Utilities' Next Moves May Mean Higher Fees

By Sarah Hollander

Every high electric bill that lands in Michael Link’s mailbox means a potential cut to his budget elsewhere.

“I’m pretty fortunate that I can meet my basic needs, but still, there’s always that bucket list,” said the retired Social Security Administration manager. A $168 bill for his Columbus town house after a steamy summer month, for example, may mean fewer visits to out-of-town relatives. “You make your choices with the funds you have.”

Link, 65, isn’t the only one worried about his bills. A 2014 AARP survey showed that affordable utilities are a key concern for Ohio voters 50 and older, with 69 percent calling the issue very important.

For the past year, AARP Ohio has been fighting rate and fee hikes proposed by the state’s two largest electric companies—American Electric Power Co. (AEP) and FirstEnergy Corp.—and a request from Dayton Power & Light. Now AARP’s focus has broadened to anticipate regulatory changes and their impact on customers.

AEP has signaled that it intends to lobby the General Assembly to restructure Ohio’s deregulated electricity market, possibly by early next year.

AARP Ohio will oppose those efforts, said Trey Addison, associate state director: “We think reregulation—or its new term, ‘restructuring,’—is bad for consumers and not needed. Utility rates are cheaper when there is competition in the market.”

Ohio deregulated its energy market in 2001. Rates that were once controlled by the large utility companies, with oversight by the Public Utilities Commission of Ohio, are now determined by the wholesale price of power on the grid. Companies such as First­Energy and AEP still control electricity transmission and distribution, but consumers can choose to buy their power from other providers.

Electric companies say they can’t compete fairly under current conditions. They are stuck operating expensive coal and nuclear power plants at a time when other sources, such as natural gas, cost less.

Surcharges possible
Restructuring could mean extra fees or surcharges to keep running those old plants, which are still needed to cover demand. Or it could allow the electric companies to buy all their power from the plants, even if the cost exceeds wholesale prices.

AEP CEO Nick Akins has said restructuring could retain consumer choice in electric providers and give AEP enough stability to invest in modernizing the grid. FirstEnergy executives went on record last year supporting restructuring in general.

Critics say the companies should lower profit expectations for shareholders instead of looking for more money from consumers.

Deregulation’s potential has already been eroded by state-approved exceptions, Ohio Consumers’ Counsel spokesman Dan Doron said. The utilities have successfully used an update to the law to gain approval of charges above the market price of electricity.

Restructuring would only worsen the problem by moving the state further from market rates, Doron said. “With energy markets at historic low prices, consumers should be seeing lower prices on their monthly electric bills.”

If the companies’ proposals come up for a vote, AARP will make sure legislators know the potential impact on consumers, Addison said. Ohio is home to a large population of adults on fixed incomes.

“In Ohio, we currently have a lot of new energy generation coming online or under construction,” Addison said. “So why would we bail out traditional utilities?”

Sarah Hollander is a writer living in Cleveland.