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Q. I don’t understand the opposition between FirstEnergy and AEP. Don’t they operate under the same set of rules?

by on May 21, 2012

A. AEP Ohio and FirstEnergy are making the transition to a competitive market at different times.

FirstEnergy started the switch in 1999, shortly after Ohio legislators passed Senate Bill 3. This allowed a majority of Ohioans to choose who they wanted to buy generation from.

At the same time, generation rates were reduced by 5 percent and then frozen for five years.

High-cost service territories, such as First Energy, saw a significant number of customers switch to lower-cost generation providers. Low-cost service territories, such as ours, saw little to no switching.

FirstEnergy began to corporately separate its assets with a two-phase, five-year plan. FirstEnergy received nearly $7 billion in stranded cost recovery. The company has continued to recover these costs through 2010.

During the same period, regulators repeatedly asked us to wait to move to a competitive market because our rates were stable and lower than market rates. At the request of state regulators, we contractually committed our generation to serve our customers through 2015. We did the right thing for Ohio and its electric consumers by providing below market generation rates to customers.

Last year, a surplus of power driven by the economic downturn and other forces has driven market rates below AEP Ohio’s rates. Regulators have asked us to complete the transition to market.

We’re asking for a three-year transition to unwind the contractual and legal obligations we entered into with the support of the Public Utilities of Ohio. This transition will ensure robust competition between strong competitors that will produce the lowest rates possible for all Ohioans while fairly compensating the company for assets currently dedicated to customers, but used by competitors for profit.

6 Comments
  1. tony blankenship permalink

    what a load of BS, 2 years ago all the power companies got a rate increase to help pay for the cost of transporting fuel(because of the raise in gas prices). not once did u drop prices when those cost came down instead u gave the management a bigger bonus. now that the cost of transporting said fuel is back to those rate but the fuel itself has gone down you’re ask for another raise. someday (and that day is getting near) the average joe will get tired of are politicians pandering to big corperations, i think we need to regulate power companies again and put all new politicians in office so at least our pay hikes will be used for all NEW bribes and just not maintance fees on the OLD bribes.

  2. Well Tony, it’s clear you are pissed! However dissatisfied you are with AEP, let me tell you that as a First Energy customer I’m aware that First Energy has been no less generous with their bonuses; the PUCO dealt different deals for AEP and First Energy over this transition period, now the PUCO needs to level the playing field by permitting AEP’s graduated rate increase (sadly). Then customers of both companies will hopefully see legitimate competition.

  3. Mark permalink

    I work for HP. We took a pay cut. Same thing. AEP says they want to ‘save’ jobs…which translates to ‘I want to make more money’. What if the workers, bosses, CEO’s…etc took a pay cut? Then rate hikes would not have to happen and the AEP employees would be in the same boat as the rest of us. HP could sell computers for hundreds more than they do now…then I wouldn’t have to take a pay cut…same thing with AEP.

  4. Elizabeth permalink

    The majority of AEP employees are also AEP customers. So taking a paycut will not solve anything, they still have to pay their electric bills just like everyone else.

  5. Edward Phillips permalink

    Unfortunately for AEP and other “old-line” utilities, the chickens are finally coming home to roost. I worked as a contractor with several old line east coast utilities in the 1980s and 1990s (not AEP). During all of our meetings with management, we noticed that most of the office personnel appeared to be not busy at all – many playing personal games! Also, almost every time we visited the offices, several key management executives appeared to be out playing golf! Since these companies were regulated by state commissions, we couldn’t understand the low productivity levels. We later found out that the companies were guaranteed a profit by the State over and above their costs so there was very little incentive, if any, to reduce costs. It didn’t help that they were being regulated by incompetent political commissions and audited by unethical accounting firms. To sum up, now that these bloated utilities face competition from companies that are better managed, they must drastically reduce costs and it will be extremely painful for them. It’s a shame that the newer workers will have to suffer the layoffs, pension cut-backs, etc. The “old-line” managers who are responsible for the mess are probably long gone after cashing in their stock options and drawing out huge pensions. (reminds me of the problems faced by city, state and federal governments.)

  6. Phyllis Davis permalink

    To switch or not to switch? Which is the best deal??? and Why?

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