Transcript Presentation by PUCO Chairman Todd A. Snitchler to the - IEU-Ohio

Presented by PUCO Chairman Todd A. Snitchler
21st Century Manufacturing Task Force
November 26, 2012
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Before electric restructuring
Prior to restructuring, electricity was generated and supplied to most of
Ohio from four electric distribution utilities (EDU’s):
AEP Ohio
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Columbus Southern Power
Ohio Power
Dayton Power & Light
Duke Energy
FirstEnergy
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Cleveland Illuminating
Ohio Edison
Toledo Power
Electric Service Area Map
Note: FirstEnergy includes Cleveland Illuminating
Co., Ohio Edison, and Toledo Edison
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History of Ohio Electric Restructuring
Step 1: In 1999, Am. Sub. SB 3, the Ohio Electric Restructuring
Act, was passed. It authorized the restructuring of the electric
industry in Ohio. At the same time, 23 other states also
restructured their electric utility markets.
First Step: Market development period. A five year
period from 2001 through 2005 during which it was
expected that the retail markets would emerge. Current
electric rates were frozen during this period.
Second Step: Rate stabilization period. A three year
period from 2006 – 2009 resulting from the failure
of the retail markets to develop.
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History of Ohio Electric Restructuring
Step 2: In 2008, Am. Sub. SB 221 was passed. It authorized the
restructuring of the electric industry in Ohio and included an energy
efficiency requirement and a renewable portfolio standard.
SB 221 outlined alternative paths for electric utilities to implement
different forms of market-based pricing.
The law required electric utilities to file either an Electric Security Plan
(ESP) or a Market Rate Option (MRO) to supply energy to customers.
• The ESP is akin to a traditional rate plan for the supply and pricing
of electric generation service.
• An MRO is a rate plan that utilizes a competitive bidding process to
set generation prices and gradually transition customers to full
market-based pricing.
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Where is Ohio’s electricity market
today?
In March 2011 the electric utility landscape looked like:
3 vertically integrated utilities
1 competitive utility
As of November 2012 the landscape currently looks like:
3 competitive utilities
1 pending ESP filed for remaining utility
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What are the benefits of competition?
• The benefit of low RPM capacity prices
• Low auction prices, such as those in Duke Energy’s recent SSO
Auction
 Duke’s 2011 SSO supply auction price dropped 17.5%
• More entrants into the Ohio marketplace
 More jobs and economic growth in Ohio
 73 total CRES – 42 since March 2011
 202 total aggregators – 152 since March 2011
• Greater customer control over their utility spending.
• Driving the need for suppliers to differentiate themselves in the
marketplace, by offering more benefits and better products
• Electric choice puts the power in customer’s hands to choose the
supplier that best meets their needs
• Generation related investments are borne by shareholders, not
ratepayers
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What rates are regulated states seeing?
• Duke Indiana’s construction cost overrun totals more than
$1.4 billion – some of which will be passed on to ratepayers.
• Progress Energy customers in Florida could potentially be
on the hook for $326 million in nuke plant repairs.
• Florida ratepayers have paid over $1 billion for two nuke
plants not expected to be online until 2022 – if they get built
at all.
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Today’s competitive marketplace
Examples of the three typical types of offers on the
market today:
• AEP Energy offers a flat $.0649 per kwh
 Offers such as these have purported savings as high as 30%, depending on a
customer’s price to compare
• Dominion Energy Solutions offers $0.0599 per kwh to AEP’s
customers currently paying $.0800 under regulated pricing, a
savings of more than 20%
• IGS Energy offers 10% off AEP’s price to compare
• FES offers a 7 year long term Price Control Offer in all territories at a
fixed price of $0.0649
• Public Power LLC offers 100% wind product
 Other 100% renewable
 e product offers, other than wind products, are also available
* This information is readily available on the PUCO’s Apples to Apples Chart at www.puco.ohio.gov
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What is the PUCO doing to help?
Creation of the Office of Retail Competition
• The mission of the Office of Retail
Competition is to improve
awareness, trust and
understanding of market-based
utility service in Ohio.
• More than 240 presentations and
meetings have been conducted by
PUCO staff across the state.
• Our public information officers
have visited 72 of Ohio’s 88
counties educating Ohioans on
energy choice in Ohio.
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Where is Ohio’s market headed?
More suppliers entering Ohio with competitive
offers. These offers will be more than just X% off the
SSO price, for example:
• Free nights and weekends
• Non-utility related savings and deals
• Utility and non-utility bundling
• Residential dynamic pricing
• Seasonal plans
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PUCO assistance for large customers
The PUCO works closely with large load consumers who provide
significant employment in Ohio to ensure the company is able to manage
its utility costs.
For those large load companies that consume high amounts of energy, the
PUCO works with the company and utilities to create what are known as
reasonable rate arrangements.
• While these arrangements are not common, they do currently exist.
In my* view, reasonable arrangements will not be needed as competition
grows in Ohio and additional changes to the developing market occur.
*The view expressed above is mine and does not necessarily reflect the views of the PUCO or the Kasich administration.
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What does the shale play mean to electric
rates for manufacturing facilities?
• The existence of Marcellus and Utica shale gas have already impacted
the cost of natural gas and forward projections show low gas prices
for at least 3-5 years.
In fact, the oversupply of gas and infrastructure needed to move it to
market are essentially creating in-field storage as wells are drilled and
completed, but not put into production.
One analysis said if the existing drilled but non-producing wells in PA were
turned on and no new wells were drilled, there would be no impact to
supply for at least 9 months.
• Further, the midstream gathering system needs to be enhanced to
allow movement of the commodity from the production site to
market.
• Ohio’s steel industry has seen a dramatic increase as a result of the
shale industry (e.g. Timken, US Steel, V&M Starr, Republic and others).
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Questions
Chairman Todd A. Snitchler
Public Utilities Commission of Ohio
[email protected]
(614) 466-3204