From The Power Plant To Your Electric Bill: The Long Journey Towards Deregulation

May 17, 2016

A decision to block a plan that would’ve guaranteed profits for struggling coal plants in Ohio may have created a domino effect for the future of energy in the state. In part two of a three-part series, Statehouse correspondent Andy Chow takes a look at the history of deregulation in Ohio and the bombshell suggestion to reverse course.

AEP and FirstEnergy customers were on a path where they were going to see increases on their electric bills. Those increases would’ve propped up coal plants that did not perform well in the market.

But the Federal Energy Regulatory Commission, or FERC, stepped in and blocked the so-called Power Purchase Agreements.

“We have no interest in getting involved into a protracted FERC-state jurisdictional dispute.”

That’s AEP CEO Nick Akins on a call with investors just a day after FERC made its decision. The outcome from the feds leaves Ohio’s utilities asking a lot of questions about what they’ll do next with their coal plants. Akins was the first to drop the most dramatic option.

“We’ll push for re-regulation in the Ohio Legislature in order to repeal and replace SB221 or enable the transfer of and cost-recovery for certain resources at AEP Ohio therefore eliminating the need for a PPA.”

That’s a complicated sentence. But the key word there is “re-regulation.”

A re-regulated utilities industry means you’d be paying for electricity at more of a fixed rate, where a deregulated system that promotes competition among a lot of energy generators would bring electricity at its lowest cost.

To understand the true weight that comes with even thinking about re-regulating, you’d have to go back in history and retrace the steps that brought us to this point.

The first attempt to deregulate the industry started in 1992 in hopes of lowering costs, offering more reliability and creating more diversity -- it then took seven years to finally pass both chambers of the General Assembly and become law.

But regulators and legislators will tell you that was just the beginning.

“It has now been 17 years and it may be a little late in the game to put that toothpaste back in the tube.”

Republican Senator Bill Seitz of Cincinnati has had a front row seat in the Legislature for most of this journey. Since 1999, lawmakers have spent a lot of time and energy to pass laws that built the framework for deregulation.

Seitz says he’s open to having the conversation about re-regulation. But the culture crafted in the last 17 years means it’s not just the heavy hitters like FirstEnergy and AEP, but it now includes new energy providers that have come into the state ready to compete.

“There are a great many of new players in Ohio as a result of deregulation that were not here in 1999. They are going to -- I think -- cry foul at any attempt to re-regulate that would inhibit their ability to be a competitive supplier,” said Seitz.

That’s where Todd Snitchler comes in. He represents a coalition of these energy suppliers, a big one being Dynegy, which came into Ohio, bought Duke Energy’s power plants and worked to make them more efficient.

When asked if the major utilities are seeking re-regulation because they’re no longer getting what they want out of the competition, Snitchler said: that’s a fair question.

“I’m not aware of any other business that would be able to approach the General Assembly and say ‘I don’t like the result of a federal agency and I want you to go ahead and fix everything for me and ensure that I can continue to profit at the rate that I’d like to make it at,’” said Snitchler.

Like Seitz, Snitchler’s no stranger to Ohio’s march towards deregulation. He served as chair of the Public Utilities Commission of Ohio from 2011 to 2014 and was in the Ohio House before that.

“It’s been slow. It has been challenging. And I think at this point it’s reached a decision point.”

That decision point seems to be so critical that both FirstEnergy and AEP have declined to comment on the issue. Both say they’re working to determine what steps they need to make next.

But the one thing most everyone has agreed on is that Ohio has reached a critical time where the decisions made now can set the foundation for energy generation and electric bills for many years to come.

This is part two of a three-part series: From The Power Plant To Your Electric Bill. For part three Andy will report on the energy landscape in Ohio, breaking down the different paths the state can go from here and what that means for the future of electric prices.