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Oil and Gas

Ohio passes bill to revamp power market, cut use

LOS ANGELES (Reuters) - The Ohio Senate on Wednesday passed an energy bill that calls for the state to establish a hybrid of regulated and market-based electricity rates starting in 2009 that would prevent a jump in power bills and to cut power use by 22 percent by 2025.

Had the state legislature not acted, Ohio would have allowed utilities to go fully to market-based rates at the end of 2008.

Gov. Ted Strickland, who said he will sign the bill, feared that Ohioans would have gotten sharp hikes to power bills like those in Maryland and Illinois, which respectively soared 72 and 55 percent after electricity rate limits expired.

“In some ways, this may be the most important single issue we’ve dealt with so far,” said Strickland, who took office in January 2007.

“I think this bill is a fair and balanced approach toward protecting the consumers while putting in place an avenue for utilities going to market in a way that is phased-in with overriding public control,” Strickland said in a telephone interview.

Strickland said future investments, particularly for heavy industrial projects, in Ohio were in danger without a new law, because of uncertainty over energy costs.

The 22-percent energy use decrease is to be achieved starting with a 0.3-percent in 2009 and 2 percent each year until 2025. Utilities will not have to meet those targets if costs increase by more than 3 percent as a result of trying to comply.

Ohio has also taken a mixed approach to renewable energy targets. By 2025, at least 25 percent of electricity delivered in Ohio must be generated from “advanced energy” sources. Of that 25 percent goal, at least half has to come from renewable sources like wind and solar, and no more than half from “clean coal” and improved nuclear plants.

Strickland said the advanced energy idea was necessary for a state where 90 percent of power generation is from coal-fired power plants.

Carbon sequestration and other “clean coal” technologies have yet to prove feasible but coal advocates say they are within reach and necessary in Ohio where coal-fired plants dominate. Half of U.S. power generation comes from coal.

MARKET-BASED ELECTRIC RATES

In the new measure, market-based rates will be 10 percent of a utility’s load starting in 2009 and that limit, at the discretion of the Public Utilities Commission of Ohio (PUCO) can increase 10 percent per year over the next five years. After five years, utilities can go to full market-based rates or the PUCO could extend the gradual 10-percent phase-in of market-based rates until reaching 100 percent.

Alan Schriber, chairman of the PUCO, said the bill “gives the commission the authority” to alter course if market-based rates prove unworkable.

“The commission can cope with uncertainties in market place going forward,” said Schriber. “If the market evolves as we hope it evolves, the market-based generation prices will stay in play and if it doesn’t evolve, there is plenty of consumer protection.”

The five-member governor-appointed PUCO will decide how much of each utility’s mix of power sales are based on market or regulated rates by 2010. In 2009, the PUCO does not have discretion to cut the mix from 10 percent market-based rates.

At Strickland’s insistence, the bill includes a provision prohibiting “excessive earnings” by utilities. This is to determined by the PUCO by comparing each utility’s request for rates to other U.S. utilities.

The largest utilities in Ohio are FirstEnergy Corp, American Electric Power, Dayton Power and Light Co and Duke Energy.

Reporting by Bernard Woodall; Editing by Marguerita Choy

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