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