Northern Ohio Energy Management Conference

The 6th Annual Northern Ohio Energy Management Conference will be held on Wednesday, September 28th at the John S. Knight Convention Center, 77 East Mill Street, Akron, Ohio.  Matt and Mike Brakey will be among the presenters at this informative conference. See MEC Seminars for more information or to register.

For many years, the standard rates offered by AEP-Ohio’s two operating companies, Columbus Southern Power (CSP) and Ohio Power (OP), were some of the lowest in the country, let alone Ohio.  The opportunities for AEP customers to switch to a retail electric supplier for generation services and save money were limited.  There was no reason for customers to consider switching.  However, as a result of dramatic rate increases since 2004, CSP and some OP customers may now be able to save money by switching suppliers.

While market competition has stabilized and lowered costs for FirstEnergy customers in Ohio in the last decade, AEP’s standard rates have skyrocketed unchecked due to barriers to competition.  Since 2004, using the GS-3 rate schedule as an example, CSP rates have increased about 64% and OP rates have increased about 74%.

Both CSP and OP have proposed new rate plans to be effective on January 1, 2012.  These proposals are pending at the Public Utilities Commission of Ohio (PUCO).  OP’s rates are expected to increase by at least 1 penny per kilowatt hour to recover its full fuel costs.  If this happens, more OP customers may be able to save money by switching suppliers.

For certain rate schedules, AEP requires a 90-day notice to switch to a retail electric supplier.  In order to switch on January 1, 2012, you would need to notify AEP by October 3rd.  If you are a commercial or industrial customer who is not already shopping for generation, we can facilitate obtaining price quotes from retail electric suppliers and help you with the process.  Contact us for more information.

The NYMEX settlement price at the end of August was $3.857 per thousand cubic feet (MCF), down 12% from $4.370 per MCF at the end of July.  For Dominion East Ohio customers, the price to beat is NYMEX plus $1, or $4.857 per MCF in September.  Now is a good time to review your natural gas contract in preparation for the winter heating season.

Commercial and residential customers who are buying their natural gas from Dominion East Ohio (DEO) or Columbia Gas of Ohio (CGO) pay the New York Mercantile Exchange (NYMEX) month-end commodity price plus a “retail adder”.  The NYMEX settlement price at the end of July was $4.37 per thousand cubic feet (Mcf), up slightly from $4.357 at the end of June.

DEO’s “retail  adder” is $1.00 per Mcf.  DEO’s variable Standard Choice Offer (SCO) rate will increase from $5.357 per Mcf to $5.37 per Mcf for the month beginning on August 11^th.  CGO’s “retail adder”is $0.188 per hundred cubic feet (CCF). CGO’s Standard Service Offer (SSO) variable rate for August is $0.625 per hundred cubic feet (CCF), up from $0.6237 per CCF for July.

Even with this slight-up-tick in the NYMEX, natural gas prices are low and expected to remain low, as discussed in this John Funk article from Saturday’s Plain Dealer: Fixed natural-gas rate may be pricier choice this winter.  A key reason for this is the abundance of natural gas reserves that have been found in the shale, as discussed in this article from Saturday’s Plain Dealer:  Gov. Kasich touts oil and gas reserves .  We agree with John Funk’s recommendation that buying natural gas from the utility’s variable rate plan is usually the best deal.

The costs associated with FirstEnergy meeting Ohio’s energy efficiency mandates are socialized amongst their customers, by rate class, through the DSE2 charge under the Energy Efficiency Rider.  This charge became effective for service on and after May 18^th.  Then, on June 1^st, FirstEnergy filed for changes in the DSE 1 and DSE2 rates that will take effect on July 1^st.  The attached file shows the rate changes by utility and rate schedule:  DSE Riders 07012011 Note that we expect the DSE2 rates will increase in future years as the utility’s cost of compliance increases.

Mercantile customers (defined as 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 charge.  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.  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.  Mercantile customers should weigh the pros and cons of a rebate versus rider exemption.

In a recent Plain Dealer article, John Funk discusses the savings that have resulted from Ohio’s energy efficiency mandates: State rules helped Ohio consumers save $56 million.  We share the concern mentioned in the article about the difficulty of meeting the ever increasing mandates, especially for renewable energy.

What are the most cost effective ways to become more energy efficient?  If you ignore government subsidies, we have found that typically:

• Insulation and energy efficient lighting have pay back periods of less than 4 years

• Geothermal heating and cooling has a payback period of less than 10 years

• Wind energy has a payback period of about 35 years

• Solar energy has a payback period of more than 50 years.

Government subsidies have been masking the expense of wind and solar technologies, and somebody has to pay for those subsidies.  We continue to encourage our clients to first look to insulate and upgrade to energy efficient lighting.

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