Leadership Views...Trent Smith

Toledo Business Journal, Jul 01, 2007

Under the deregulation rules currently in place, customers in Ohio already have the right to choose their electricity supplier from the open market. Customer choice of supplier is part of what deregulation offers, so you don't need to start a municipal electric system to do that.

In a competitive scenario, if a city decides distribution will be its best open for savings, it'll be competing with companies like Toledo Edison. Keep in mind that distribution rates for Toledo Edison will be going down and we intend to compete for all customers. Additionally, municipal systems will also have to compete in the area of reliability. On that front, Toledo Edison has, in recent years, spent tens of millions of dollars improving reliability, which is very important to our customers. We have invested in state-of-the-art technologies that help us minimize outages, reduce the outage times, track weather patterns, and analyze data to head off problems before They start. This [investment] makes our reliability among the best in Ohio.

Another area to consider is the competition for talent. Workforce demographics fora lot of businesses, including ours, show that many employees are reaching retirement age. As a municipal system attempts to enter this business, it would also be competing for talent with existing utilities, generators, electric cooperatives, and marketers.

TBJ: Can you discuss the outlook for electricity prices in northwest Ohio for industrial, commercial, and residential customers following deregulation m con tison to other areas in the Midwest? What do you see as the impact of stranded costs from Davis-Besse and car past investments in terms of our region's electricity costs versus others?

TS: The stranded cost portion of a custumer's bill refers to the historical costs for building and making improvements to power plants -- including Davis-Besse -- and transmission and distribution systems necessary to meet customer demand. Recovery of these costs was guaranteed through the regulatory process. That recovery will be completed at the end of 2008 and those stranded costs will be eliminated from customers' bills.

TBJ: Do people realize that?

TS: Probably not everyone. But, again, this is good news for customers. The elimination of the stranded costs from the distribution bill significant because it will lower our distribution costs, making Toledo Edison one of the lower. cost distribution companies in the state.

Keep in mind, however, there are a number of moving parts in the deregulation process. Distribution costs are just one component. How deregulation measures up, overall, from a rate perspective depends on generation prices. If they remain stable, we're going to compare favorably to other deregulated states, like Illinois, Pennsylvania, and Michigan.

TBJ: What about the supply of electricity -- nationally and locally -- over the next few years? Do you see possible service interruptions?

TS: Over the next couple of years, we don't foresee any supply problems. As the demand for electricity -- generally between 2% and 4% per year -- continues to build, demand will increase,supply will become short, prices will react, and more people will enter the market. It's Economics 101.