Watch Your Wallets Ohioans; It’s Electric Re-reg Time! | October 19, 2007

Post from Brian Rothenberg’s Blog:


We invented it. Edison was from us. Brush lived among us. And we seldom think much about what the energy in that little light bulb has wrought unless we take a drive into Amish country in Ohio.

We take it for granted that it will power our appliances, chill our food, keep us cool and allow us to watch the Cleveland Indians, OSU Buckeyes (when the powers that be let us — but that’s another story) or the Daily Show’s daily dose of sarcasm.

If we’re in the hospital, everything from the bed to the equipment can’t work if the power doesn’t.
Each passing generation becomes more reliant on it – especially in our computer age. Without it, life would be much different.

And the fact is that if the price of electricity goes way up, it has probably more impact than George W’s rant on taxes, as most of our monthly bottom lines would be much different and the spiral of spending constraints could make a real impact on Ohio’s economy.

Which is a long way of saying that Senate Bill 221 deserves your attention, especially the part that explains what leeway legislators want to give the Public Utilities Commission of Ohio to set the rates we all pay for electricity.
SB 221, as introduced, was largely the work of Gov. Ted Strickland, who joined with business leaders, labor leaders and municipal electricity companies and in expressing concern for Ohio’s bottom line.

The seeds for SB 221 were planted in 1999 after Ohio and 17 other states rushed to the finish line like 49ers to the gold rush to deregulate their electricity services and let the open market set the prices. This was after all the height of the free market Reaganomics in all its glory: Dereg of utilities, dereg of phones, dereg of airlines and yes NAFTA – a gold rush of profits many of which have lost their luster.

(By the way, anyone notice we deregulated phone companies, sliced them and diced them from the old Baby Bells and now they are put back in large part as supergiant AT&T? Makes you wonder who made all that money through corporate mergers on the way back to a monopoly, doesn’t it. And gee, who pays for phone service – why all of us of course. Dereg is a great thing.)
Now back to electricity.
The goals of deregulation were lofty: The market would result in competition, causing prices to go down and consumers to benefit. On the floor of the Statehouse, it was discussed as if the savings in our wallets were a foregone conclusion.
The problem: No competitive market actually emerged, so the market began setting prices as high as the market would tolerate. In Maryland, where the phase-in has already ended, prices spiked up 72 percent in one year.

And quality began to suffer as power companies traded the unseen commodity of electrical energy in a fluctuating market much like gasoline deregulated into OPEC oversight in the 1970s.

Just in the years since we’ve begun to phase in deregulation, we’ve watched Enron go bust from the diversification and accounting games that accompanied a non-transparent utility, we’ve seen a major blackout that began in Northern Ohio and blacked out electricity from New York to Montreal, and of course, who can forget the revelation of a rusted cap at the top of an Ohio nuclear power plant.

So here we are, at the end of the phase-in of deregulation that was supposed to lower our costs and make utilities more efficient and the market was supposed to demand increased quality; and at the end of next year, the market will begin setting the prices in Ohio, causing fears that our prices will skyrocket, much like Maryland’s did.

Other than a handful of self-serving utilities, nobody really is arguing that there really is a competitive market but the Governor gave it a nod by allowing one to exist if someone can prove it exists, and most experts are convinced that unless Ohio does something before the end of next year, we really will end up like Maryland.

Given the general agreement that deregulation was a failure, the arguments over ending our flirtation with deregulation center largely on how much leeway the Public Utilities Commission of Ohio (PUCO) should have — if and when Ohio returns to a system of regulating electricity prices. And how much you and I and the other ratepayers should know about what goes into the PUCO’s pricing calculation. Transparency. We should have the right to know what fees and charges are being levied for the electric energy we are using.
In Ohio, there is a strong case to be made for the public’s right to know – not only given our recent political history, but given the experts who oversee our utilities. If you don’t believe me, you should believe the Lehman Brothers (well-regarded bean counters from Wall Street.)
Lehman does an annual ranking of state utility regulators and the PUCO in Ohio is routinely ranked about the most utility-friendly in the nation. And why would we not expect that after 16-years of cow-towing to corporate leaders who know how to play the political system in Ohio. After all, we are a company town as a state. We host industry giants First Energy and AEP that are behemoths of the industry and have much greater territory than just the Buckeye State.

It’s clear from things the Commission has done – and not done – that average consumers are left to battle for their pocketbooks. And it’s clear from utilities’ annual reports that electricity stockholders are doing quite nicely.
The consumer/utility balance is so out of whack that large industrial companies like Ford, and GM, and AK Steel, and Worthington Industries have banded together to gang up on the PUCO and demand that if it’s given the power to set utility rates, those of us who pay the rates should be allowed to peek in the utilities’ books. That’s the only way we’ll know if the prices the commission is setting (and the prices we’re paying) are fair, just and reasonable.

Back in pre-deregulation days, we all got to peek in the books – it was considered part of the progressive agenda of Teddy Roosevelt’s Republicans that the monopoly of large utility companies could only be balanced by the transparency of an open corporate set of books.

Back before they fixed electricity to help our pocket books, when a utility company wanted to raise rates, they had to go before the PUCO to justify the higher costs. All parties viewed this arrangement as part of the compact between the utility companies and the customers:

The state guaranteed each utility a base of customers, the regulators guaranteed the utilities a profit, the utilities guaranteed the state that it would provide electricity to those customers for a fair, just and reasonable price. To prove the prices were fair, the PUCO demanded a peek into the utilities’ books.
All that changed in deregulation – in the name of protecting your wallet – irony of ironies.
David Boehm, a lawyer who is working for some of Ohio’s largest employers, testified in favor or SB 221 and explained why open books are necessary – and how the process should work:

    “Witnesses would be heard and subject to cross-examination and all interested parties would be represented.
    Utilities could put on whatever other evidence they think relevant including evidence of market rates. If, thereafter, negotiations are entered into with the utilities, the basic data underlying those negotiations is open and transparent and known to everyone.
    We do not see how anyone in an open society could oppose such a provision. While flexibility is an obvious goal of S.B. 221, it must not be at the expense of due process or transparency.
    A federal appeals court judge, Damon Keith said in 2002 ‘Democracies’ die behind closed doors. The Framers of the First Amendment did not trust any government to separate the true from the false for us.”

Although Mr. Boehm might not know how anyone in an open society could oppose it, Ohio’s utilities found a way to oppose it.

With the ever increasing throng of lobbyists, consultants and employees, the utilities offered a string of audacious amendments. The bottom line: The want to continue to have a guaranteed set of customers and a guaranteed profit – but they want authority to veto any PUCO decisions they don’t like.
And they don’t want us to peek in their books.

That’s right. Let’s get this straight, they want guaranteed customers, they want guaranteed profits and want veto authority over a board appointed to protect the public’s interest.

See a problem here? Why have a PUCO?

And that’s what makes this issue so fascinating. For a company whose mission is to illuminate our lives, they sure seem to be angling for some reason to protect their profits, while shielding their costs.

And in Ohio, when you see the shadowy deal making in the Statehouse start to move away from transparency into darkness, you better grab your wallet and run.
So, here’s hoping our legislature finds the light switch or else we all need to padlock our wallets. After all the last time they tried to save us money – it created this mess to begin with.

What’s that definition of insanity again?

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