Cutting costs

Business owners across the state should see a drop in their electric bills when electric deregulation legislation goes into effect Jan. 1.

Now, businesses, like everyone who purchases electricity, pay their electric supplier to do everything, from generating the power to installing lines to delivering the power. Under the new system, signed into law by Gov. Bob Taft last July, the companies which own the wires will remain in the delivery business, but consumers will have the opportunity to choose which company generates the electricity delivered through those wires to their homes and businesses.

The cost of transmitting and distributing electricity makes up about 30 percent of a customer’s bill and that will remain the same under the deregulation plan.

The cost of generating the electricity makes up the remaining 70 percent of the bill, and it is that cost which will vary under the new plan, depending on a customer’s choice of supplier. Under the bill passed by the legislature, the amount the consumer will pay for the electric generation portion of the bill will decrease at least 5 percent, guaranteed, and could fall as much as 20 percent, depending on where in the state the customer is located, according to Matt Motley, public information officer for the Ohio Public Utilities Commission.

In Ohio, about three-quarters of electricity is sold to industrial and consumer interests. Big businesses will probably be the biggest beneficiaries of the ability to choose a supplier, but the law is structured so that the biggest companies can’t buy up all of the cheaper electricity, leaving residents and smaller businesses the only users of the higher cost electricity.

Business owners in Northern Ohio currently pay higher rates for their electricity than do those in the central and southern parts of the state, Motley says. Nuclear power is a prevalent source of electricity in that part of the state, and the high cost of building, maintaining and operating those facilities is reflected in power costs. Under deregulation, business owners in Northern Ohio can expect greater savings than those in the rest of the state.

Motley says PUCO plans to advertise heavily, beginning this fall, about the ability to choose an electric supplier, but “won’t need to get the message out as strongly” in Northern Ohio, because those consumers who are now paying higher rates “are more likely to say, ‘Let’s pack it up and move to another supplier.'”

Customers who don’t state a choice will remain with their current supplier. There is no deadline for making a choice, Motley says, but by Dec. 31, 2003, there must be a 20 percent switching rate in each customer class. That can be achieved by PUCO adjusting rates to make certain selections more attractive, he says.

For some businesses, even the minimum 5 percent guaranteed reduction in the generation portion of their bill will result in substantial savings. For those that use a large amount of electricity, the cost can be a very high percentage of their total operating costs, one reason the Ohio Grocers Association has been a huge proponent of electric deregulation for years.

“Grocery stores are high users of electric energy,” says Tom Jackson, president and CEO of the 900-member association. “The refrigeration equipment runs 24 hours a day, seven days a week. Other businesses shut off the lights. We may dim them, but we still have an awfully lot of electricity going into our stores,” especially those that are open 24 hours a day.

While that organization has been following the progress of electric deregulation closely, other businesses may not yet be aware of the choices that are coming. Motley says PUCO’s extensive ad campaign will educate consumers about their options and their rights, and wants to make the process as easy as possible for consumers to understand.

“We want to inhibit as much customer confusion as possible,” Motley says. “At the first hint of confusion, people are likely to give up and say, ‘It doesn’t bother me, so why do it now?'”

In Ohio’s $11 billion electricity market, the competition among suppliers will most likely be fierce, says Motley. Under gas deregulation, which was begun as a pilot program in Ohio in 1997, “gas is gas is gas,” says Motley, and consumers made their choice based solely on price. But with electric deregulation, “electricity is not necessarily electricity. Price will be a major factor, the overriding factor,” but consumers will be able to take other things into consideration as well, such as environmental factors, Motley says.

And because consumers have already gone through deregulation in the gas industry, Motley says they should be prepared to go out and shop around for the company which best meets their needs.

For more information about electric deregulation and how it could affect your business, go to