The failure of deregulation 

In 1999, Ohio passed legislation to deregulate the state's electric power market. The goals were laudable: break up the regulated monopoly of investor-owned utilities covering most of the state, promote competition and innovation, give consumers more choices, facilitate the entry of small power producers into the market, promote efficiency and conservation, and assure a safe, reliable, and economical delivery of power.

It's now clear that this has been a near total failure. Ohio's electricity industry now offers:

• No true competition in retail electricity service.
• Likely future electricity price increases to retail customers.
• Minimal innovation or entrepreneurism in electricity markets.
• Dubious reliability of electricity service.
• Unsustainably high air emissions from electricity generation.

The above indictment comes from an extraordinary set of comments submitted recently by The Cleveland Foundation to the Public Utilities Commission of Ohio (PUCO). The analysis, which was written by the foundation's new BP Fellow for Energy and Environmental Advancement, Richard Stuebi, concludes:

"...it is clear that the status quo in the Ohio electricity industry is unacceptable. Changes must be made. Without a move towards more progressive electricity industry regulation, Ohio faces the distinct possibility of a worsening economic and environmental future, as companies and citizens perish or leave the state for places that offer stronger prospects and a cleaner, healthier environment in which to live and work. At minimum, Ohio will be challenged to attract new businesses and citizens, who have many attractive choices across the country and around the world in which to locate.

"New directions in electricity policy are thus necessary in Ohio:

• To better enable customers to minimize their expenditures on energy.
• To better promote competitive alternatives in the energy marketplace from which customers can choose.
• To better foster innovation and entrepreneurism that will continue to drive further efficiencies in the energy sector.
• To better stimulate increased economic activity.
• To better protect the environment."

Update
The above comments were submitted to the PUCO as part of an important case affecting small power producers. On August 28, 2006 the staff of the PUCO submitted its recommendations in the case. In developing the recommendations, PUCO staff identified a need for
Ohio to adapt to the changing energy environment. Further, the staff identified areas where more opportunities for advanced energy could be provided. The recommendations included:

• Develop a renewable energy portfolio for Ohio that would best integrate alternative energy standards into
  Ohio’s retail electricity market.
• Eliminate rules that place limits on net metering and streamline the interconnection rules that would allow for simplified applications and fee schedules.
• Require Ohio’s electric distribution utility companies to file a comprehensive list of Advanced Metering Infrastructure (AMI) technologies and costs and identify types of customers and their related load shapes.
• Utilize the McKinsey model to evaluate the costs and benefits of AMI deployment strategies.
• Revise
  Ohio’s interconnection rules to include all interconnection services in the electric distribution utility companies’ tariffs to ensure they are accessible for the interconnection service customer.
• Bill supplemental power and scheduled maintenance according to the tariff rate schedules and provide market options. Establish the Commission as a liaison to self-generators for interpreting tariff provision and facilitating interconnection processes.
• Analyze the electric distribution utility companies’ transmission and distribution systems to identify locations where distributed generation could improve operations and provide additional generation benefits.

None of the recommendations outlined by PUCO staff require a law change. All of the recommended changes can be accomplished under the Commission’s jurisdiction.

The comments focus in detail on four important issues now before the PUCO — net metering, availability of stand-by power for cogeneration and small power production, interconnection issues for distributed power producers, and smart metering which would allow consumers to buy power at times of the day when its cheapest. PUCO is accepting comments on the report until September 18, 2006.

But the larger issue is the overall future of energy thinking in Ohio. The Cleveland Foundation calls for an advanced energy strategy for Ohio. Go here to read about what that could mean.

The Plain Dealer reports on Jan. 18 that PUCO Chairman Alan Schriber said, The commission's order will set new connection and metering rules, something alternative energy supporters also advocate to make it easier for homeowners, farmers and businesses to connect wind, solar, and digester power projects to a utility's wires. Schriber added that he thought the commission would not adopt a renewable energy portfolio.

Resources
Cleveland Foundation original comments to the PUCO
Cleveland Foundation study of the economic costs of an Advanced Energy Portfolio Standard
PUCO staff recommendations in deregulation case
Cleveland Foundation response to PUCO staff recommendations
Ohio Consumers' Counsel energy proposal
Ohio Department of Development comments to the PUCO
Status of combined heat and power (CHP) in Midwest states
Put a real consumer advocate on the PUCO