House approves plan to put PUCO in charge; Senate OK likely today

A stalemate between Gov. Ted Strickland and Republican legislative leaders over electricity regulation ended yesterday with a deal that leaves the rates for American Electric Power customers with a state commission.

Rates are going up for AEP customers in central and southern Ohio, who currently pay the lowest among customers of the state's major utility companies. During months of negotiations on the energy bill, the question has always been "by how much?" Under the latest version of the bill, the Public Utilities Commission of Ohio will provide the answer.

After months of talk, hours of committee testimony, more than 20 rewrites and untold thousands of dollars spent on a truckload of lobbyists, the House voted 93-1 for Senate Bill 221. The Senate is expected to concur today.

"This bill gives the maximum amount of protection to make sure that energy prices moving forward will remain stable," said House Speaker Jon Husted, R-Kettering.

Strickland said it would be unrealistic to assume that prices won't increase in "very moderate ways."

The bill, however, "protects the consumers from having to pay unjustified prices for a commodity that is essential for them and is delivered in an atmosphere where a competitive retail market does not currently exist," he said.

But others, including Janine Migden-Ostrander, the Ohio consumers' counsel -- the state's advocate for residential utility consumers -- said the bill still would leave utilities "significant opportunities to request rate increases."

"I recommend that customers look very seriously at energy efficiency, change out your light bulbs and do whatever you can to mitigate the rate increases that are coming," she said.

Husted and House Republicans essentially agreed to the same offer Strickland put on the table last week: letting the PUCO use an "excessive earnings" standard to judge whether utilities are earning too much compared with similar companies and giving the commission more control over how a utility moves into an open, unregulated market.

Elected leaders have been trying to craft a new system of electricity regulation in Ohio before the current rate caps expire at the end of 2008. Although Strickland has favored a more-regulated rate system, Husted has preferred giving utilities a more-defined option to move into an open market.

The result is a bill that would give the PUCO power to set state-regulated rates. If a company chooses to move into an unregulated market, the commission would determine, over 10 years, what percentage of power can be sold at market rates.

Ohio manufacturers praised the bill. AEP did not get the rate-making structure it wanted.

"It appears that the House amendments provide a workable approach going forward, including preserving a market-rate option and a mechanism for future-generation investment in Ohio," said Melissa McHenry, spokeswoman for the Columbus-based utility.

Husted said much of the success or failure of the plan will fall on the PUCO, a panel of five gubernatorial appointees that was criticized before deregulation in 1999 for favoring utility companies at the expense of consumers.

"(It's) probably more authority than I'm comfortable with," Husted said.

Strickland, who has made two appointments to the commission, said he is confident it will be fair to customers and utilities.

GOP lawmakers also struggled to swallow Strickland's "excessive earnings" proposal, which the governor called a vital consumer protection.

"It's difficult to live with, because it kind of defies the concept of free enterprise and business as we know it," said Senate President Bill M. Harris, R-Ashland.

Husted said the provision should have little impact if the PUCO sets proper rates.

The bill also contains key green-energy provisions, requiring that at least 25 percent of electricity generation in Ohio come from renewable or advanced energy sources by 2025, and that power usage become 22 percent more efficient by 2025. Annual benchmarks, backed by financial penalties, would motivate utilities to ramp up their green production.

"Not only will an investment in renewable energy reduce pollution, it will also boost our manufacturing base and put Ohioans back to work," said Erin Bowser, director of Environment Ohio, an advocacy group.

Lobbying on the bill has been intense, so much so that Husted called members into the House chamber yesterday and had them wait a good 30 minutes while the final draft of the bill was completed. Lobbyists are not allowed in the chamber, except for on the balcony.

"There was just no end to the amount of things people wanted to change about the bill," Husted said.