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About The Author:

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
(603) 225-9716









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STATELINE by Robert Olson

July 1999
Ohio Passes Deregulation Bill
by Robert Olson  --   Brown, Olson and Wilson, P.C.
(originally published by PMA OnLine Magazine: 07/99)

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.

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.

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.

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.

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.

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.

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.

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.

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.

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 | (603) 225-9716

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