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Electrical deregulation is not working for Ohioans

Record high temperatures and an extended streak of 90 degree plus days ensures higher electric bills will be arriving in your mailbox soon. These higher bills are driven by increased usage.

But the ominous prospect of large increases in electric rates in just over a year is prompting action in Columbus now to mitigate what happened in Illinois and Maryland where rates jumped as much as 55% and 70% respectively.

Like Ohio, legislators in these states had deregulated their utilities a number of years ago in the hope of bringing more competition into the market and lowering electric rates. The idea was to allow electric rates to be set by market conditions. The law assumed a competitive market would develop over a period of five years.

Deregulation didn’t work in Illinois and Maryland, and it is not working in Ohio. Our deregulation law was passed in 1999, and went into effect the week I was sworn into the legislature.

We must deal with that well-intentioned but failed initiative this year to avoid the fate of Illinois and Maryland residents. Thanks to the efforts of the Public Utilities Commission of Ohio under the leadership of Chairman Alan Schriber, Ohio electric consumers have so far avoided that fate. But now we need permanent fixes.

The PUCO helped out by extending the period during which competition was expected to develop.

Under the law passed in 1999 the market develop period ended December 31, 2005. But when a competitive market failed to develop by that deadline, the PUCO established Rate Stabilization Plans that took effect in January 2006.

These plans included rate increases, but they were much smaller than the rates that could have been implemented if we had allowed them to go to market rates. These RSPs end in December 2008.

We must act now to give the utilities ample time to implement whatever solutions we decide to enact.

Let me be clear. Electric rates are going up. The challenge is to find a way to allow rates to rise gradually so they do not dramatically impact either residential or business customers. At the same time the rates have to be set so utilities can recover their costs for the coal and natural gas they use to generate electricity, and the expensive environmental controls required on coal-fired generating plants.

It is little comfort to residents in southern Ohio that our electric rates are among the lowest in the state. Most people compare their bills to the last one, not to someone else’s bill from another part of the state. But high electric rates in northern Ohio were one of the factors that led the Ohio General Assembly to pass an electric deregulation.

The governor is expected to release his recommendations on changes within the next few weeks.

That will be the starting point for the legislative discussions. I anticipate his recommendations will also include provisions for alternative energy initiatives like wind and solar power and conservation programs.

Some of us have already been meeting with key individuals and groups about this issue. I expect to be very involved in these discussions as a member of the Senate Energy and Public Utilities Committee.

Senator Tom Niehaus can be reached at (614) 466-8082, e-maied at tniehaus@mailr.sen.state.oh.us, or writtten to at the Ohio Senate, Room 38, Statehouse, Columbus Ohio 43215. Please include your home telephone number and address.