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Transition to competition must be fair

by on May 21, 2012

This letter to the editor from AEP Ohio President Pablo Vegas was published in The Columbus Dispatch on May 19.

When Ohio deregulated the state’s electric-utility industry, the idea was to create a competitive market that would allow Ohioans a choice of suppliers to obtain electricity at the best possible price.

From the date of enactment of the law through the past decade, market electricity prices were higher than rates paid by AEP Ohio customers. The Public Utilities Commission of Ohio asked that AEP Ohio stay with a traditional regulated plan to keep our prices low.

Utilities with higher rates, such as FirstEnergy, moved to competition and were permitted to recover billions in above-market costs during their transition period. Now, when market prices are low, AEP Ohio is responding to the commission’s directive to transition to competition. But time is required to unravel significant commitments that have been made by AEP Ohio to support customers in the previously regulated environment.

Let’s be clear: AEP Ohio embraces the move to a fully competitive market. But the transition to competition must be fair and reasonable for customers and the company. We have filed a plan with the commission that provides an equitable transition to the competitive market. The plan addresses customers’ concerns about the effect of rate increases and lays out a sensible path for the company to provide services to its customers.

Our plan sets a pricing structure for competitive suppliers to purchase generation capacity from AEP Ohio to serve electric customers. This pricing is significantly below our costs but allows for recovery of some costs associated with serving customers, a critical element in sustaining the health of Ohio’s energy economy.

FirstEnergy Solutions and other suppliers are pushing a separate scheme to get generation capacity at an artificially low rate. Their profits will increase under this scheme, while consumers will see little benefit.

AEP Ohio will suffer considerable financial damage, and the state could see significant job losses. The commission’s role in this case is to promote fairness and competition. That means AEP Ohio should get a fair price for the generation capacity it must provide to suppliers who compete to serve its customers.

AEP has been mischaracterized as anti-competitive through misleading ads. The fact is, nearly 40 percent of AEP Ohio’s customer load already has switched or is in the process of switching to an alternative electricity supplier. Even without the discounts we’re proposing, customers are saving money by switching today.

Our plan is not anti-competitive. Unlike the fair and reasonable three-year transition we have requested, FirstEnergy, the utility with the highest electricity prices in the state and the parent company of FirstEnergy Solutions, took nearly 10 years to complete its transition to market and collected nearly $7 billion in costs from its customers.

We are asking for much less. All businesses expect fair play and fair dealing. What FirstEnergy wants is artificially low generation-capacity charges to allow it to maximize profits and financially weaken AEP, its biggest competitor in the state. That’s not fair. And it’s not good for Ohio.

Ohio needs robust competition with strong competitors and a regulatory environment that supports fair competition. Jobs and investment in Ohio are at stake.

PABLO VEGAS

President, chief operating officer

AEP Ohio

Gahanna

2 Comments
  1. Duane Kiser permalink

    There is no fair transition to competition. I lived outside Dallas when Texas made this change. After more than 10 years electric prices have skyrocketed… The new electric vendors haven’t built a single new plant… Electric rates are based on your credit reference, the worst the reference the higher your bill… Electric is more than triple compared to what we pay AEP now… Brown outs are normal now during the summer… This whole plan needs to be stopped now…. Electric production should remain regulated…

  2. Duane Kiser permalink

    There is no fair transition to competition. I lived outside Dallas when Texas made this change. After more than 10 years electric prices have skyrocketed… The new electric vendors haven’t built a single new plant… Electric rates are based on your credit reference, the worst the reference the higher your bill… Electric is more than triple compared to what we pay AEP now in the Tri-state (KY/OH/WV) area…. Brown outs in TX are normal now during the summer… My electric in Dallas was over $800 a month on the budget but my electric bill here is less than $200 a month… This whole plan needs to be stopped now…. Electric production should remain regulated…

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