Office of the Ohio Consumers' Counsel

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Ohio Consumers’ Counsel reacts to Senate’s passage of energy policy legislation

COLUMBUS, Ohio – October 31, 2007 – In response to today’s passage of Substitute Senate Bill 221 by the Ohio Senate, the Office of the Ohio Consumers’ Counsel (OCC) issued the following comments:

“On behalf of Ohio’s 4.5 million residential consumers, we remain concerned that even with the Senate amendments, important consumer protections are missing from this legislation,” said Janine Migden-Ostrander, Consumers’ Counsel. “We look forward to working with House members on changes that would bring consumers the lowest cost energy options, provide a fair and open rate setting process, and allow more opportunities for renewable and energy efficiency technologies.”

The OCC highlighted the following specific areas of concern:

Rate fairness for customers

Fails to assure customers the lowest-cost electricity option - The OCC believes that a side-by-side review and comparison of the Electric Security Plan and the Market Rate Option of providing electricity be required. The comparison should be performed in each utility’s service territory since the rates vary significantly from utility-to-utility. The comparison will ensure that the lowest rate option is implemented in each part of the state.
Regulatory transition charges – Under Ohio’s electric choice law, these charges could not be collected later than 2010. But, based on the proposed legislation, these charges would be included in the Electric Security Plan. For example, a typical residential customer in the Toledo Edison service territory could continue to pay more than $340 per year for these charges.
Potentially duplicative charges – The bill allows the utility to add an extra charge for “default” service to guarantee that all customers have a source of power, which is already included in customers’ charges under the proposed legislation. For example, the cost for a typical residential Toledo Edison customer for this potentially duplicative charge is more than $200 per year.
Not ensuring the fair calculation of the value of existing power plants so consumers will not overpay – Any payment by customers for generation service should be based on utility costs.
Removal of the “prudence” test traditionally required for new charges to customers – The proposed legislation requires that charges be “just and reasonable” but removes the requirement that they be “prudent.” This removes a consumer safeguard that should ensure utilities use the best alternative to provide service.
Allows for automatic adjustments for numerous utility costs without an assurance of proper consumer protections – The bill includes the potential for rate increases based on environmental and fuel costs; operating and maintenance costs and other costs like taxes; investment in generating facilities; and other costs. There is no mention in the bill of the process for approval or if there will be audits of these costs to verify that they are accurate or reasonable.

Energy efficiency and renewable energy options

Enhancing the use of energy efficiency – Technology exists to help lower customers’ demand for power through energy efficiency. Energy efficiency is a far less costly option than any supply-based option and represents Ohio’s best opportunity to manage and deflect rising costs to keep service affordable for customers. A greater commitment in the legislation to energy efficiency would have been a benefit to consumers.
Diversity of energy resources – The state has tremendous potential to diversify the resources used to produce electricity, including the need for utilities to use wind, solar and biomass. Because these resources do not pollute and have no fuel costs associated with them, Ohio should increase the commitment to renewable energy and include annual benchmarks and penalties for noncompliance.

Openness and transparency in the rate setting process

Continues the lack of openness – The proposed legislation allows non-residential customers with special contracts to have their own rate level based on the terms set by those contracts. This continued practice raises questions about who will be asked to cover the cost of continuing discounts to large non-residential users.
Allows the possibility of unfair bargaining between a utility and its affiliates – The proposed legislation allows the utilities to negotiate with its affiliates for rates to charge customers for power, raising concerns about the appropriateness of this bargaining without regulatory review.

About the Office of the Ohio Consumers' Counsel

The Office of the Ohio Consumers' Counsel (OCC), the residential utility consumer advocate, represents the interests of 4.5 million households in proceedings before state and federal regulators and in the courts. The state agency also educates consumers about electric, natural gas, telephone and water issues and resolves complaints from individuals. To receive utility information, brochures, schedule a presentation or file a utility complaint, residential consumers may call 1-877-PICKOCC (1-877-742-5622) toll free in Ohio or visit the OCC website at www.pickocc.org.