10/17/03

Columbus - The office charged with protecting Ohio utility consumers has destroyed a closely guarded consultant's report that might have saved billions of dollars for customers in FirstEnergy electric territory.

Ohio Consumers' Counsel Rob Tongren conceded yesterday that his office got rid of the document in late July - after his staff changed a records-retention policy that would have required it to be held a minimum of five years. Tongren said he did not know that his staff had shortened the retention period to one year.

The shredded report, which cost taxpayers $579,000, included the consultant's recommendations on how much FirstEnergy Corp. should be allowed to collect from its customers to recoup investments made before deregulation of the electricity market in 2000.

Several sources familiar with the report said it recommended that FirstEnergy be allowed to collect $2 billion to $4 billion for these investments, known as "stranded costs."

That amount was far less than the $8.7 billion the company requested and eventually got.

The Plain Dealer and other groups sought access to the report repeatedly in 2000 and 2001, and the newspaper renewed its efforts after the blackout earlier this year.

In an interview, Tongren said he could not remember the exact estimate, but recalled it fell in the range of $2 billion to $4 billion. He said he decided not to make the dramatic figure public because he feared it would only contribute to lengthy and fruitless litigation. But consumer advocates have long believed that the work of the consultant, LaCapra Associates of Boston, could have been a "smoking gun" that would have weakened FirstEnergy's claim for the full $8.7 billion.

David Hughes of Pittsburgh-based Citizen Power, said that if the LaCapra figure had been aired during the deregulation fight, Ohio's budding electric market would be different today.

"The anti-consumer deal that went down in April 2000 . . . would not have happened had this report been made public," said Hughes.

Although the public was not aware of LaCapra's findings, FirstEnergy was, Tongren said. Utility spokesman Ralph DiNicola argued that making them public would not have affected the outcome of the debate over stranded costs. "There was an understanding by the [state] legislature that if stranded costs weren't dealt with fairly, there would be no dereg law," DiNicola said.

If the company's request had not been met, he added, "that would have been confiscation without representation and, believe me, we would have pursued every legal option we had available."

The legislature decided to deregulate the power market in 2000 and ordered the Public Utilities Commission of Ohio to work out the details, of which the most contentious was the scope of stranded costs. FirstEnergy, which serves much of Northeast Ohio, was particularly interested because of its heavy investment in nuclear power.

The PUCO staff began working on its own estimate of stranded costs. But before it was complete, FirstEnergy and its opponents, including major power customers, reached a settlement that brought the process to a halt.

Tongren, too, signed off on the settlement, which allowed FirstEnergy to collect stranded costs through monthly electric bills for five years. DiNicola said rates did not increase, however, because the costs already were being figured into existing bills.

Tongren argued that conceding on the stranded-costs issue strengthened his hand in other issues under negotiation. As a result, he said, he was able to ensure the growth of a competitive market in electric power.

"FirstEnergy wanted two things: They wanted money and they wanted no competition." Tongren said. "We decided [to go] in a direction where at least one of FirstEnergy's goals is going to be thwarted: We're going to produce competition."

But Henry Eckhart, a former PUCO commissioner who represented several consumer groups in the debate, said Tongren should have made the LaCapra estimate public.

"Why did he keep it hidden?" Eckhart asked. "I know why: They would have had testimony that FirstEnergy wasn't entitled to any - or to very little - in terms of stranded costs."

Hughes of Citizen Power was still more critical of Tongren's actions. "It's his job to protect ratepayers and he did the opposite."