Consumer and environmental groups are opposing a proposed rate plan of FirstEnergy Corp. that has the backing of organizations representing schools, hospitals, and manufacturers.
FirstEnergy filed the plan with state regulators last week. If approved by the Public Utilities Commission of Ohio it would set in place a schedule for how rates would be set for three years, starting in June, 2011 when the current plan will expire.
The plan would use a competitive bidding process to establish supply and prices for customers who don’t choose alternative providers. The same process was used by FirstEnergy’s operating companies, Toledo Edison, Ohio Edison, and Cleveland Electric Illuminating Co., last May. There would be four separate bidding sessions – one each in July and October of 2010, July 2011, and July 2012 - to determine rates.
While the plan calls for base distribution rates to remain in place, it provides for the utilities to recover the costs of property taxes, Commercial Activity Tax, income taxes as well as upgrades to distribution systems, including substations and related equipment that were not included in the rate base determined in January, 2009.
The “Delivery Capital Recovery” rider in the plan sets caps for collecting the associated revenue at $150 million during the first 12 months, $165 million in the following 12 months, and $75 million in the next five months.
Three other riders to recover capital improvement costs won’t be covered by the caps.
FirstEnergy management said the plan has the backing of the PUCO staff, Ohio Schools Council, Ohio Hospital Association, Association of Independent Colleges and Universities, and the Ohio Manufacturer’s Association, and City of Cleveland.
“We appreciate the efforts of the signatory parties to reach an agreement that will provide rate stability for customers, support jobs and economic development in our communities, and encourage continued investment in our utility infrastructure,” said Anthony Alexander, president and chief executive officer of FirstEnergy.
He said the proposal also supports the continued development of the “competitive electricity marketplace in Ohio…”
But Ohio Consumers’ Counsel Janine Minden-Ostrander said the plan to let the company adjust quarterly rates to collect up to $390 million in distributions charges from customers over a 2 ½-year span was unfair.
“In these difficult economic times, residential consumers cannot withstand more distribution rate increases from FirstEnergy,” she said. “FirstEnergy customers would be better served by determining generation rates through a competitive bid process. The other requests should be addressed through separate proceedings before the PUCO, such as a distribution rate case. That would provide more accountability and a better opportunity to thoroughly review the costs.”
The PUCO approved a $137 million increase for FirstEnergy in January, 2009. The OCC had recommended overall rate reductions for Cleveland Electric Illuminating and Ohio Edison customers and a slight increase for Toledo Edison customers.
Other organizations siding with the OCC in opposition to the plan, include the Northwest Ohio Aggregation Coalition, Ohio Environmental Council, Natural Resources Defense Council, Citizens for Fair Utility Rates, Northeast Ohio Public Energy Council, and others.
In order to begin the bidding process in July, FirstEnergy has requested an expedited hearing and approval by the PUCO.