Statement from Congresswoman Marcy Kaptur
Monday, October 25, 2010
Thank you to the Public Utilities Commission of Ohio for holding this series of hearings around our state on the important issue of all-electric rates. Thank you especially for holding the first hearing in Sandusky, where so many people have organized to demand fair treatment in this matter. I especially want to commend the dynamic Serving Our Seniors organization here in Sandusky and other organizations throughout Northern Ohio that have stood strong on behalf of 300,000 ratepayers.
My name is Marcy Kaptur. I represent the Ninth District of Ohio in the U.S. House of Representatives. The all-electric issue directly affects thousands of my constituents across the Ninth District, from Vermilion to Huron to Sandusky to Toledo and Maumee. I am here to support these constituents in a dispute with FirstEnergy, the fifth-largest investor-owned utility in America.
I appreciate the opportunity to offer brief comments. I know many others who are waiting to speak, so I will be brief and I will submit a written statement for the official record.
High electricity costs have long impeded economic development and job creation efforts throughout Northern Ohio. At times our rates have ranked among the highest in the nation, putting our communities at a competitive disadvantage against warmer climates such as the Southeast and Southwest, but also Western states that have benefited from federally-subsidized public works projects. That is why I have worked hard to promote alternative energy sources such as wind, solar and biofuels in our region.
High electricity rates have also caused hardship for thousands of families who have struggled to keep pace with rising utility costs, including senior citizens who live on fixed incomes. It is appalling that, in our great state and our great nation, that anyone would have to face the choice of eating versus heating, but that is not an overstatement of the predicament in which many of our citizens might find themselves if the Commission allows FirstEnergy to go back on its word to all-electric customers.
If this issue could be depicted in a cartoon, it would be from Peanuts. You would have Lucy holding the football. She’s FirstEnergy. And you would have Charlie Brown, running up to kick it. That would be FirstEnergy’s all-electric customers. And you know what happens next: Lucy pulls the ball away at the last minute and Charlie Brown goes flying. Lucy made an implied promise to Charlie Brown, that she would hold the football in place, and she broke that promise by pulling it away at the last minute, and he ended up flat on his back, seeing stars.
To a person, FirstEnergy’s all-electric customers believed the corporation would hold their rates in place. And now FirstEnergy wants to pull the ball away at the last minute.
How can so many people be so wrong about what the utility company promised in return for giving up a choice of energy supply? Do you believe 300,000 people or do you believe FirstEnergy? For me, it’s not a difficult question to answer.
The all-electric rates were offered by the utility companies in order to guarantee a revenue base and predictable revenue stream. The all-electric marketing scheme constituted a good-faith agreement between the customer and the company: the company promised favorable rates in return for the customer and the customer promised to forfeit the choice of an alternative supplier of power. Now the company wants to break the promise, saying the marketplace has changed.
But a promise is a promise. And customers that live in all-electric developments or apartment complexes clearly lack bargaining power. They lack access to a genuinely open marketplace. For them, natural gas is not an option. These seniors and families depend on electricity for their heating, water heating, and cooking needs. They have no other options because they relinquished them as a direct result of the agreements they made in good faith with FirstEnergy companies.
A few months ago, when FirstEnergy tried to eliminate the all-electric rate that their customers had paid for years, thousands of ratepayers throughout Northern Ohio experienced electricity rate-shock as their bills doubled or even tripled.
The Commission, to its credit, finally intervened and returned rates to their previous levels, albeit temporarily. But the situation remains unresolved. The uncertainty of the past winter is far from a distant memory. All-electric customers can only hope that their voices are heard and the experiences of last winter will not be repeated. That is why we are here tonight and why hundreds of citizens will turn out tomorrow in Maumee and at all the other hearings.
If the Commission allows FirstEnergy to renege on its promise to the all-electric customers, our communities could be overwhelmed. Some families might even be forced to leave their homes. Think about this: in an already depressed housing market, just who would buy a home where there is no choice in energy, and the only option is unfittingly high? I think you know the answer. If the all-electric rate is completely abolished, the effects will be devastating. You must not put our communities in such a position.
Yet, at a time when many families and small businesses are retrenching, trying to ride out the economic storm, First Energy is going in the opposite direction. They are trying to get even bigger by gobbling up Allegheny Energy in a stock deal estimated at $8.5 billion. The electric utility sector is witnessing a dramatic consolidation. Northeast Utilities, for example, is proposing to acquire NStar for $4.3 billion, creating the dominant utility in the Northeastern United States. But that deal is only half as large as the proposed FirstEnergy-Allegheny merger. Already the fifth-largest investor owned utility in the nation; First Energy would grow substantially larger after the merger with Allegheny.
Are we to believe that a corporation such as FirstEnergy, with annual revenues of approximately $1 billion—that’s a thousand million dollars a year, more than the GDP of Haiti, Kyrgyzstan, Iceland, or 15 African nations—are we to believe that such a giant corporation cannot afford to keep its promises to senior citizens and working families in all-electric homes and apartments?
The merger with Allegheny Energy would expand First Energy’s customer base by more than one third. Does this sound like a corporation that has no choice but to go back on its word in order to make ends meet? Of course not. First Energy is a highly profitable corporation seeking to expand its profit margin.
FirstEnergy most definitely can afford to keep its promises and it is the responsibility of state and federal regulators to make sure that it does.
I say "federal regulators" because the Federal Energy Regulatory Commission is reviewing the proposed First Energy-Allegheny Energy merger. Also, the Federal Trade Commission and the Department of Justice are considering whether to clear the proposed merger under Hart-Scott-Rodino antitrust provisions. Clearly there is a federal role here and I will not shy away from making my voice heard in those quarters as well.
Meanwhile, I would urge the Commission to take note of promises that FirstEnergy has made in respect to the merger with Allegheny. Among other things, FirstEnergy has promised “better service reliability." It has promised better prices for its customers. And it made “certain commitments” to its workforce. Should state and federal regulators believe these promises if FirstEnergy feels free to break its promise to 300,000 all-electric ratepayers in Northern Ohio?
Mr. Chairman, serving in Congress has helped me appreciate the basic structure of promises and pragmatism. FirstEnergy’s promise to its customers in the form of all-electric rates, at a minimum, constituted an implied contract. FirstEnergy gave up something; its customers gave up something. Both parties benefited from the bargain. FirstEnergy gave up its normal rates for electricity and received a predictable customer base and revenue stream; the customers gave up their choice of a form of energy and received a promise of favorable rates with no stated shelf life.
Unfortunately, in today’s world, promises can sometimes be broken, and sometimes without consequences. Lawyers might refer to “contracts of adhesion,” in which one party abuses an inordinate amount of power--such as a multi-billion dollar corporation on one side and a family or a widow on the other side.
But the rule of law exists to enforce contracts so that parties can enjoy certainty and predictability, so that the powerful cannot simply run roughshod over the powerless.
I respectfully ask the Commission to ensure that FirstEnergy keeps its promise to its all-electric customers. Thank you.
The 15th paragraph in the article above should read as follows:
Are we to believe that a corporation such as FirstEnergy, with revenues of approximately $1 billion per month—that’s a thousand million dollars a month—more than the annual GDPs of Haiti, Kyrgyzstan, Iceland, or at least 15 African nations—are we to believe that such a giant corporation cannot afford to keep its promises to senior citizens and working families in all-electric homes and apartments?