Under Ohio law, electric distribution utilities (“EDU”) are required to provide consumers with (1) a “market-based standard service offer” and (2) an option to buy “competitive retail electric service [priced through] a competitive bidding process”. ORC Ann. § 4928.14(A) and (B) (the “Statute”). Each EDU is to make these services available after its particular market development period terminates. The Public Utilities Commission of Ohio (the “PUC”) recently adopted rules to implement the statutory requirement (the “Rules” Case No. 01-2164-EL-ORD, Finding and Order, issued December 17, 2003. The Rules set forth the general requirements that each EDU’s standard offer and bid process must ordinarily satisfy, but the Rules do permit an EDU to propose a plan that varies from the Rules.

The Rules provide that the standard offer and bid process are to be made available to EDU customers who are not receiving electricity through a competitive retail electric service supplier. Under the standard offer, the customer will pay a market-based variable rate; under the bid process, the customer will pay a market-based fixed rate.

The standard offer’s variable rate must be based on “a transparent forward market, daily market and/or hourly market” rate. The details of how the determination will be made are to be proposed in each standard offer application. The bid process’s fixed rate is the rate resulting from the bidding process. Bids are to be solicited for the provision of retail electric service under a supply contract with a term of between one and three years, and the bid process must include a third-party auctioneer. The bidders are to bid for a portion of the EDU’s load, and the customers remain customers of the EDU. The bid process for residential and small commercial customers must be separate from the bid process for other customer classes, and the EDU may further subdivide the load of residential and small commercial customers for bidding and rate purposes.

Under the Rules, small and general service customers who have not switched to a competitive supplier by the commencement of the program are to choose between the EDU’s standard offer and bid process. Such customers who do not make a choice receive the bid process by default. Customers who switch to a competitive supplier but return to the EDU by choice or because their contract has ended may also choose between the standard offer and bid process, with the bid process being the default option. Customers who return to the EDU because a competitive supplier failed to provide service automatically receive service under the standard offer.

Customers who select the bid process are free to choose another supply option, e.g., standard offer service, at any time. Customers who do not select the bid process, however, do not have an automatic right to switch to the bid process without restrictions or conditions, “e.g., minimum stays, exit fees, pricing adjustments, etc.”, and the Rules permit the EDU to propose such restrictions or conditions.

The Rules specify that EDUs with program commencement as of January 1, 2006 must file their standard offer service and competitive bid applications by July 1, 2004.  For EDUs with an earlier program commencement date, the standard offer service application must be filed at least six months before program commencement “so there is at least [a standard offer] available.” The Rule is unclear as to when such EDUs must file their bid process application.

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:

Brown, Olson & Gould, PC
2 Delta Drive, Suite 301
Concord, NH 03301

rolson@bowlaw.com | (603) 225-9716