FirstEnergy wants new rate plan that would allow quarterly increases for equipment upgrades

By John Funk, The Plain Dealer 

March 23, 2010

FirstEnergy Corp. has filed a comprehensive new rate plan with state regulators that would give the utility the right to tack on $390 million in new customer fees with minimal oversight.

The increases are included in an application and 42-page agreement the Akron company submitted to the Public Utilities Commission of Ohio Tuesday.

The provision calls for quarterly adjustments in delivery rates to pay for upgrades to wires, transformers, substations and similar equipment. The company could also immediately pass on to customers any increases in property taxes and income taxes.

Traditionally, FirstEnergy and other utilities had to apply for rate increases after paying for upgrades or tax increases.

The new plan would begin June 1, 2011, and run through May 31, 2014. It's not clear how the proposal would affect individual monthly bills.

Only 14 months ago, FirstEnergy received a $137 million increase in delivery rates, is first in more than a decade.

The utility negotiated the agreement behind closed doors with the PUCO staff and more than a dozen lawyers representing industrial customers as well as trade associations representing manufacturers, hospitals, school boards, colleges and others. The commission staff last November urged the discussions.

The Ohio Consumers' Counsel Janine Migden-Ostrander and a number of other consumer groups refused to sign the agreement, objecting not only to the increases but to the closed-door bargaining and especially to the procedures the agreement would put into place to increase future rates.

The company wants the PUCO to approve the plan by May 5 -- a time frame Migden-Ostrander said is completely unreasonable.

She said the plan puts customers at risk for paying "hundreds of million dollars" in extra rates over the next several decades because FirstEnergy is moving the control of its power lines from a Midwestern grid manager to one in the East, exposing customers to paying for long term projects in both regions.

The company immediately denied that there would be any risk to customers, saying it would absorb the extra fees, if there are any.

In a prepared statement, FirstEnergy CEO Anthony Alexander said the agreement would provide "rate stability for customers, support jobs and economic development in our communities and encourage continued investment in our utility infrastructure."

If approved, the new plan would continue to use wholesale auctions to set power prices, calling for a series of auctions for a portion of its power needs -- including one in July, a second in October, and others in July 2011 and July 2012 -- so as to not to fully expose customers to market rates at any one time.

Migden-Ostrander and other consumer groups object to giving the company the ability to file for quarterly increases and delivery rates.

"If they filed a rate case, we could examine and see if the increases are reasonable," she said. "They want to file for increases, have audits that review the accuracy of their numbers, but not whether the expenses are necessary."

David Hughes, executive director of Citizen Power, a regional energy advocacy organization with offices in Ohio and Pennsylvania, where FirstEnergy also has companies, also refused to go along with the agreement.

"This process did not permit a thorough vetting of the issues. This commission does what FirstEnergy wants and then says the Ohio Consumers' Counsel is the problem."