“Everyone is unhappy” with the state of the electric industry in Ohio, according to a report issued Tuesday night by the state agency charged with protecting the interests of Ohio electric consumers.
Noting that a majority of states have lower electric rates, the report from the Board of Governors of the Office of the Ohio Consumers’ Counsel calls for the state legislature to form a task force to do a full-scale review of the state’s electric industry and its regulation.
The report states that renewables and energy efficiency save consumers money and notes that states with a more diverse electricity supply mix have lower rates than Ohio. At the same time, however, the report refers to utilities’ concerns about deregulation and the emphasis for energy efficiency leading to a so-called “death spiral.”
“What we’re looking at is to basically get everybody, first of all, to admit there’s a problem,” said Gene Krebs, who chairs the board. “And then let the task force begin to ask about and understand what are the core issues going on and how this should be addressed.”
‘Something is really off here’
The OCC board’s call for a task force is “completely data driven,” said Krebs. “Of all the deregulated states, our rate of increase in cost is by far and away the most.”
The problem is “not renewables,” Krebs noted, pointing out that states such as Iowa have significantly more renewable energy than Ohio. “Yet they’re substantially cheaper than we are” when it comes to residential rates.
“Something is really off here in Ohio,” Krebs stressed. “It’s got to be in our regulatory structure, because the data indicate that all other things being equal, our electricity should be substantially cheaper than what it is.”
The OCC’s call for a task force comes on the heels of FirstEnergy and AEP facing new hurdles in their quests to have electric utility consumers guarantee sales of electricity from unregulated, affiliated power plants. Within the past month, energy giants such as Dynegy and Exelon have offered to undercut the so-called “bailout” deals by billions of dollars.
The OCC report also comes less than six months after FirstEnergy CEO Chuck Jones commented that he would end deregulation of Ohio’s electricity generation market “in a heartbeat.”
Krebs said specific discussion of that idea “never crossed our lips” at the OCC board.
“The board had enough questions about how things are currently structured that we sincerely believe we need to have the task force,” Krebs said. “We’re not anywhere near anything as specific” as re-regulation or anything else in terms of what should be done.
The task force envisioned by the OCC board would include members from the Ohio Senate and House of Representatives, the chair of the Public Utilities Commission of Ohio (PUCO), representatives from the state development agency, state attorney general’s office, agricultural industry, large industrial customers, private and public electric utilities and academia. The Ohio Consumers’ Counsel would also serve on the task force.
Yet the proposed 15-member task force has some significant omissions.
“They largely ignore the environmental community,” said Dan Sawmiller of the Sierra Club. “At a time where we’re seeing the first ever carbon regulations on power plants and we are working as a country and across the globe to fight climate change, environmental policies and regulations are a critical component of utility regulation and price.”
“An open and fair process [for any review] is critical to ensuring Ohioans’ right to breathe clean air,” said Trish Demeter of the Ohio Environmental Council. “We should scrutinize their decisions to make sure they are holding utilities to their commitments to move towards cleaner, more efficient sources of energy.”
The cost of renewable energy has also been coming down, and that should be recognized in any review, noted Cathy Kunkel, an energy analyst who consults with the Institute for Energy Economics and Financial Analysis.
Also missing from the proposed membership are any competitors of the large utilities’ affiliates.
“I’m concerned that the proposed task force would not include representatives of the different interests involved in the electricity system,” Kunkel said. “It includes a representative of the utilities, but I don’t see any representation from any independent power producers” like Dynegy or renewable energy companies operating in Ohio.
“It’s clear from the proposed [power-purchase agreement cases before the PUCO] that AEP and FirstEnergy are very interested in limiting competition and protecting their own obsolete power plants,” Kunkel continued, “and if that is the only perspective on electric generation that is represented on the task force, that will be a problem.”
Utility companies are not on board with everything in the OCC board’s report, either.
“We believe a review of the energy policies in Ohio is a good idea but we do not agree with the one-sided narrative of what the OCC perceives to be the challenges with our energy economy,” said Vikki Michalski, a spokesperson for American Electric Power.
Among other things, the OCC report characterizes AEP’s and FirstEnergy’s pending PUCO cases as “bail-outs” that are basically “rent seeking.” In other words, the proposals would add to the companies’ wealth without providing a corresponding economic benefit for gross domestic product, the report says.
Conflicts of interest?
The OCC board’s report is not the first time there’s been a call for a review of Ohio’s electric industry.
On March 26, 2014, the PUCO announced its intent to continue a review of issues relating to Ohio’s electric industry and directed its staff to audit the state’s utilities for their compliance with state law on corporate separation from, and arms-length dealing with, their generation affiliates.
“That audit was supposed to take place in 2015, and the PUCO did not lift a finger on it,” said Sawmiller.
In his view, having the same CEO for a generation company and a distribution utility presents “a conflict of interest.”
The distribution utility should buy power from any available source at the lowest available price, while the generation affiliate wants to sell as much of its own power at the highest price possible, he explained. “And without a clear barrier between those two companies doing business, consumers are at considerable risk,” Sawmiller said.
“How about we start with the audit that the PUCO already committed to give us?” he added. “And why isn’t the OCC hounding the PUCO for that audit to take place?”
Krebs stressed that the OCC board has not yet focused on specific measures, but said its members were unanimous that a review of the system is needed.
“We definitely do not have the answers,” Krebs said. “We can’t tell you that. We don’t know that. But the other thing we do know is that nobody is happy” with the status quo.
“We’re just Bob and Betty Buckeye, trying to do what’s best for Ohio,” Krebs added.