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Regional Economy | Article published March 27, 2003
Electric ‘rate shock’ predicted
FirstEnergy official warns of boosts in 2005

By
BLADE BUSINESS WRITER


Customers of FirstEnergy Corp. could be in for ‘‘rate shock’’ after 2005 when deregulation in Ohio is complete and the utility can raise rates, possibly well above current locked-in prices, a top company executive said yesterday.

Richard Marsh, chief financial officer for Akron-based FirstEnergy, the parent company of Toledo Edison, said commercial, industrial, and residential customers ‘‘are being served at rates far below even wholesale rates’’ because Ohio’s deregulation plan locked them into such prices through 2005.

He hinted that rates could jump nearly 50 percent for homeowners and renters, who now pay 3.4 cents per kilowatt hour for power generated or supplied by FirstEnergy. Businesses pay 1.8 cents.

Those figures, which are wholesale numbers that don’t include other fees charged by the utility, are well below today’s wholesale price of more than 5 cents a kilowatt hour, the figure for which power sold at a recent New Jersey auction, Mr. Marsh told analysts.

‘‘So, all those customers [in Ohio] are receiving generation charges that we feel are well below the market level for retail rates right now,’’ he said.

One analyst questioned whether FirstEnergy’s cash flow might suffer after 2005, after which it can no longer charge for $8.8 billion in debt costs it has been permitted to recoup from customers.

Mr. Marsh said the firm expects its ability to charge higher rates will offset those losses.

However, the public may not be happy with higher electric rates when deregulation was approved by state regulators as a way to reduce monthly bills for homeowners, renters, and businesses.

Alan Schriber, chairman of the Public Utilities Commission of Ohio, said his regulatory agency is ‘‘very concerned’’ about the potential for rate shock.

‘‘We’re thinking about it a lot," he said. "It consumes us actually.’’

He recently spoke to a group of Wall Street analysts about the issue. ‘‘I told them that one thing I don’t think Ohio will tolerate very well would be rate shock, and we’re looking for ways to mitigate it,’’ he said.

No one knows how volatile the power market will be in three years, but Mr. Schriber said he doesn’t want to take chances.

Within three months, he said, he wants to initiate discussions to find solutions to avert rate shock.

The state no longer will be able to regulate the price FirstEnergy can charge for power, but there may be ways to restructure other parts of a customer’s bill so that the overall bill does not rise significantly, he explained.


More articles on this subject »
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Besse working conditions get mixed grades in study 03/21/2003
FirstEnergy files notice of securities sale 03/18/2003
Deregulation called factor in Besse lapse 03/13/2003
Utility’s reactor head is replaced; plant could be shut till summer 03/12/2003

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