Ohio's electric cooperatives spent a lot of time listening to their members before deciding to "wait, watch and learn," about the state's new deregulated market. The co-ops still can "opt in" to competition any time it benefits their members.

Ohio's electricity Customer Choice Law

In 1999, Ohio enacted a law deregulating (some folks use the term "restructuring") the state's electric utility industry. The centerpiece of this legislation is its "customer choice" provisions, under which some customers were eligible to start shopping for new generators of their electric power on Jan. 1, 2001.

In essence, the law "unbundles" investor-owned utilities ("IOUs") — American Electric Power (AEP), Cinergy, FirstEnergy, and Dayton Power & Light. Under the old "regulated" system, an IOU owned everything from the power plant (or "generation") to the high-voltage wires that carry electricity from the plant ("transmission") to a substation near you, then the wires that carry the power locally from the substation to your home ("distribution").

Under the new deregulated system, each of those segments are broken into separate "cost bundles." Some — but not ALL — customers have the option to choose which "cost bundle," or company, generates their electricity.

Electric consumers in some other states, especially California, have found deregulation to be a hair-raising experience because of wild price swings and blackouts.

The new law was expected to lower costs to consumers by introducing competing sources for power generation.. One such opportunity is energy marketing, in which companies purchase power from another firm and then resell it to customers. But as of today, few new marketers actually are offering power to Ohio customers because the rates they already pay are so competitive. In essence, many Ohioans have choice but no competing offers.

A special choice for Cooperatives

In the new law, Ohio legislators recognized cooperatives are different in some very important ways — we are nonprofit, our consumers hold title to their own power plants, and we serve and are controlled by our member-owners, who elect our boards of directors.

Because of our unique relationship with our consumers, Ohio's electric co-ops were given a choice of when and if we want to "opt in" to competition — allow our members to choose new power suppliers.

But, unlike the IOUs, which are required by law to offer choice, the cooperatives in Ohio decided to wait, watch the market take shape, and learn. Why?

• Because the choice to "opt in" is irrevocable; it's permanent. Once it's "opted in," a cooperative can't "opt back out" again, even if it turns out to be bad for most members.
• Because even though our members don't have choice today doesn't mean they never will. The cooperatives can "opt in" whenever the time is right
• The cooperatives' costs of generating and transmitting power already are significantly lower than the state average. And because the members are the owners of their co-op, they also are an investor. The money they've earned in capital credits is being used today to provide operating capital for their business. Depending on how the new marketplace evolves, opting in could put some or all of their investment at risk.
• No one still really knows yet how the new competitive market will work. Given what we know today, the costs of switching will outweigh any savings. As customers in other first states which deregulated their electricity markets, discovered to their sorrow that in gaining choice, they lost protection from price volatility when power supplies get tight. Some saw their monthly bills double and even triple.

If cooperatives decide to opt-in to competition, they risk "stranding" investments in equipment which serves customers who might choose to get power from another source. The cost of stranded investments must be spread among the remaining customers.

Cooperative members speak their minds

This decision to not "opt in" right away wasn't made lightly. Meetings were held around the state with sample groups of cooperative members. They told us:

• They don't want choice if it involves risk to them or their co-op.
• They might want choice someday, but only when the time is right. And they trust their local board of directors to decide when that time has come.
• They expect their cooperative to update them often as more information about the new market comes out, and they want the implications explained to them. Concern for our members' best interest is behind everything we do. It's been that way for more than half a century.