Fight over AEP electric bills hits Ohio airwaves

JULIE CARR SMYTH

Asso­ci­ated Press

COLUMBUS — In a year notable for its bar­rage of pres­i­den­tial TV ads, a pair of Ohio util­i­ties unac­cus­tomed to high-profile spats is also tak­ing to the air­waves in a dis­pute over future elec­tric bills.

The rivalry involves Columbus-based Amer­i­can Elec­tric Power’s request to raise rates as it recov­ers costs asso­ci­ated with switch­ing to a dereg­u­lated market.

The util­ity com­pany says the increases are nec­es­sary to cover con­tract oblig­a­tions and pro­tect its work­force, but com­peti­tors, led by Akron-based FirstEn­ergy, say the added charges will make it impos­si­ble to com­pete in AEP territory.

The often imper­me­able world of util­ity reg­u­la­tion has been trans­lated for the air­waves into an ugly school­yard squabble.

AEP Ohio’s emo­tional TV spots paint FirstEn­ergy Solu­tions, the company’s retail arm, as a big, greedy businessman.

In one ad, he weighs down one end of a see­saw, lick­ing a melt­ing ice cream cone, as a child at the other end dan­gles pre­cip­i­tously in midair.

In other, he filches lemon­ade from a child and sells it at a profit.

“Push­ing a scheme on a gov­ern­ment agency to keep their costs down, FirstEn­ergy Solu­tions and other sup­pli­ers buy elec­tric­ity at rates that aren’t fair, and turn around and resell it at a profit,” the ad says. “And if it con­tin­ues, it could destroy thou­sands of Ohio jobs.”

FirstEn­ergy Solu­tions has responded with its own round of equally emo­tional spots. One por­trays AEP as a bas­ket­ball player dodg­ing behind a group of chil­dren to avoid competition.

Another, in omi­nous black-and-white, shows a line of drably clothed chil­dren in a cafe­te­ria line: “Step in line, and take what you’ve been served. When there isn’t fair energy com­pe­ti­tion, this is what it looks like: no real choice, no real innovation.”

Con­sumer mail has risen as the unprece­dented ad war rages, said Pub­lic Util­i­ties Com­mis­sion of Ohio spokesman Matt Butler.

AEP Ohio asks to increase rates per 1,000 kilowatt-hours by $7.40 per month for res­i­den­tial cus­tomers. That’s a 5 per­cent rate increase this year, to be fol­lowed by a 3– to 4-percent increase next year and a nom­i­nal increase in 2014.

Rev­enue raised would help pay off AEP’s invest­ments in power lines and fuel, and to help off­set dis­counts it’s offer­ing com­pet­ing sup­pli­ers a dis­count off the $355 per megawatt day it costs the com­pany to cover its gen­er­a­tion con­tracts, said pres­i­dent and chief oper­at­ing offi­cer Pablo Vegas.

He says AEP has pooled the power it gen­er­ates through­out the Mid­west for 60 years, and it had kept the company’s rates below dereg­u­lated com­peti­tors. The company’s posi­tion is that it’s fair to charge sup­pli­ers who enter its ter­ri­tory to use the power gen­er­ated under three-year pool­ing agree­ments signed before the tran­si­tion, he said.

Vegas said the com­pany is bound to honor those con­tracts, and so can’t freely retire or sell plants that aren’t economical.

“They’re com­mit­ted to our cus­tomers in the state,” he said. “It’s a con­tract that we can­not break.”

FirstEn­ergy is fight­ing the pro­posed capac­ity charge, accus­ing AEP of seek­ing a “billion-dollar bailout.”

“Right now, the mar­ket price for the capac­ity charge is about $16 (per megawatt day). They want to charge about $255 for the right to serve the vast major­ity of their cus­tomers,” said spokesman Doug Colafella. “What that does is essen­tially wipes out any sav­ings that we can offer to a customer.”

AEP likens the cost recov­ery it seeks to the “stranded costs” com­peti­tors, includ­ing FirstEn­ergy, were granted when they tran­si­tioned to the open market.

In 2000, the PUCO autho­rized FirstEn­ergy to col­lect $6.9 bil­lion in such costs, which rep­re­sent the dif­fer­ence between a company’s total invest­ment in an asset, such as a power plant, and what it would sell for. The com­pany says it ulti­mately did not col­lect the entire amount.

Colafella said AEP had 10 years to col­lect stranded costs, and declined to recover the major­ity under a set­tle­ment agreement.

Sandy Buchanan, exec­u­tive direc­tor of Ohio Cit­i­zen Action, a watch­dog group spe­cial­iz­ing in energy issues, said FirstEn­ergy did not raise rates — but did tack sur­charges to cover its nuclear plants onto elec­tric bills for years.

“The way I read this is that AEP is say­ing, ‘Hey, wait a minute. FirstEn­ergy got this bailout, how come we can’t get a bailout now that we’ve decided to enter this retail mar­ket?’” Buchanan said. “I mean, it wasn’t fair that FirstEn­ergy got a bailout, so is it now fair for AEP to get one? All of that is bad for consumers.”

Posted by AP News on Jun 18 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.