Ohio Consumers' Counsel Issues Status Report on First Three Months of Retail Electric Competition in Ohio

Despite Few Choices for Electric Consumers, Education Efforts Must Continue



Apr 03, 2001, 01:00 ET from Ohio Consumers' Counsel

    COLUMBUS, Ohio, April 3 /PRNewswire/ -- The first three months of
 "electric choice" have brought few shopping choices but welcome consumer
 protection standards for Ohio's residential electric customers.  That's the
 verdict from Robert S. Tongren, Consumers' Counsel for the State of Ohio, in a
 report issued today on the status of retail electric competition in Ohio and
 its impact on the state's residential consumers.
     The report notes that while "competition has been slow to develop, choices
 have been slow to materialize and savings have been slow to accumulate,"
 residential consumers are benefiting in other ways.
     "While it's true that Ohio consumers have not yet had many new choices in
 the first three months of electric choice, it's equally true that they aren't
 being subjected to the kind of risks that Californians are facing," said
 Tongren.  "From our perspective at the Ohio Consumers' Counsel, that's a fair
 and reasonable trade-off."
     In the report, Tongren credits state legislators with taking a "wiser,
 longer-term view" of restructuring the electric industry that is helping to
 protect Ohio's residential consumers from the volatility of an evolving,
 unregulated retail electric market.  Among a number of consumer protection
 standards mentioned in the report, provisions in the restructuring law for a
 "market development period" earned special praise from Tongren.
     "The market development period allows residential consumers to take their
 time to learn how to shop for and buy electricity in a competitive market
 without the pressure to make a decision too soon," Tongren explained.  "And
 let's not forget, all residential customers served by Ohio's investor-owned
 utilities are currently receiving a guaranteed 5 percent reduction in the
 generation portion of their electric bill -- and will continue to receive that
 savings for the next 3 to 5 years if they choose not to switch."
     Looking to the future, the report acknowledged that "no one can say with
 any certainty" what Ohio's electric market will be like in three to five years
 when the market development periods expire, and identified several
 requirements for making electric choice work as intended.  These include (a) a
 healthy base of suppliers with room to compete on price, (b) an adequate
 supply of generation and (c) knowledgeable, interested and market-wise
 consumers.
     Tongren indicated that as the state's residential utility advocate, the
 Ohio Consumers' Counsel (OCC) has a major responsibility for ensuring that the
 third requirement is in place, and that the OCC staff is working aggressively
 to educate Ohio's residential electric customers about electric choice even
 though few choices currently exist.
     Tongren also issued a warning to any electric suppliers who may try to
 defraud Ohio's residential consumers.
     "While we welcome and encourage suppliers to come to Ohio and serve the
 state's residential customers, we will not tolerate sales practices that
 attempt to take advantage of the fears or lack of knowledge of those
 customers," said Tongren.  "Nor will OCC tolerate market abuses such as those
 seen in California. We will react swiftly and forcefully to ensure the
 continued integrity of Ohio's competitive electric marketplace to protect the
 interests of the state's residential consumers."
     The Ohio Consumers' Counsel is the legal representative and residential
 utility advocate serving as a resource for individuals who have questions and
 concerns, or would like more information, about the services provided by their
 publicly owned electric, natural gas, telephone and water companies. The
 agency also educates consumers about utility issues and resolves complaints
 from individuals. To receive utility information brochures, schedule a
 presentation or file a utility complaint, residential consumers may contact
 1-877-PICKOCC (1-877-742-5622) or visit the OCC website at www.pickocc.org .
 
                             THE VIEW FROM 90 DAYS:
                  Despite Few Choices for Electric Consumers,
                         Education Efforts Must Proceed
 
             Prepared by Robert S. Tongren, Ohio Consumers' Counsel
 
     During the first three months of retail electric competition in Ohio, a
 clearer picture of "electric choice" has materialized.  Volatile wholesale
 electricity prices, increased risks for suppliers and intensive media coverage
 of continuing problems in California's electric markets are interacting with
 market conditions created by the safe and cautious approach legislators
 adopted in Ohio's electric restructuring legislation.  The result is a slowly
 emerging marketplace that will in all likelihood take three to five years or
 more to deliver the full benefits of retail competition.  This period will
 give Ohioans the opportunity to become better informed about how to shop for a
 new electric supplier as Ohio transitions to a new way of marketing, selling
 and buying electricity.
 
