The governing board of the Ohio Consumers' Counsel has concluded the state's efforts to reform power company regulations eight years ago has failed and the state's electric utilities are in a "death spiral" fighting competitors and new technologies. The board wants lawmakers to take another look.
COLUMBUS -- The unprecedented efforts initiated by FirstEnergy and followed by American Electric Power to have customers temporarily subsidize power plants that they say can't compete have led to calls for reform.
The governing board of the Ohio Consumers' Counsel has released its analysis of the malaise gripping Ohio policy makers as technology and competition overtake the state's traditional utilities -- and consumers pay more for electricity than customers in 32 other states.
The nine-member citizens board likened Ohio's utility situation to that of Australian Aborigines unable to comprehend the arrival of British seafarer Captain James Cook in 1770, bringing new technologies and an alien culture. The board is calling for lawmakers to create a 15-member task force to come up with reforms.
Gene Krebs, chairman of the board and a former lawmaker, said the massive technology changes are coming to the power industry along with deregulation and tougher competition -- and that these changes will lead to more and more on-site power generation, leaving power companies with fewer customers who will face increasingly higher rates.
"So, the questions are: When is this going to happen, how do we cushion the fall, how do we regulate this, so that citizens are held harmless," he said. "What you are seeing with FirstEnergy is a company trying to hold its shareholders harmless"
Lawmakers and the governor's policy makers are also hearing today from the chief executives of at least four independent power companies who are spending Wednesday visiting legislative leaders to explain why they believe the FirstEnergy and AEP deals are anti-competitive and would force consumers to pay billions more.
Top executives representing Dynegy, Talen Energy, Calpine and NRG says their companies have invested or committed $5 billion in Ohio and could easily supply the power if Davis-Besse, Sammis and several AEP plants had to be shut down because they really could not compete.
The companies are members of the Alliance for Energy Choice, which includes a number of large manufactures as well. The Alliance has called the rate deals "schemes" and "handouts" designed to reward shareholders at the expense of customers.
"We are not looking necessarily to change the law," said Robert Flexon, CEO of Dynegy, in a late morning interview. "We are trying to reinforce some facts -- that fist and foremost the fees are so exorbitant and punitive, that what FirstEnergy and AEP pare proposing is something the industry has never seen before."
Flexon said that the fees, when all tallied, are three times larger than the total costs based on the last round of competitive auctions. He dismissed the arguments that keeping old power plants running is necessary for "stability," saying that grid manger PJM is responsible for grid stability, not FirstEnergy or AEP.
The Consumers' Counsel board released its proposal late Tuesday, just minutes after the Public Utilities Commission of Ohio closed its 38th day of hearings into FirstEnergy's proposal to protect its Davis-Besse nuclear power plant and its coal-fired W.H. Sammis plant from lower-priced power available on the regional high-voltage grid. FirstEnergy's attorneys spent the day trying to discredit the testimony of the opponents.
The eight-year FirstEnergy deal would add $3 billion to power bills and cost a typical household an extra $100 a year, says the Consumers' Counsel and the Northeast Ohio Public Energy Counsel. The company argues otherwise, saying the power plants would become competitive once the price of natural gas rises and power plants burning gas will have to raise their rates.
Hearings are expected to wrap-up Friday, but the commission has not said when it will vote on the proposal.