s need to comply with the standard if advanced energy projects would increase rates by 3 percent or more by 2025. This could mean that a utility constructing an expensive clean coal or nuclear plant might be exempt from providing any power using wind, solar or biomass.

Consumers can act now to get changes made to SB 221

Consumers’ Counsel Janine Migden-Ostrander provided testimony and proposed amendments in the Ohio Senate on behalf of our state’s more than four million residential electric households. The OCC’s recommendations would have ensured that customers obtain the lowest electric costs through a fair and open process. However, the legislation was passed by the Senate without addressing many of the OCC’s concerns.

The proposed legislation is now being considered by the Ohio House of Representatives. The OCC is working with this group of legislators, and is encouraging individual residential consumers to also become involved in this important legislation that affects each household budget.

The OCC believes the following are among the most important changes to SB 221 needed to give consumers protections and safeguards well into the future.

1. Protect consumers by providing the lowest-cost electricity generation option, either an electric security plan or a market price. The comparison should be done in each utility’s service territory since utilities’ rates can vary significantly. This will help ensure that the lowest rates are paid by residents in each part of the state, as one solution will not work for all Ohioans.

2. Allow for due process and ensure all costs under an electric security plan are justified by a utility before it is allowed to increase customers’ rates. The proposed legislation needs to include a process to ensure that any rate increase proposed by the utility is investigated fully in a regulatory proceeding and is fair to consumers. There should be audits of these costs to verify that they are accurate, reasonable and prudent.

3. Enhance the use of energy efficiency and renewable energy in Ohio. Beyond the need for benchmarks and penalties to be added to the standards in SB 221, the OCC believes the requirements should be increased.

The renewable energy standard should be increased from 12.5 percent in the proposed legislation to 20 percent by the year 2025.

Regarding the energy efficiency standard, SB 221 would produce approximately 0.3 percent average annual reductions in energy usage. The OCC recommends adopting a more aggressive approach modeled after a new law in Illinois.

What can you do to help?

Contact your state representative immediately and let them know the importance of these consumer protections and safeguards. A personalized telephone call or letter is preferable. If you do not have time to make this personal contact, you may use the OCC’s sample letter to send to your representative. The sample letter and more information about SB 221 is available at www.pickocc.org or by calling 1-877-PICKOCC (1-877-742-5622).

To find out which representative represents your area and his or her telephone number, call 1-800-282-0253.

You can mail a letter to your state representative’s attention by using this address:

The Honorable (fill in the name of your representative)
77 South High Street
Columbus, OH 43215-6111

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Facts to consider about utility line warranty programs

Many times when consumers are faced with problems with their utility service, their first thought is to contact the utility company to have the issue corrected. However, not all problems are the responsibility of the utility and could cost consumers large amounts of money to fix. Consumers generally are responsible for paying costs associated with utility lines that run from the curb into their home as well as pipes or lines inside their homes. While utility line warranty programs may help ease the expense consumers must pay to have the repairs made, it may not always be in their best interest to purchase these programs.

Electric, Natural Gas and Water

When consumers contact the company to fix a problem, line warranty programs provide partial to full payment for work performed on their electric, natural gas or water line. In some areas, non-utility companies sell warranty programs either for the inside or outside pipes and lines.

Columbia Gas has proposed to assume responsibility for any of the lines and risers it replaces as part of a regulatory order. Duke Energy has been replacing pipes and other equipment as part of its “Accelerated Main Replacement Program” and has assumed financial responsibility for at least some of what has been replaced.

Telephone

In Ohio, consumers are responsible for all wiring that is inside their homes while the company is responsible for any repairs outside of the home. Most local telephone companies offer “Inside Wiring Maintenance Plans” that cover repairs to any wiring problems found inside the home. These plans are not required, so consumers should think carefully about whether they may need inside repairs.

For more information on utility line warranty programs contact the OCC at 1-877-PICKOCC (1-877-742-5622) toll free or visit www.pickocc.org.

Issues to consider before signing up:

• Some consumers may never need to replace or have repairs made to a utility line.

• These programs cost between $3 and $10 per month with coverage amounts ranging between $1,000 and $4,000 toward applicable repairs or replacements.

• If you live in an older neighborhood (over 40 years old) where pipes and lines are still the originals or if your neighbors have had replacements, you may want to consider purchasing a plan.

• For telephone lines, most problems typically occur every 20 to 30 years.

• Most companies will not cover repairs to pre-existing conditions, such as cracks in the line, and have provisions to inspect the line within a few months of the program start date.

• The monthly fee may not cover the full repair cost at time of service. Some companies charge customers for parts or other services.

• Consumers who live in apartments may not need to participate in warranty programs because the landlord may be responsible for the repairs. The signed lease or rental agreement should outline who is responsible if a utility pipe or line needs to be replaced.

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‘Green’ energy terms

Americans have been increasingly talking about energy independence. In fact, it has been identified as the most important concern next to healthcare by the Center for American Progress. As the discussions continue, there are several terms that may be unfamiliar to residential consumers. Below are some of the terms likely to be part of the energy independence conversation.

Cogeneration – The simultaneous generation of electricity and heat by a power plant. The captured heat is used for domestic or industrial heating purposes close to the plant or distributed through a system of pipes. An example would be combined heat and power, a form of distributed generation

Demand Response – The ability for consumers to manage their electricity, through conservation or efficiency measures, based on the overall need for power. Since the price of electricity purchased by a utility can be very expensive during times of peak demand (for example, on hot summer days), programs and rates can be offered to encourage customers to use less power during these hours

Distributed Generation – When customers or utilities produce some of their own electricity from sources other than a central power plant. The power sources are located at or near the places they serve

Interconnection – The physical connection of the energy generated by customers, such as a wind turbine, to a utility’s distribution line

Net Metering – Customers generating their own electricity receive credits to their monthly bill for energy they sell back to the utility. The “net” result of how much energy is provided to or used from the utility is applied to a customer’s bill

Renewable Portfolio Standard – Also known as RPS, a renewable portfolio standard sets a requirement for a percentage of the total electricity produced in a state to come from renewable energy, such as biomass, solar and wind

Smart Meters – Technology that reports real-time prices of electricity. The meters allow customers to decide when they want to use electricity based on the price at certain times during the day

Stand-by Power – Provides electricity during scheduled or unscheduled outages for a customer whose electricity needs are normally served by electricity produced onsite. Typically used by commercial or industrial customers

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