     Progress Report
     The first three months of electric choice in Ohio are notable for the
 following developments:
 
     * Plenty of certified suppliers, but few actively marketing to residential
       consumers.  Thirty-six electric suppliers (excluding governmental
       aggregators) have been certified by the Public Utilities Commission of
       Ohio (PUCO) to provide electric generation services to Ohio's
       residential consumers.  Of these, just two currently have offers on the
       table and are soliciting new customers.
 
     * Marketing activity beginning to expand into other parts of the state.
       While most of the marketing activity has been concentrated in the
       service territories of the three FirstEnergy companies, early in
       February we saw the first supplier (The New Power Company) begin
       marketing to customers of Cinergy and AEP. To date, no suppliers have
       yet begun marketing to Dayton Power and Light customers.
 
     * Some customers switching to new suppliers.  An estimated 152,000
       residential customers in FirstEnergy territories have switched to new
       suppliers.  In addition, about 500 American Electric Power, Cinergy, and
       Dayton Power and Light residential customers have switched.
 
     * Largest single community aggregation in the nation.  The Northeast Ohio
       Public Energy Council (NOPEC), which represents more than 400,000
       customers from 94 communities in northeast Ohio, is the largest
       community buying group of its kind in the nation.  In February, NOPEC
       negotiated a  contract on behalf of its members with Green Mountain
       Energy Co. that will provide lower prices, a long-term (five-year
       contract) and a commitment to cleaner energy (98 percent of the
       electricity will come from natural gas, with 2 percent coming from
       renewable energy sources).
 
     * Generally limited savings to date.  Customers who have switched
       suppliers are expected to save from as little as a few cents per month
       to as much as $100 per year. NOPEC customers will save $10 to $12
       million over five years, which works out to an average of about a dollar
       or two a month for each customer.
 
     The simple and unavoidable fact is that competition has been slow to
 develop, choices have been slow to materialize and savings have been slow to
 accumulate.  Even in areas of the state that have seen the most activity, most
 offers from alternative suppliers disappeared soon after FirstEnergy's limited
 supply of low-cost wholesale power -- the market support generation --
 disappeared.
     The apparent reluctance of suppliers to participate in these early days of
 Ohio's retail electric market is easy to understand.  Unanticipated price
 volatility in wholesale markets has increased the risk factors for suppliers
 thinking about entering Ohio's retail market. In addition, all of the bad news
 emanating from California has contributed heavily to the destabilization of
 wholesale markets. What's more, constant media coverage of California's energy
 woes has made some Ohio consumers understandably skeptical about the potential
 benefits of electric choice, which in turn has further discouraged suppliers
 from coming into Ohio and helping to spark competition.
 
     Ohio's Trade-Off
     While it's true that Ohio consumers have not had many choices in the first
 three months of electric restructuring, it's equally true that they aren't
 being subjected to the kind of risks that Californians are facing. From our
 perspective at the Ohio Consumers' Counsel, that's a fair and reasonable
 trade-off.  It's also no accident.
     Whereas California's legislative approach was to throw everyone --
 consumers, suppliers and utilities alike -- into the deep end of the swimming
 pool from day one, Ohio's legislators took a wiser, longer-term view.  They
 crafted a restructuring plan with market development periods ranging from 3 to
 5 years, during which consumers are sheltered from the volatility of an
 evolving, unregulated marketplace.
     As a result, Ohio's residential electric customers can take their time to
 learn how to shop for and buy electricity in a competitive market without
 pressure to make a decision too soon.  And, let's not forget, all residential
 customers currently served by one of Ohio's investor-owned utilities are
 currently receiving a guaranteed 5 percent reduction in the generation portion
 of their electric bill -- and will continue to receive that savings for the
 next 3 to 5 years if they choose not to switch.
     Ohio's residential consumers also benefit from a host of additional
 consumer protection standards included in Ohio's electric restructuring
 legislation. Some notable examples include
 
     * Requirements for all competitive electric suppliers to be certified to
       do business in Ohio by the Public Utilities Commission of Ohio;
     * Requirements for suppliers to adopt codes of conduct and minimum
       service, quality, safety and reliability standards;
     * Prohibitions against slamming and against suppliers providing false or
       misleading information;
     * Provisions for OCC to take legal action to resolve problems residential
       consumers may have with their suppliers; and
     * Forgiveness of electric bill arrearages for certain low-income customers
       who are disabled or over age 65.
 
