BUCKEYES BASHED: OHIO ELECTRIC CUSTOMERS TAKING IT ON THE CHIN

(Image of Ohio Coal-Fired Generation Plant)

Ohio Electric bills have skyrocketed…Why?

Customers have seen massive increases in their price to compare, which is the average electric supply rate. There have been a handful of factors that have caused electricity rates to surge. In this article we will take a quick look at the contributing factors that have led to increases of as much as 30% in some areas, as well as an energy outlook on what consumers in this region can expect going forward.

The groundwork was laid 3 years ago. The first domino to fall in Ohio was due to EPA regulations (Clean Power Plan) forcing generation plants to close. Ohio saw the largest impact to their electricity infrastructure by these regulations, which have caused 6 GW of closures, by far the most in the entire country. In April, First Energy closed the last of 3 coal-fired power plants that sat on Lake Erie. The shutdowns come three years after First Energy announced it would be closing the plants, rather than modernize them to meet new clean air standards.

(For information on how Ohio consumers can combat these changes in their electricity service: CLICK HERE)

As you can see in the illustration above, Ohio has been heavily dependent on coal as a fuel source for electric generation, utilizing it almost twice as much as the national average. With the Lake Erie power plants no longer part of the generation equation, Ohio is scrambling to adjust to the regulatory mandates. This is only the beginning of a chain of events that the impact will be felt for quite some time.

The next impactful issue was the PJM capacity auction held in May 2012. The PJM is the organization that operates the electric grid for thirteen states, including Ohio. The PJM holds an annual auction to secure electricity capacity to meet the needs of a 13-state region that includes Ohio. The auction results were the main component in the hike in electricity bills. These capacity prices were so high that the PJM separated out the First Energy’s transmission territory from the rest of the region. First Energy is the utility that services the majority of Northern Ohio’s electricity needs.

In this region, the price of electricity jumped an appalling $357 per megawatt. According to PJM, prices increased due to the unprecedented retirement of the previously mentioned coal-fired generation plants. The PJM has also requested for the utility FirstEnergy, to build new high-voltage power lines from some of its power plants, and to provide upgrades to various substations and transformers. FERC (The Federal Energy Regulatory Commission) has estimated the cost of these upgrades, in conjunction with First Energy, at roughly $263 million on the transmission project, which is only the beginning of a much larger $4.2 billion effort to revitalize the infrastructure. These costs will be passed through to consumers by way of electricity rates, which will increase annually until completed.

All of these factors are cause for current increases for consumer’s electricity bills, as well as probable speculation that rates will continue to rise in the future. As for First Energy, all of these happenings have made them the recent target of a Public Utilities Commission of Ohio investigation. In September, there were hearings held for the P.U.C.O. to determine how FirstEnergy’s power plant company, FirstEnergy Solutions, is separate from its three distribution companies. (Illuminating Company, Ohio Edison and Toledo Edison). State law mandates the companies are not supposed to share information.

What this all means is that Ohio consumers will need to plan their energy budgets accordingly. The recent rate hikes do not seem to be an anomaly. They appear to be the opening act for a transition period that will cost them substantially.

Matt Helland
SVP-NAEA

Sources:
http://www.cleveland.com/
http://www.offthegridnews.com/
http://www.eia.gov/