FirstEnergy’s Energy Efficiency Mandates

Due to the recent passage of Senate Bill 221, aggressive energy efficiency mandates have been placed on Ohio’s distribution utilities, including FirstEnergy.  The utilities will remain revenue neutral.  The costs associated with FirstEnergy meeting these mandates will be socialized amongst their customers through a charge under the Demand Side Management and Energy Efficiency (DSE) Rider, called the DSE2 charge.  This charge will take effect on May 18th.

The DSE2 rates vary by utility and rate schedule.  For example, residential customers will pay about 0.2 cents per kilowatt hour (kWh).  The rates for commercial and industrial customers range from a low of 0.035 cents per kWh for Ohio Edison Primary, Subtransmission and Transmission rates to 0.1392 cents per kWh for the Illuminating Company’s Secondary rate.

One notable example of FirstEnergy’s efforts to meet these energy efficiency mandates is the light bulb program.  You may read about that in an article by John Funk in today’s Plain Dealer:  So, what’s FirstEnergy doing with all those light bulbs?

Over time these charges are expected to grow to well over a penny per kWh as the efficiency benchmarks the Ohio utilities have to meet increase over the coming years.  Fortunately, some customers can achieve rider exemption.  Mercantile customers (i.e., non-residential customers who use more than 700,000 kWh per year or are part of a national account) who are able to offer up energy efficiency projects to FirstEnergy have the ability to become exempt from the DSE2 rider.  

In addition, on April 11, FirstEnergy launched several new energy efficiency rebate programs for commercial and industrial customers.  This first set of programs provides rebates for lighting and motor projects.   Other programs will be rolled out in June.  However, a mercantile customer cannot use the same project for both the rebate program and exemption from the DSE2 charge under the energy efficiency rider.  We can help you weigh the trade-off between the up-front rebate and the long-term rider exemption.

Contact us if you want to know more.

Commercial and residential customers who are buying their natural gas from Dominion East Ohio (DEO) or Columbia Gas of Ohio (CGO) pay a variable rate based on the New York Mercantile Exchange (NYMEX) month-end commodity price plus a “retail adder”.  The NYMEX settlement price at the end of April was $4.377 per thousand cubic feet (Mcf), up from $4.24 at the end of March.

This means that DEO’s variable rate will increase to $5.377 per Mcf for the month beginning on May 12th, up from $5.24 per Mcf for the prior month.  CGO’s variable rate will increase to $0.6257 per hundred cubic feet (Ccf) for May, up from $0.612 per Ccf for April.  You may compare these standard prices to those available from retail suppliers, as shown on the Public Utility Commission of Ohio’s website:  PUCO Apples to Apples.  If you have a fixed rate contract for a price that is significantly higher than these variable rates, you might want to contact your supplier to explore your options.

In today’s Plain Dealer, John Funk has an article about not only the increase in the price of the natural gas itself, but also an increase in the fixed monthly charge.  See: Natural gas customers will be seeing higher bills 

In spite of these increases, natural gas continues to be a great energy buy.  We recommend using natural gas over electricity wherever it makes sense.  At DEO’s present natural gas price of $5.377 per Mcf, the price of electric generation would have to be less than 2 cents per kWh to be less expensive than natural gas for the same amount of energy.

As part of its plan to comply with Ohio’s energy efficiency and peak demand reduction requirements, FirstEnergy launched new energy efficiency rebate programs on April 11th for commercial and industrial customers.  The first set of programs provides rebates for lighting and motor projects.  We have prepared the following summary of the programs: FirstEnergy Rebate Programs 04222011.  More detailed information is available at www.energysaveohio.com

Dominion East Oho customers who buy their natural gas through the utility’s variable rate program will see prices drop beginning April 1.  Currently, these customers pay the New York Mercantile Exchange (NYMEX) month-end commodity price plus a “retail adder” of $1.20 per 1,000 cubic feet.  The “retail adder” will decrease from $1.20 to $1.00 in April.  We continue to recommend staying with Dominion’s variable rates rather than locking into a fixed rate contract with an alternative supplier.