     Viewed from this big-picture perspective, Ohio's deliberate and thoughtful
 approach to restructuring the state's electric industry is already paying
 substantial, and perhaps under-appreciated, dividends.
 
     Looking Forward
     While Ohio's residential consumers currently are protected from the
 volatility of wholesale electric market prices, no one can say with any
 certainty what the future holds when the 3-year and 5-year market development
 periods expire.  While Ohio's restructuring legislation was crafted in a way
 to minimize the risks of any California-like problems that would negatively
 impact consumers, the fact remains that the transition to a competitive retail
 electric market is a work in progress.  Only as Ohio's market develops over
 the next few years will we know for certain the outcome.
     We do know, however, that there are certain requirements for making
 electric restructuring work as it was intended:
 
     1. We need a healthy base of competitive suppliers who receive positive
        signals from the marketplace, have access to less volatile prices on
        the wholesale market and find ample room in the pricing arena to
        compete for customers.
 
     2. We need an adequate supply of generation that keeps pace with our
        growing demand.  We must continue and complete the construction of new
        and expanded generation projects already under way in Ohio.  We also
        maintain government policies that encourage investment in base load as
        well as peaking generation capacity.
 
     3. We need knowledgeable, interested and market-wise consumers who know
        how to shop for electricity in a competitive market and who are aware
        of the resources available to assist them in taking full advantage of
        electric choice.
 
     It is in this third area that an especially heavy responsibility falls
 upon OCC as the state's residential utility customer advocate.
 
     The Need for Consumer Education
     Eventually, electric restructuring will bring more than just a choice of
 suppliers. It also will bring other choices such as different lengths of
 contracts and terms of agreement, variable rates and pricing schemes, and a
 mixed bag of incentives, premiums, penalties and fees. Not only will these new
 choices often be complicated and hard to understand -- there will be no single
 combination that is right for everyone.
     Just as Ohioans need to be informed, savvy shoppers to get the best deal
 on a car, a home mortgage or a mutual fund investment, they are going to need
 to be informed, savvy shoppers to get the best deal for electric generation --
 with the terms and conditions that best match their individual needs,
 priorities and comfort levels. Many of the initial offers made to consumers in
 northern Ohio required residents to research their options, understand their
 choices and make a decision in two to three weeks or less. That simply isn't
 much time to make a decision as important as switching electric suppliers.
     That's why OCC, along with the PUCO, the investor-owned utilities and the
 new suppliers entering Ohio's marketplace, is working hard to educate Ohio's
 residential consumers on electric choice.
 
     Protection Against Fraud and Abuse
     Finally, in any new marketplace there will be those who try to abuse the
 system.  Informed and educated consumers will be alert to warning signs and
 better able to avoid scams.  There will be an ongoing need to monitor and
 police the sales practices of electric suppliers -- a charge that OCC embraces
 as its statutory mandate to serve as counsel for the state's residential
 utility customers.
     Within this context, OCC issues these warnings today to all electric
 generators, marketers, brokers and aggregators who intend to do business in
 Ohio:
 
     * While OCC welcomes and encourages suppliers to come to Ohio and serve
       the state's residential customers, the agency will not tolerate sales
       practices that attempt to take advantage of the fears or lack of
       knowledge of those customers.
     * Nor will OCC tolerate market abuses such as those seen in California.
       OCC will react swiftly and forcefully to ensure the continued integrity
       of Ohio's competitive electric market.
 
     Conclusion
     Over time, as Ohio's new electric market develops and matures, we will see
 an effective and dynamic interplay between marketing and shopping emerge.
 Ohio is well-positioned to benefit from retail electric competition in a
 three- to five-year time frame without the kind of wrenching disruptions that
 we've seen in California.  To succeed in Ohio, we need education and
 vigilance. The Ohio Consumers' Counsel will be providing both.
 
