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<title>Ohio Passes Deregulation Bill</title>
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<p align="left"><strong><small><font face="Arial">About The Author:</font></small></strong></p>
<p align="left"><font face="Arial" style="font-size: 9pt">Robert A. Olson is a partner in the law firm of
Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law,
public utility law and related commercial transactions.</font></p>
<p><small><font face="Arial"><font style="font-size: 9pt">He can be reached at:</font><br>
<br>
<b><font color="#0000FF">Brown, Olson & Gould, PC</font></b><br>
2 Delta Drive<br>
Suite 301<br>
Concord, NH 03301<br>
<a href="mailto:[email protected]">[email protected]</a><br>
(603) 225-9716<br>
<a href="mailto:[email protected]"></a></font></small></p>
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<td width="69%" valign="top"><img src="../images/statelin.gif" alt="STATELINE by Robert Olson" border="0" WIDTH="375" HEIGHT="75"><p><b><u><br>
July 1999<br>
</u><font face="Arial"><big><big><big>Ohio Passes Deregulation Bill<br>
</big></big></big></font>
</b><strong>by Robert Olson -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
07/99</em>)</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">Competition will begin January 1, 2001 for
Ohio electric consumers under a bill passed by the state legislature and signed recently
by Governor Taft. Retail electric generation, aggregation, power marketing and power
brokering will become competitive beginning on that date. However, the Public Utilities
Commission of Ohio (PUCO) may delay the competition date up to 6 months if a utility
applies for an extension, but only if extreme technical conditions exist which prevent the
utility from starting competitive service.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The PUCO will no longer regulate the competitive
services supplied by electric utilities, but electric transmission and distribution
services will remain subject to PUCO regulation. The bill requires separate pricing for
competitive retail services and itemized prices on the customer’s bill, as well as
reduction for residential customers of 5% from the unbundled generation rate of each
incumbent electric utility receiving transition revenues. The bill also requires that
there be corporate separation between the competitive and non-competitive retail electric
service operations and non-electric products and services. </font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The legislation provides for a market development
period which will extend until December 31, 2005 for each incumbent electricity provider.
The bill will initiate certain transitional mechanisms during the market development
period which will include the utilities’ recovery of their costs associated with the
transition. The "transition rates" will be received by the utility through the
payment of unbundled rates for retail electric service by each customer that is supplied
generation service during the market development period by its electric distribution
utility and a transition charge by each customer that is supplied generation service by an
entity other than the customer’s electric distribution utility. These
"transition rates" will be collected at rates frozen at current levels or
through a transition charge based on kilowatt hour to be determined by the PUCO. </font></p>
<p ALIGN="JUSTIFY"><font face="Arial">Every electric utility supplying retail electric
service in Ohio will be required to file a plan for the company’s provision of
service, including standard offer generation service, during the market development
period, no later than 90 days after the bill’s effective date. The PUCO will
establish a rule for the form of the transition plan which must include: a rate unbundling
plan, a corporate separation plan, a plan for technical implementation, an employee
assistance plan for those employees effected by the restructuring, and a consumer
education plan. </font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The bill authorizes the PUCO to ensure that services
are provided at compensatory, fair and nondiscriminatory prices, terms and conditions, if
it determines that on or after the starting date there is a decline or loss of effective
competition. The PUCO is required to adopt rules regarding minimum service standards which
will generally require suppliers of competitive services to be certified as to their
managerial, financial and technical capability, as well as consumer protection measures.
The PUCO is also authorized to oversee all mergers and acquisitions and to resolve abuses
of market power that interfere with competition in retail electric service.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The PUCO is given the authority under the bill to
approve, disapprove or modify utility corporate separation plans and must adopt rules
regarding corporate separation and procedures for filing a separation plan. The PUCO can
also examine books, accounts or other records of an electric utility that may relate to
separation. An electric utility may, but is not required to, divest itself of any
generating asset anytime without PUCO approval. The legislation does not specifically
require the mitigation of above-market power purchase contracts with independent
generators. </font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The bill also gives the PUCO authority to determine
issues related to stranded costs and to charge Ohio consumers for stranded costs. Recovery
of stranded costs may extend through December 31, 2010. The bill allows utilities to
recover costs associated with regulatory assets and other investments that are part of the
total allowable recoverable transition costs upon an order by the PUCO. The bill does not
provide for securitization of utility stranded cost recovery. </font></p>
<p ALIGN="JUSTIFY"><font face="Arial">Unlike restructuring legislation in other states,
the Ohio bill does not require retail electric suppliers to meet a renewable energy
portfolio standard, nor does it contain any significant subsidies for renewable energy
generation projects.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The legislation prohibits any entity from owning or
controlling transmission facilities beginning on the starting date for competition, unless
it is a member of, or transfers control to, an operational, qualifying transmission
entity. A transmission entity is qualifying if it: (1) is approved by FERC; (2) results in
separate control from generation facilities; (3) implements policies and procedures to
minimize "pancaked" transmission rates; 4) improves service reliability; (5)
achieves the objectives of an open and competitive electric generation marketplace; (6)
substantially increases economical supply options for consumers; (7) is controlled
independently from its users; (8) operates under policies that promote positive
performance to satisfy the customers’ electric requirements; and (9) is capable of
maintaining real time reliability. If the qualifying transmission entity is not
operational, the PUCO, either by rule or order, must take measures or impose requirements
on all for-profit entities that own or control electric transmission facilities to achieve
independent, nondiscriminatory operation and separate ownership of such transmission
facilities on or after the competitive retail electric service starting date.</font></p>
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<blockquote>
<p align="left"><font face="Arial">
<small>Robert A. Olson is a partner in the law firm of Brown, Olson &
Gould P.C.
which maintains a nationwide practice in energy law, public utility law and related
commercial transactions. He can be reached at:</small></font><p align="center">
<font face="Arial"><small><font color="#0000FF"><b>Brown, Olson & Gould, PC</b></font><br>
2 Delta Drive, Suite 301<br>
Concord, NH 03301 <br>
<br>
<a href="mailto:[email protected]">[email protected]</a> | (603) 225-9716<a href="mailto:[email protected]"></a></small></font>
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