Electric Deregulation Termed Work in Progress

Aug 09 - Dayton Daily News

Ohio's experiment with allowing consumers to choose their electricity supplier hasn't attained its goal of establishing a fully competitive market, the Public Utilities Commission of Ohio said in a review of the program.

Some progress has been made, but more time is needed to allow deregulation to work so that customers can experience the benefits of having alternate electricity suppliers compete with Ohio's existing utilities, say the PUCO and the Ohio consumers' counsel, the office which represents the state's residential consumers in utility rate matters.

It took time for alternate suppliers to come forward and gain access to the power delivery networks of the established utilities, and for groups to form and start collectively buying power as aggregates to obtain rate discounts for consumers in their areas, advocates say.

Among states that have deregulated the electricity supply industry, Ohio is second only to Texas in the percentage of residential customers that have switched from their local utility to an alternative electric supplier, the PUCO said in its report. Texas led with 22.5 percent to Ohio's 17.4 percent, compared with 7.3 percent in New York state, 3.3 percent in Pennsylvania and 2.9 percent in Maryland, according to the PUCO.

Consumer switching has increased in Ohio, but is generally greater in northern Ohio where higher utility rates gave alternative suppliers a better opportunity to compete, the PUCO reported.

"Where utility prices are already low, suppliers have little room to compete," Alan R. Schriber, the PUCO's chairman, wrote in a cover letter last week that accompanied his agency's report to the Ohio General Assembly.

But some don't think electricity deregulation is worth continuing. Public Citizen, the Washington-based organization founded by consumer advocate Ralph Nader, says utilities have been able to raise rates in deregulated markets, leaving consumers worse off than they were when states regulated the rates charged by utilities which enjoyed monopolies in their service regions.

Deregulation hasn't met its goals of reducing electricity prices and improving the reliability of supply, said Tyson Slocum, Public Citizen's research director of the energy program. Fifteen states continue to pursue retail electricity deregulation, down from 24 states in 2000, Slocum said.

Consumers are hard-pressed to evaluate which electricity provider could best meet their needs because assessing electric power supply isn't like judging the appeal of cars, clothing or appliances, he said. It isn't enough for a state to merely say there are increasing numbers of consumers switching to new suppliers.

"All people want to do when they turn on the switch is have the lights go on and not get ripped off," Slocum said Monday by telephone from Washington, D.C. "Competition for the sake of competition has not delivered."

Ohio's deregulation program began on Jan. 1, 2001. The plan originally called for Ohio to allow electric suppliers to begin charging purely market-based rates beginning on Jan. 1, 2006. But because of concerns that consumers could face sharp rate increases then, the PUCO required utilities to develop "rate stabilization plans" that allow utilities to obtain some rate increases but phase them in from 2006 through 2008.

Sen. Robert Schuler, R-Cincinnati, chairman of the state Senate's Energy and Public Utilities Committee, said Monday his panel is still trying to determine what customers will face when market-based rates start in January 2009. Schuler said he still likes the concept of electric market competition.

"By having alternatives, that keeps pressure on everybody to be efficient, rather than having a monopoly," Schuler said. The PUCO's update is one of a series of the regulatory agency's reports the Ohio General Assembly has requested to determine whether electricity regulation is working.

Communities that have banded together to buy power as an aggregate have had the most success in Ohio's deregulation effort, the PUCO said. The aggregate buyers account for most of the residential and commercial consumers that have switched suppliers, the PUCO said.

Nearly 170 cities, counties and townships have formed these government aggregations to buy discounted power for consumers in their areas. Consumer advocates and the PUCO say that the Northeast Ohio Public Energy Council, which represents 112 communities in eight counties and more than 350,000 retail customers, is the largest and most successful aggregate. No aggregate purchasing is taking place in the region served by Dayton Power and Light Co.

DPL Inc., the utility's parent firm, believes that reflects that DP&L is offering a competitive price for electricity, said Arthur Meyer, a vice president of DPL Inc. The utility supports electricity deregulation, Meyer said.

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