 

SOURCE Ohio Consumers' Counsel
    COLUMBUS, Ohio, April 3 /PRNewswire/ -- The first three months of
 "electric choice" have brought few shopping choices but welcome consumer
 protection standards for Ohio's residential electric customers.  That's the
 verdict from Robert S. Tongren, Consumers' Counsel for the State of Ohio, in a
 report issued today on the status of retail electric competition in Ohio and
 its impact on the state's residential consumers.
     The report notes that while "competition has been slow to develop, choices
 have been slow to materialize and savings have been slow to accumulate,"
 residential consumers are benefiting in other ways.
     "While it's true that Ohio consumers have not yet had many new choices in
 the first three months of electric choice, it's equally true that they aren't
 being subjected to the kind of risks that Californians are facing," said
 Tongren.  "From our perspective at the Ohio Consumers' Counsel, that's a fair
 and reasonable trade-off."
     In the report, Tongren credits state legislators with taking a "wiser,
 longer-term view" of restructuring the electric industry that is helping to
 protect Ohio's residential consumers from the volatility of an evolving,
 unregulated retail electric market.  Among a number of consumer protection
 standards mentioned in the report, provisions in the restructuring law for a
 "market development period" earned special praise from Tongren.
     "The market development period allows residential consumers to take their
 time to learn how to shop for and buy electricity in a competitive market
 without the pressure to make a decision too soon," Tongren explained.  "And
 let's not forget, all residential customers served by Ohio's investor-owned
 utilities are currently receiving a guaranteed 5 percent reduction in the
 generation portion of their electric bill -- and will continue to receive that
 savings for the next 3 to 5 years if they choose not to switch."
     Looking to the future, the report acknowledged that "no one can say with
 any certainty" what Ohio's electric market will be like in three to five years
 when the market development periods expire, and identified several
 requirements for making electric choice work as intended.  These include (a) a
 healthy base of suppliers with room to compete on price, (b) an adequate
 supply of generation and (c) knowledgeable, interested and market-wise
 consumers.
     Tongren indicated that as the state's residential utility advocate, the
 Ohio Consumers' Counsel (OCC) has a major responsibility for ensuring that the
 third requirement is in place, and that the OCC staff is working aggressively
 to educate Ohio's residential electric customers about electric choice even
 though few choices currently exist.
     Tongren also issued a warning to any electric suppliers who may try to
 defraud Ohio's residential consumers.
     "While we welcome and encourage suppliers to come to Ohio and serve the
 state's residential customers, we will not tolerate sales practices that
 attempt to take advantage of the fears or lack of knowledge of those
 customers," said Tongren.  "Nor will OCC tolerate market abuses such as those
 seen in California. We will react swiftly and forcefully to ensure the
 continued integrity of Ohio's competitive electric marketplace to protect the
 interests of the state's residential consumers."
     The Ohio Consumers' Counsel is the legal representative and residential
 utility advocate serving as a resource for individuals who have questions and
 concerns, or would like more information, about the services provided by their
 publicly owned electric, natural gas, telephone and water companies. The
 agency also educates consumers about utility issues and resolves complaints
 from individuals. To receive utility information brochures, schedule a
 presentation or file a utility complaint, residential consumers may contact
 1-877-PICKOCC (1-877-742-5622) or visit the OCC website at www.pickocc.org .
 
                             THE VIEW FROM 90 DAYS:
                  Despite Few Choices for Electric Consumers,
                         Education Efforts Must Proceed
 
             Prepared by Robert S. Tongren, Ohio Consumers' Counsel
 
     During the first three months of retail electric competition in Ohio, a
 clearer picture of "electric choice" has materialized.  Volatile wholesale
 electricity prices, increased risks for suppliers and intensive media coverage
 of continuing problems in California's electric markets are interacting with
 market conditions created by the safe and cautious approach legislators
 adopted in Ohio's electric restructuring legislation.  The result is a slowly
 emerging marketplace that will in all likelihood take three to five years or
 more to deliver the full benefits of retail competition.  This period will
 give Ohioans the opportunity to become better informed about how to shop for a
 new electric supplier as Ohio transitions to a new way of marketing, selling
 and buying electricity.
 
