Retail choice started in Ohio in 2001, and the full transition to competition has continually been extended. In 2008, legislators again tacked on several more years in the transition to full competition.
Most Ohio utilities continue to own generation, but the FirstEnergy companies sold off their power plants. The utilities continue to own the transmission and distribution wires, while also providing 'backstop' power to customers who do not shop for electricity.
With the move to competition, Ohio utilities have separated their service into two parts:
- Regulated distribution of power, which is still only provided by the utility, and
- Supply of the electric commodity, which is open to competition.
Customers can choose to receive their electric supply from their utility, or an alternate electric provider.
Under new legislation, utilities are required to develop 'Electric Security Plans' to serve customers who do not choose an alternative energy supplier. The pricing under the electric security plan depends on the utility. The plans are currently being debated by the Public Utilities Commission of Ohio, and are supposed to take effect January 1, 2009. However, their approval before that time may not occur, and utilities may continue their current pricing until the security plans are approved.
Under the security plans, customers will be responsible for a host of new charges, including surcharges for energy efficiency, economic development, new power plants, and updated and deferred fuel costs. Additionally, the security plans propose deferring current costs into the future. While this may keep rates low right now, customers will have to pay interest on carrying costs for such deferrals, ultimately raising rates. Choosing an alternative supplier may allow customers to avoid some of these charges, but that is subject to the outcome of pending cases at the Public Utilities Commission.
Natural Gas:
The Public Utilities Commission of Ohio has reformed the natural gas industry to give customers a chance to shop for lower natural gas rates. Customers at Dominion East Ohio, Columbia Gas, Duke Energy and Vectren Energy Delivery have the ability to choose an alternative supplier for their natural gas supply service. Their gas supply will still be delivered by the local utility, but customers will be buying their gas supply from a new company.
A customer's natural gas bill has been separated into two parts:
- Regulated distribution of gas, which is still only provided by the utility, and
- Supply of the gas commodity, which is open to competition.
Customers can choose to receive their gas supply from their utility, or an alternate gas provider.
Traditionally, local utilities arranged for gas supply for their customers and charged a supply rate known as a Gas Cost Recovery (GCR) rate. The rate could be compared to the rates charged by alternate suppliers.
However, most of the local utilities are transitioning away from arranging for gas supply for customers who don't choose an alternate provider, and are doing away with the GCR rate. Under this process, utilities are exiting what is called the 'merchant' function of gas supply service, and instead will merely bill for gas supply that is arranged by another company.
Utilities are engaged in a multi-step transition away from this merchant function, with the first step being auctioning off customers' supply needs to competing suppliers, rather than the utility procuring the supply needs itself. Under the new process, the utility no longer charges a GCR rate, but instead charges something new called a 'Standard Service Offer' rate, or SSO. The SSO is similar to the GCR in that it is a supply price which customers should use to compare offers from competitors. However, the SSO rate is set by competing suppliers in the market via an auction and is based on the NYMEX price for natural gas, unlike the GCR which was based on a utility supply portfolio.
Dominion East Ohio and Vectren Delivery currently have Standard Service Offer rates. Duke and Columbia still use GCRs but are moving towards using the SSO. The customer sees little difference in the change, as they still see a supply charge on their bill under both methods, and can still shop for an alternate supplier under both methods. The next step in the transition, which may come in the spring of 2009 at Dominion pending regulatory approval, is changing the SSO so that customers who do not choose an alternate supplier are assigned to a specific competitive supplier, rather than the supplier merely bidding for a slice of Dominion's system.
Both the SSO and GCR change monthly, which means customers are exposed to volatility. Choosing an alternate provider permits customers to lock-in a cheap rate before the more expensive winter season.
No matter who you choose to buy energy from, your local utility will continue to deliver your gas and respond to service interruptions and outages. You will still pay your utility for these services. Depending on your area, you can choose to receive a single bill from your utility listing your utility delivery charges and competitive supply charges, or separate bills from the utility and alternate energy provider.
