CITIZEN POWER

Public Policy Research Education and Advocacy

FOR IMMEDIATE RELEASE Contact: David Hughes

January 22, 2002 412/421-6072

PUCO CHAIRMAN’S AND CONSUMERS’ COUNSEL’S ELECTRIC CHOICE REPORTS MISLEADING, SAYS WATCHDOG GROUP

CLEVELAND, January 22/PRNewswire—Recent reports on the first year of Ohio’s Electric Choice program by Public Utilities Commission of Ohio Chairman Alan Schriber and Ohio Consumer’s Counsel Robert Tongren are misleading, according to the utility watchdog group Citizen Power. “The successes claimed are not the result of PUCO’s implementation of Senate Bill 3. On the contrary, key decisions by the PUCO, and OCC’s acquiescence, are a major reason why supplier choices and savings are extremely limited,” according to David Hughes, executive director of Citizen Power. “That’s why Schriber and Tongren are now trying to shift the blame for a poor first year of Electric Choice,” Hughes said.

The PUCO and OCC reports claim successes of the Electric Choice program including: the Northeast Ohio Public Energy Council aggregation, system reliability last summer, rate freezes and reductions, and new energy sources. “None of these are the result of PUCO or OCC initiatives. Each one of them happened because of already established reliability mechanisms, prior settlements, or in the case of NOPEC, Senate Bill 3 requirements,” Hughes continued.

“Citizen Power has been trying for several years to get PUCO and OCC to protect FirstEnergy ratepayers. But, in virtually every instance PUCO has rubber stamped utility requests that are anticompetitive, and OCC has either been complicit or AWOL. Now we see the results of these anticompetitive decisions,” Hughes said

Citizen Power offered some major examples of PUCO decisions and OCC acquiescence that have hurt ratepayers, including:

• Giving utilities 100% recovery of “stranded costs”, a windfall ($8.7 billion in the case of FirstEnergy for massive nuclear plant construction cost overruns) that is being used to dominate regional markets and to sell power nationwide.

• Refusing to review mergers (e.g., AEP-CSW and FirstEnergy-GPU) that further solidify market domination by incumbent utilities.

• Refusing to delay the start of Electric Choice despite the fact that the transmission system would not support the access necessary for a competitive market to develop.

• Allowing customer switches between subsidiaries of utility holding companies to count as “competitive” switches, which artificially inflates switching percentages, and in the case of FirstEnergy, greatly reduces the risk that it will have to refund to customers any of the $500 million it promised if the 20% switching target established by S.B. 3 is not achieved.

Alan Schriber and Robert Tongren finally realize that the lack of transmission access to Ohio markets has hampered the development of competition. However, both are now trying to cover their failure to address the problem by attempting to shift the blame to federal regulators.

“The law permitted PUCO to delay the start up of the Electric Choice program until it had some assurance that market structures, such as access to transmission, were in place to allow competition to develop,” said Roger Odisio, economist with Citizen Power. “Citizen Power argued that failure to do so would allow incumbent utilities to dominate their markets after restructuring. PUCO ignored its responsibilities under the law, brushed off our arguments, and blithely pushed ahead. For Schriber to now acknowledge problems that Citizen Power had previously identified without acknowledging that PUCO brushed them off is disingenuous,” said Odisio.

Tongren now claims he opposed counting switches to utility affiliates. “He is trying to rewrite history,” Odisio said. “Far from opposing them, OCC actually supported counting switches to affiliates in their filings, where they opposed every argument raised by Citizen Power about potential problems with restructuring,” said Odisio

Citizen Power is concerned about the future of Electric Choice because it believes Ohio ratepayers are left unprotected in the face of utility market power. “Schriber claims ‘PUCO will continue its vigilance… to insure a healthy market’, but in fact PUCO has been anything but vigilant,” Hughes said. “I hate to think what is going to happen when the Market Development Period is over.”

Citizen Power is attempting to force PUCO to fulfill its mandate to protect consumers, and to fill the void left by OCC’s refusal to fight for FirstEnergy ratepayers. It has a rehearing request at PUCO on FirstEnergy’s incentive credit application, in which FirstEnergy falsely claims enormous percentages of its commercial and industrial customers have already switched suppliers. Citizen Power has appealed PUCO’s refusal to review the FirstEnergy-GPU merger to the Ohio Supreme Court. It also intends to call for legislative oversight hearings and amendments to S.B. 3 in an attempt to remedy the problems already apparent in the Electric Choice program.

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