Public Utilities Commission of Ohio

I know what you are thinking. We're in an age of deregulation, so the role of the state public utility commission is diminishing. You feel you can cut back on your regulatory affairs staff and concentrate on your business - on your marketing plan. Well, think again.

"Deregulation" doesn't quite describe what's happening today in energy and telecommunications. In reality, we are restructuring, not deregulating. And restructuring will raise a number of difficult issues that, like it or not, must survive review by your friendly state regulator.

In fending off the special interests, Congress spawned new inequities.

The fourth anniversary of the Telecommunications Act of 1996 most likely will be celebrated with more groans than cheers. The law set out to create "a pro-competitive, deregulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information services to all Americans by opening all telecommunications markets to competition,"[Fn.1] but that objective has not been fulfilled.

Five commission chairs from states in all phases of deregulation ponder their changing roles. Will market success make them obsolete?

As most state electric competition plans are implemented within the next few years, regulators face an uncertain future. And they're already reflecting on their role in a changing industry.

Regulatory commissions in both Illinois and California have created panels to discuss the issue and the National Association of Regulatory Utility Commissioners (NARUC) has held closed-door sessions on the subject.

Ohio's proposal for retail marketing areas would give all customers meaningful choice and all suppliers even footing.

When grocery shoppers go looking for a can of tuna fish, they must decide which brand to buy. No particular brand will jump off the shelf into their shopping carts. The same is true with automobiles or any other consumer good. First you choose a make and model. Electricity and other utilities, however, are a special case. In the transition from monopoly to competition, consumers face a different prospect.

The post-mortems on last summer's price spikes in the Midwest are in. At least three studies of the event diverge in their conclusions:

First, on Sept. 24 of last year, the staff of the Federal Energy Regulatory Commission found the root cause of the spikes in extreme weather and unexpected outages. It observed no direct evidence of market manipulation and concluded that the events were unlikely to recur.

As utility takeovers break new ground, the FERC ponders proposed rules, perhaps already out of date.

A year ago, when U.S. Antitrust Czar Joel Klein talked of a "window of opportunity" for electric utility mergers, he didn't predict when it would close.

And it hasn't yet.

In the 12 months leading up to January 1998, when Klein had addressed the Federal Energy Regulatory Commission through its "Distinguished Speakers" series, only the ill-timed Primergy deal had been turned down. The next year, 1998, would prove no different.

TELEPHONE BILLING PRACTICES. Citing the filed-rate doctrine, which bars deviation from published tariffs, a federal appeals court affirmed the dismissal of two class action suits against AT&T Corp. that sought damages for alleged fraud. The suite arose from AT&T's failure to disclose to its residential long-distance telecommunications customers its practice of rounding charges up to the higher full minute.

COMPETITIVE transition charges. Wires charges. Securitization payments. Every stranded cost recovery mechanism considered to date requires customers to pay for electric utility stranded costs through direct assessments on monthly bills. These charges will continue for many years after competition is introduced.

There is a real irony here: As we seek to introduce competition into the electric industry, we as regulators are forced to invoke all of the most heavy-handed tools to extract payments from citizens.

The debate over restructuring the electric industry has encompassed a revisiting of the traditional rate-of-return (ROR) pricing model. Parties of widely divergent interests increasingly advocate alternatives. Under the label "performance-based regulation," these new pricing models share the objective of strengthening incentives for electric utilities incentives to pursue some specified "socially desirable" outcome.

(TRC) test has become the dominant method of comparing the costs and benefits of demand-side management (DSM) programs. Yet the TRC test fails to recognize the negative rate impacts from reduced kilowatt-hour consumption. DSM advocates argue that more extensive DSM programs will compensate for this flaw. If all customers have an opportunity to participate in a DSM program, they claim, customers' total bills will fall in spite of rising rates that pay for the DSM investments.