For immediate release: January 28, 2004
Contact: Catherine Turcer, Legislative Director
Ohio Citizen Action
(614) 263-4111


Taft silent on Ohio's biggest economic issue:
FirstEnergy rates could cost 18,000 Northern Ohio jobs


COLUMBUS -- "During today's State of the State, Governor Bob Taft was strangely silent about FirstEnergy's $3 billion rate case," said Catherine Turcer, legislative director for Ohio Citizen Action. Turcer said FirstEnergy's proposed rates would pull at least $1 billion out of the Northern Ohio economy each year in 2006, 2007, and 2008. "That missing money translates to 18,000 missing jobs for Northern Ohioans," Turcer said. "It dwarfs everything Taft has done and wants to do on jobs."

"Sometimes what is important is what is left unsaid. Governor Taft could have said that this case deserves the normal nine-month review and serious scrutiny. Instead, his silence invites speculation about FirstEnergy's influence over him. Last year alone, the Akron utility gave $200,000 to Taft's issue PAC."

"Governor Bob Taft isn’t the only one who has been silent about FirstEnergy. None of the gubernatorial candidates -- Attorney General Jim Petro, Auditor Betty Montgomery, and Secretary of State Ken Blackwell -- have yet called for slowing down the Public Utility Commission's breakneck schedule. Why?"

Ohio Citizen Action is the state's largest environmental organization, with 100,000 dues-paying members. Non-profit and non-partisan, Ohio Citizen Action has been analyzing the influence of money on Ohio politics since 1992.

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Background

FirstEnergy rate case

On October 21, 2003, FirstEnergy filed a "rate stabilization plan" with the Public Utilities Commission seeking approval to continue to collect stranded costs for three extra years. Because stranded costs are required by state statute to expire by December 31, 2005, FirstEnergy simply changed the name of the charge to a rate stabilization charge.

Based on the level of stranded costs – roughly $9 billion – FirstEnergy can collect under current commission orders and allowances for other types of increases in FirstEnergy’s pending filing, an average family can expect the "rate stabilization plan" to cost about $30 a month.

FirstEnergy’s approved $9 billion can be is broken into two types of stranded costs and includes about $2 billion of pass-through taxes. Adjusting for all this, it is likely that the “rate stabilization” would come to about $3 billion over the 3 years. The reason that we have nothing more than an estimate is that FirstEnergy will not provide numbers unless the recipient signs a confidentiality agreement, thus avoiding public scrutiny and forcing public estimates.

Job loss estimate

The estimate of 18,000 jobs lost to northern Ohioans is conservative, principally because the $3 billion price tag on the rate case is conservative. The FirstEnergy rate filing is a skeleton, with no documentation, leaving the door open for various rate increases that are not even quantified.

"Economic impact analysis" -- translation of an economic event, such as a drop in consumer spending, into consequential job gains or losses -- is a well-established field. Hundreds of such studies have been done in Ohio and elsewhere, using differing methodologies, different input-output models, different factors introduced, and using up a good deal of money and time. The results of such studies, however, follow a clear pattern. Where the economic event involves a drop in consumer spending, the employment consequence ranges from one job lost for each $48,000 in lost spending to one job lost for each $55,000. Using the more conservative figure of 1 job/$55,000, $1 billion in lost consumer spending means 18,181 fewer jobs in Northern Ohio each year these rates would be in effect.

Many economic impact analyses take into account the compensating effect of new jobs created by the shift in resources. So, for example, in considering a tax hike to pay for new highway construction, the analysis would produce a net job change, subtracting job loss from the tax hike, and adding the job gains from the construction project.

In the current FirstEnergy rate case, however, there are no compensating expenditures. FirstEnergy says the rates are for the purpose of protecting customers against volatile rates when the current transition period ends. In effect, the rate case would just lock in extraordinarily high rates for three additional years to no one's benefit other than the utility. To the extent that the high rates would increase FirstEnergy's stock price, that value would exist only on paper until the stock is sold -- assuming the stock price had not subsequently dropped.

-- Paul Ryder, Ohio Citizen Action (216) 861-5200.