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Published: Tuesday, 8/10/2004

Rate freeze thaws out

THE road to electric deregulation suddenly looks as if it could be a lot more treacherous, and expensive, for customers of FirstEnergy Corp.

The Public Utilities Commission of Ohio has decided that a freeze in electric rates won't mean what most people expected - continuing to hold rates steady for the utility's 300,000-plus residential customers in the Toledo area. Instead, the regulatory agency has come up with a thaw in the plan for what is supposed to happen when deregulation takes effect in 2006.

Back in June, the PUCO decided it would give the state's shaky deregulation law one last chance, ordering an auction this coming Dec. 1 to determine if there are electric suppliers willing to undercut FirstEnergy's rates. The rates have been frozen since 1995 in the run-up to deregulation.

If the auction fails - and almost no one seriously expects competition to suddenly emerge - the PUCO said it would lock in First Energy's rate proposal, which includes generous padding to pay the company back for its expensive investment in nuclear power plants, through 2008. The rate freeze is supposed to numb the realization that FirstEnergy customers previously reimbursed the company for those costs through rates that already are among the highest in Ohio.

Now the PUCO has handed FirstEnergy another sharp tool with which to extract more money from customers, allowing the utility to request authority to pass on higher fuel costs. Judging from the comments of PUCO member Judy Jones, of Toledo, such a request will be a mere formality, "People need to understand that there are some real increases that we really don't have any control over," Ms. Jones said.

No, the PUCO can't control the price of coal or natural gas that is used to generate electricity, but neither is the agency required to stand passively by and give FirstEnergy everything it wants. The regulators have a responsibility to hold FirstEnergy's feet to the fire more closely on customer charges, particularly when the utility profited handsomely in the deregulation deal.

The rate freeze was an integral part of the deregulation plan. Now that it's melting away, the theory that competition would lead to lower electric rates for Ohioans seems less well-founded than ever.
