Let's Wait and See
Appeared in July 2000 Country Living
Although I have never had the ability to foretell the future, I do think Co-ops across the state (ourselves included) will look back years from now and be very happy to have waited to enter into a deregulated utility environment.
Under a special provision in the law, electric cooperatives and municipal owned utilities can either choose to introduce competition for energy supply in their service territory ("opt in") or not to introduce competition ("opt out").
An "opt out" policy for at least one year after the introduction of deregulation will enable HWE to monitor the situation fully and let the "dust settle." This initial position is a way to avoid the mistakes that are inevitable when any new method of doing business is introduced. In spite of everything, our number-one priority is to do what is best for the Co-op and its members.
It is important to fully understand the deregulation issue, for it is certainly a confusing one. Last year, the Governor of the State of Ohio signed an electric deregulation bill, finalizing a plan that will allow some customers to begin shopping for electric power on January 1, 2001. The bill "unbundles" the Investor Owned Utilities (IOUs), such as American Electric Power and First Energy.
Under the current system, an IOU is a fully-integrated electric power company from the plant where power is generated to the point where power is delivered to the customer. Under the new deregulated system, various parts of the electric system will be broken into separate companies, and customers will be given the option to purchase some services from other providers. The separate companies will include:
- Generation: This segment of the system is the company that generates and sells the energy.
- Transmission: This is the company that transports energy on high voltage lines over long distances (i.e., from one part of the state to another or from one state to another).
- Distribution: This part of the system is the company that delivers the electricity from a local substation to the customer's home or business.
New business opportunities will be introduced and existing opportunities expanded within the electric industry in Ohio as a result of deregulation. One such opportunity will be energy marketing. Energy marketers are companies that do not actually generate electricity but purchase it from generators and resell it to customers. This business should thrive and prosper in this new environment. HWE will also thrive and prosper and looks forward to capitalizing on some of the opportunities created by deregulation.
As was stated earlier, HWE is still evaluating "when and if" we will participate in competition within our service territory. As a Co-op, we have this luxury because the state legislature recognized that electric cooperatives and municipal utilities were small businesses with specific needs and included a number of special provisions in the legislation to avoid the potential of larger utility companies taking over the small utility companies. In providing these accommodations, the legislators recalled the reasons electric cooperatives had to be formed in the first place. They remembered that the IOUs refused to provide electricity to rural areas of the state that were not profitable for them to extend service. Ohio is fully electrified today, only because electric cooperatives were formed and distribution systems were built to extend service to rural Ohio. This commitment to the citizens of Ohio was recognized by legislatures by giving cooperatives an opportunity to "opt in" if desired.
This topic is far from simple, but I hope that you now have a better understanding of why HWE plans to "wait and see" and what these changes mean to our industry.
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