     Progress Report
     The first three months of electric choice in Ohio are notable for the
 following developments:
 
     * Plenty of certified suppliers, but few actively marketing to residential
       consumers.  Thirty-six electric suppliers (excluding governmental
       aggregators) have been certified by the Public Utilities Commission of
       Ohio (PUCO) to provide electric generation services to Ohio's
       residential consumers.  Of these, just two currently have offers on the
       table and are soliciting new customers.
 
     * Marketing activity beginning to expand into other parts of the state.
       While most of the marketing activity has been concentrated in the
       service territories of the three FirstEnergy companies, early in
       February we saw the first supplier (The New Power Company) begin
       marketing to customers of Cinergy and AEP. To date, no suppliers have
       yet begun marketing to Dayton Power and Light customers.
 
     * Some customers switching to new suppliers.  An estimated 152,000
       residential customers in FirstEnergy territories have switched to new
       suppliers.  In addition, about 500 American Electric Power, Cinergy, and
       Dayton Power and Light residential customers have switched.
 
     * Largest single community aggregation in the nation.  The Northeast Ohio
       Public Energy Council (NOPEC), which represents more than 400,000
       customers from 94 communities in northeast Ohio, is the largest
       community buying group of its kind in the nation.  In February, NOPEC
       negotiated a  contract on behalf of its members with Green Mountain
       Energy Co. that will provide lower prices, a long-term (five-year
       contract) and a commitment to cleaner energy (98 percent of the
       electricity will come from natural gas, with 2 percent coming from
       renewable energy sources).
 
     * Generally limited savings to date.  Customers who have switched
       suppliers are expected to save from as little as a few cents per month
       to as much as $100 per year. NOPEC customers will save $10 to $12
       million over five years, which works out to an average of about a dollar
       or two a month for each customer.
 
     The simple and unavoidable fact is that competition has been slow to
 develop, choices have been slow to materialize and savings have been slow to
 accumulate.  Even in areas of the state that have seen the most activity, most
 offers from alternative suppliers disappeared soon after FirstEnergy's limited
 supply of low-cost wholesale power -- the market support generation --
 disappeared.
     The apparent reluctance of suppliers to participate in these early days of
 Ohio's retail electric market is easy to understand.  Unanticipated price
 volatility in wholesale markets has increased the risk factors for suppliers
 thinking about entering Ohio's retail market. In addition, all of the bad news
 emanating from California has contributed heavily to the destabilization of
 wholesale markets. What's more, constant media coverage of California's energy
 woes has made some Ohio consumers understandably skeptical about the potential
 benefits of electric choice, which in turn has further discouraged suppliers
 from coming into Ohio and helping to spark competition.
 
     Ohio's Trade-Off
     While it's true that Ohio consumers have not had many choices in the first
 three months of electric restructuring, it's equally true that they aren't
 being subjected to the kind of risks that Californians are facing. From our
 perspective at the Ohio Consumers' Counsel, that's a fair and reasonable
 trade-off.  It's also no accident.
     Whereas California's legislative approach was to throw everyone --
 consumers, suppliers and utilities alike -- into the deep end of the swimming
 pool from day one, Ohio's legislators took a wiser, longer-term view.  They
 crafted a restructuring plan with market development periods ranging from 3 to
 5 years, during which consumers are sheltered from the volatility of an
 evolving, unregulated marketplace.
     As a result, Ohio's residential electric customers can take their time to
 learn how to shop for and buy electricity in a competitive market without
 pressure to make a decision too soon.  And, let's not forget, all residential
 customers currently served by one of Ohio's investor-owned utilities are
 currently receiving a guaranteed 5 percent reduction in the generation portion
 of their electric bill -- and will continue to receive that savings for the
 next 3 to 5 years if they choose not to switch.
     Ohio's residential consumers also benefit from a host of additional
 consumer protection standards included in Ohio's electric restructuring
 legislation. Some notable examples include
 
     * Requirements for all competitive electric suppliers to be certified to
       do business in Ohio by the Public Utilities Commission of Ohio;
     * Requirements for suppliers to adopt codes of conduct and minimum
       service, quality, safety and reliability standards;
     * Prohibitions against slamming and against suppliers providing false or
       misleading information;
     * Provisions for OCC to take legal action to resolve problems residential
       consumers may have with their suppliers; and
     * Forgiveness of electric bill arrearages for certain low-income customers
       who are disabled or over age 65.
 
