Lessons on Solar Mandates

As Ohio is just starting down the road of alternative energy mandates, we can look to the experiences in other states who have already implemented such laws.  A case in point is Massachusetts.

Several years ago, Massachusetts set in motion a “Don Quixote” strategy to battle global warming.  There were a number of stakeholders in Massachusetts who protested these alternative energy mandates.  High electric costs had already driven larger manufacturing companies out of Massachusetts.  At the same time, many of their citizens have moved north into New Hampshire and Maine.  Part of the argument was that many of the solar cell strategies were ill advised and would prove financially disastrous.  Some even warned that these politically driven energy projects might double or triple Massachusetts future electric rates that are already hovering over 20 cents per kilowatt hour.

Now, Massachusetts businesses are complaining about the increased costs of electricity associated with solar-power mandates at a time when the economy is weak.  Electricity prices are already higher in Massachusetts than in other parts of the country.  Energy suppliers are also not happy about the requirement to produce power at such a high cost.  For more information, see this March 30th article from the Boston Herald: Businesses fuming over solar rules

The lesson for Ohio is that our electric costs will increase as the requirement for alternative energy grows.  It is critical for businesses to prepare by pursuing ways to reduce their electric consumption while taking a more active role in shaping Ohio’s energy policy through organizations like IEU-Ohio.  Contact us if you want to know more about what you can do.

In the spring of 2008, Dominion East Ohio (DEO) got out of the natural gas supply business.  The utility only provides gas delivery services.  The charge for residential delivery is presently $1.8204 per Mcf.  It will climb to $2.96 in April in order to cover the cost of a program that allows low-income customers to pay only a portion of their bills.

You may buy your natural gas from another supplier and have it delivered by Dominion East Ohio.  If you have not selected an alternative supplier, your gas supply was assigned to another company under the variable Standard Choice Offer (SCO).  In this case, regardless of which supplier you are assigned, you are charged DEO’s SCO rate, which varies each month based on New York Mercantile Exchange (NYMEX) month-end settlement price, plus a “Retail Price Adjustment” (RPA) of $1.40 (dropping to $1.20 in April). Based on recent NYMEX natural gas prices, for the period from May 20 to June 19, we expect the SCO rate might fall under $5.00 per Mcf.

Based on the information on the PUCO website, marketers are not offering one-year fixed rate contracts for less than $7.30 per Mcf.  We recommend staying with DEO’s variable SCO rate if you have not locked in with another supplier.  If you have an alternative supplier contract at a rate significantly higher than $6 per Mcf, and there is no early termination fee, you might want to consider returning to DEO.  You would do this by contacting your supplier and telling them that you want to default back to DEO.

There is a 5-year fixed price offering shown on the PUCO website at a pricey $10.30970 per Mcf.  We like the fact that marketers are offering multi-year contracts again.  However, we want to see the price come down.  In the meantime, we’ll keep an eye out for multi-year fixed rate contracts (hopefully 3 years or longer) at prices under $7 per Mcf.

Natural gas prices have been falling.  However, Dominion East Ohio Gas customers will see an increase in one component of the gas delivery charges in order to cover the cost of a special program that allows low-income customers to pay only a portion of their gas bills.  John Funk described this in more detail in the Plain Dealer on March 25th:

Dominion bills to increase to cover low-income rates

The current FirstEnergy rates in Ohio expire on May 31, 2011.  FirstEnergy has filed a proposed rate plan that would begin on June 1, 2011, with the Public Utilities Commission of Ohio (PUCO).  The proposal includes the right to quarterly increases to pay for the cost of equipment upgrades.  As electric costs increase, it will become more critical for companies to understand the rates and what they can do to control costs.  For more information, see John Funk’s March 24th article from the Plain Dealer: FirstEnergy crafts rate plan allowing quarterly increases

When FirstEnergy restructured their electric rates in early 2009, some customers who accept power at lower voltage levels saw increased electric costs.  John Funk gives some examples of this and quotes Mike Brakey in the following Plain Dealer article:

Small manufactures pay a steep price in FirstEnergy rate restructuring

The new rates encourage reducing consumption.  We work with our clients to identify ways to reduce electric consumption not only to reduce electric bills but also to seek exemption from the Demand Side Energy Efficiency (DSE) rider.

John Funk reported in the March 18th Plain Dealer that FirstEnergy will restore discounts for some all-electric homeowners.  The utility will not provide any refunds of amounts already paid under the higher rates.  For more information, see the link below:

Customers want more guarantees from FirstEnergy Corp. about all-electric homes.

Mike Brakey was quoted in a recent article in Crain’s Cleveland Business regarding Babcock & Wilcox and their preparations for the future of electric generation. See: Babcock & Wilcox looks to future

John Funk had another article in Saturday’s Plain Dealer about discounts for all-electric homes:

FirstEnergy Corp. promised permanent discounts for all-electric homes, documents show

On Wednesday, March 3, the Public Utilities Commission of Ohio (PUCO) ordered FirstEnergy to restore the discounted rates that were in effect on December 31, 2008 for all-electric homes.  It has not yet been determined if rates will increase for other customers in order to make up the difference.  For more details, see John Funk’s article in the Plain Dealer at: PUCO orders FirstEnergy to restore deep discounts or view a video of the PUCO meeting at PUCO webcast

In today’s Plain Dealer, John Funk reported that the gas price will fall in March for customers who still buy directly from Dominion East Ohio.  See this link: Dominion East Ohio gas price falling

Our recommendation is that you stay with Dominion East Ohio’s standard variable rate plan for now, if you have not already signed up with a marketer.  We will be watching in the next few months for good long-term fixed rate plans to recommend.