Tuesday, July 15, 2003

Indian Hill: CG&E challenge

Defend right to pool

Cincinnati Gas & Electric Co. (CG&E), an early advocate of Ohio's utility deregulation, now objects to a local community taking advantage of that law to buy cheaper electricity from an outside supplier.

CG&E, a unit of Cinergy, has gone to court over Indian Hill's plan to pool residents to buy electricity from Dominion Resources Inc., which the village says would save a residential customer about $183 annually. Under deregulation, the power would still be provided through CG&E's lines and CG&E would handle the billing. CG&E claims the law also entitles it to financial guarantees from both Indian Hill and Dominion, in case Dominion should default on the contract for some reason.

That kind of double guarantee would wipe out savings from switching energy suppliers and would chill other Ohio municipalities from pooling their residents to buy cheaper electricity. In other words, it eliminates the consumer benefit of deregulation.

The Public Utilities Commission of Ohio (PUCO) denied CG&E's claim. The company has appealed the case to the Ohio Supreme Court, but the suit has prompted Indian Hill to put its aggregation plan, and its savings for the customers, on hold. Although such municipal aggregation deals have been widely used among communities in northeast Ohio, Indian Hill is the first to try it in CG&E's service area.The justices should quickly clarify the intent of Ohio's deregulation law. It calls for a "sufficient financial guarantee" against default but does not state an electric distribution utility like CG&E must be given a double guarantee from both the municipality and energy supplier. PUCO ruled July 8 that if CG&E thinks Dominion's financial guarantee is insufficient, then it should seek relief on that issue from PUCO.

But CG&E isn't saying Dominion's guarantee is insufficient. CG&E insists the law requires a financial guarantee against default from Indian Hill or any other governmental aggregator. If an outside energy supplier defaults, CG&E as the "statutory provider of last resort" would have to supply replacement power. CG&E says a default in Indian Hill's case could cost up to $5 million, and those costs would fall on its customers at large, not just Indian Hill residents.

Energy companies do sometimes default, but CG&E's case is weakened by the fact that in commercial or industrial energy pooling, only the outside energy supplier is required to put up a financial guarantee - not the corporate customer. None of the 112 northeast Ohio communities with aggregation deals had to put up guarantees beyond those provided by the electric suppliers. Ohio's Supreme Court should stick to the law's intent, and make sure Ohio residents aren't excluded from energy-buying pools.

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