     Viewed from this big-picture perspective, Ohio's deliberate and thoughtful
 approach to restructuring the state's electric industry is already paying
 substantial, and perhaps under-appreciated, dividends.
 
     Looking Forward
     While Ohio's residential consumers currently are protected from the
 volatility of wholesale electric market prices, no one can say with any
 certainty what the future holds when the 3-year and 5-year market development
 periods expire.  While Ohio's restructuring legislation was crafted in a way
 to minimize the risks of any California-like problems that would negatively
 impact consumers, the fact remains that the transition to a competitive retail
 electric market is a work in progress.  Only as Ohio's market develops over
 the next few years will we know for certain the outcome.
     We do know, however, that there are certain requirements for making
 electric restructuring work as it was intended:
 
     1. We need a healthy base of competitive suppliers who receive positive
        signals from the marketplace, have access to less volatile prices on
        the wholesale market and find ample room in the pricing arena to
        compete for customers.
 
     2. We need an adequate supply of generation that keeps pace with our
        growing demand.  We must continue and complete the construction of new
        and expanded generation projects already under way in Ohio.  We also
        maintain government policies that encourage investment in base load as
        well as peaking generation capacity.
 
     3. We need knowledgeable, interested and market-wise consumers who know
        how to shop for electricity in a competitive market and who are aware
        of the resources available to assist them in taking full advantage of
        electric choice.
 
     It is in this third area that an especially heavy responsibility falls
 upon OCC as the state's residential utility customer advocate.
 
     The Need for Consumer Education
     Eventually, electric restructuring will bring more than just a choice of
 suppliers. It also will bring other choices such as different lengths of
 contracts and terms of agreement, variable rates and pricing schemes, and a
 mixed bag of incentives, premiums, penalties and fees. Not only will these new
 choices often be complicated and hard to understand -- there will be no single
 combination that is right for everyone.
     Just as Ohioans need to be informed, savvy shoppers to get the best deal
 on a car, a home mortgage or a mutual fund investment, they are going to need
 to be informed, savvy shoppers to get the best deal for electric generation --
 with the terms and conditions that best match their individual needs,
 priorities and comfort levels. Many of the initial offers made to consumers in
 northern Ohio required residents to research their options, understand their
 choices and make a decision in two to three weeks or less. That simply isn't
 much time to make a decision as important as switching electric suppliers.
     That's why OCC, along with the PUCO, the investor-owned utilities and the
 new suppliers entering Ohio's marketplace, is working hard to educate Ohio's
 residential consumers on electric choice.
 
     Protection Against Fraud and Abuse
     Finally, in any new marketplace there will be those who try to abuse the
 system.  Informed and educated consumers will be alert to warning signs and
 better able to avoid scams.  There will be an ongoing need to monitor and
 police the sales practices of electric suppliers -- a charge that OCC embraces
 as its statutory mandate to serve as counsel for the state's residential
 utility customers.
     Within this context, OCC issues these warnings today to all electric
 generators, marketers, brokers and aggregators who intend to do business in
 Ohio:
 
     * While OCC welcomes and encourages suppliers to come to Ohio and serve
       the state's residential customers, the agency will not tolerate sales
       practices that attempt to take advantage of the fears or lack of
       knowledge of those customers.
     * Nor will OCC tolerate market abuses such as those seen in California.
       OCC will react swiftly and forcefully to ensure the continued integrity
       of Ohio's competitive electric market.
 
     Conclusion
     Over time, as Ohio's new electric market develops and matures, we will see
 an effective and dynamic interplay between marketing and shopping emerge.
 Ohio is well-positioned to benefit from retail electric competition in a
 three- to five-year time frame without the kind of wrenching disruptions that
 we've seen in California.  To succeed in Ohio, we need education and
 vigilance. The Ohio Consumers' Counsel will be providing both.
 
 SOURCE  Ohio Consumers' Counsel