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Contact: Ryan Lippe
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Consumers’ Counsel recommends changes to FirstEnergy’s proposals for generation service

COLUMBUS, Ohio – January 8, 2010 – FirstEnergy’s proposed bidding process to arrive at the generation rates customers will pay should be permitted but greatly modified, the Office of the Ohio Consumers’ Counsel (OCC) will say in a brief to be filed later today with state regulators.

The brief focuses on FirstEnergy’s proposed “market rate offer” (MRO), a provision under Ohio’s 2008 electric policy law for setting rates for customers who do not choose an alternative provider of generation service. Generation rates recover the cost to the utility of producing electricity or acquiring electricity from power plants. FirstEnergy – including Cleveland Electric Illuminating, Ohio Edison and Toledo Edison – wants the MRO to set rates beginning June 1, 2011, when its current rate plan expires.

The OCC’s filing will also state how FirstEnergy’s proposed generation rate structure is unfair to residential consumers and how those rates should be modified by the Public Utilities Commission of Ohio (PUCO).

“We want an effective bidding process and properly-structured rates to provide the lowest-cost energy for residents,” said Consumers’ Counsel Janine Migden-Ostrander. “Several changes are necessary in order for FirstEnergy’s bidding process and the resulting rates to be fair to residential customers.”

FirstEnergy’s overall generation rates were lowered in June 2009 after a successful public auction among wholesale electric suppliers. While a competitive bidding process has been proposed by the utility for rates beginning in 2011, the OCC wants changes made to serve the public’s best interests.

Among the OCC’s recommendations are:

• Requiring future auctions to include a portfolio of low-cost options. The OCC proposes that a portfolio of options be considered, such as long-term contracts with generation suppliers, bids for energy efficiency and reductions in demand and for renewable energy. In contrast, FirstEnergy’s proposal relies entirely upon short-term power purchases in the wholesale market.

• Changing the competitive bidding process to minimize risk and uncertainty to suppliers. While FirstEnergy has proposed beginning the competitive bidding in June 2010, the OCC recommends waiting until early 2011 to provide more certainty regarding the regional transmission organization (RTO) under which the bidding would take place. RTOs independently administer the nation’s electric transmission systems, which move high voltage electricity from power plants to local distribution facilities. In August 2009, FirstEnergy announced it would move its transmission operations from one RTO (Midwest Independent System Operator) to another (PJM). FirstEnergy’s decision to transition to a different RTO increases uncertainty about the proposed bidding process. If suppliers are uncertain regarding which RTO is appropriate for the bidding process, their bids could reflect that uncertainty through a higher price.

• Maintaining a generation credit for residential customers with all-electric homes. FirstEnergy’s proposal would eliminate a credit provided to customers who lost an allelectric discount several years ago through changes in FirstEnergy’s rates. The credit partially offset the discount that all-electric customers historically received from FirstEnergy.

• Providing a constant per-kilowatt hour rate structure for the residential class of customers. FirstEnergy proposes charging a higher rate for residential electricity usage of more than 500 kilowatt hours per month during the summer. The utility’s design would be unfair to some residential customers, including those who have higher usage during off-peak hours (for example, late at night).

• Eliminating a surcharge to residential customers for a program offered exclusively to large commercial and industrial customers. FirstEnergy’s proposed Interruptible Generation Service Opportunity program would be paid for by all customers, including residential consumers who are not eligible to participate. The OCC believes the program’s costs should be borne only by large customers.

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.