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Presented by PUCO Chairman Todd A. Snitchler 21 st Century Manufacturing Task Force November 26, 2012 1.

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Presentation on theme: "Presented by PUCO Chairman Todd A. Snitchler 21 st Century Manufacturing Task Force November 26, 2012 1."— Presentation transcript:

1 Presented by PUCO Chairman Todd A. Snitchler 21 st Century Manufacturing Task Force November 26, 2012 1

2 Before electric restructuring Prior to restructuring, electricity was generated and supplied to most of Ohio from four electric distribution utilities (EDU’s): AEP Ohio Columbus Southern Power Ohio Power Dayton Power & Light Duke Energy FirstEnergy Cleveland Illuminating Ohio Edison Toledo Power 2

3 Electric Service Area Map 3 Note: FirstEnergy includes Cleveland Illuminating Co., Ohio Edison, and Toledo Edison

4 4 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. History of Ohio Electric Restructuring

5 5 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. History of Ohio Electric Restructuring

6 6 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 Where is Ohio’s electricity market today?

7 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 7 What are the benefits of competition?

8 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. 8

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10 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 10 * This information is readily available on the PUCO’s Apples to Apples Chart at

11 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. 11

12 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 12

13 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. 13

14 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). 14

15 Questions Chairman Todd A. Snitchler Public Utilities Commission of Ohio (614) 466-3204 15

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