You may learn more about this in John Funk’s article in today’s Plain Dealer: Dominion, Columbia customers likely to see lower prices ahead

The 15th Annual Ohio Energy Management Conference was held in Columbus on February 22nd and 23rd.    Matt Brakey, in his role as chairman of IEU-Ohio, served as emcee.  Mike and Matt Brakey both made presentations at workshops.  The handouts from all sessions are available to download under Energy at www.mecseminars.com

Matt Brakey

The 6th Annual Northern Ohio Energy Management Conference will be held on Wednesday, September 28, 2011 at the John S. Knight Center in Akron.  For more information, see www.mecseminars.com

For customers of Columbia Gas of Ohio and Dominion East Ohio, prices continue to be lower for those who buy directly from the utility rather than from an alternative supplier.  Columbia Gas customers will see a decrease starting on April 1.  The U.S. Energy Information Administration predicted that prices will stay low through the rest of this year, but could increase in 2012.  For more information, see John Funk’s article in the February 9th Plain Dealer: Lower natural gas prices are expected to continue

The New York Mercantile Exchange (NYMEX) month-end settlement price for January was $4.32 per Mcf, up from $4.216 at the end of December.  Note that this is just the price for the gas; there will also be charges for basis and delivery.

For residential customers of Dominion East Ohio, the standard variable price will increase from $5.42 to $5.52 on February 14th.  We continue to recommend staying with the utility’s variable rates. 

For more information, see John Funk’s article in today’s Plain Dealer: Columbia, Dominion prices to rise slightly.

Thursday’s Plain Dealer had two interesting articles related to the push for clean energy.

• Jonathan Fahey of the Associated Press provided an insightful analysis of President Obama’s statement that he wants 80 percent of our electricity to come from clean energy sources by 2035, Obama goal for clean energy.  We agree that we need to be open to using a mix all viable energy sources.  However, any plan to force the use of particular sources will lead to higher costs for electricity.
• John Funk had an interesting article about the difficulty that FirstEnergy is having with meeting Ohio’s solar power mandates, FirstEnergy says it is unable to buy all the solar power credits it needs.  If Ohio continues down this path, utilities will have to pay higher fees for solar credits and those costs will be passed on to consumers.  While the highest electric costs in Ohio are around 14 cents per kilowatt hour, customers are paying between 25 and 47 cents per kilowatt hour in states like Massachusetts and California that have had solar mandates in place for years.

Earlier this week, the second of six wholesale auctions was held to determine FirstEnergy’s default generation rates for the period from June 1, 2011 to May 31, 2014.  The PUCO approved the results of the auction at its meeting on Thursday.  The auction resulted in the following prices:

• 5.613 cents per kilowatt hour (kWh) for the period from June 1, 2011 to May 31, 2012
• 5.410 cents per kWh for the period from June 1, 2011 to May 31, 2013
• 5.658 cents per kWh for the period from June 1, 2011 to May 31, 2014

These prices are averaged with the results of a similar auction that was held last October to determine the prices for the year beginning on June 1, 2011.  The resulting weighted average price from both auctions is 5.56 cents per kWh for the 12 months beginning on June 1, 2011.

This average wholesale price will be converted by the utilities to retail rates that will vary by rate schedule and season.  Note also that FirstEnergy’s current default charges cover both generation and transmission services.  Starting in June, the default charges will be for generation only.  The transmission charges will be passed through to the customer.  Thus, these auction results and any price quotes from alternative suppliers connot be compared directly to current rates.

To learn more about the auction process, see John Funk’s recent articles in the Plain Dealer: Electricity auction and FirstEnergy customers to pay less for power

John Funk had an interesting article in Sunday’s Plain Dealer about the impact of this winter’s cold weather on natural gas bills: Cold weather driving up cost of natural gas.  As he points out, the best prices for Dominion customers are still the monthly variable rates offered by utility.