AES Ohio’s next electricity supply auction will be next week. By the next morning, residents should have an idea what electric costs will look like in the Dayton area this summer, although final rates won’t be known until the utility files them with state regulators.
AEP Ohio in Columbus is already telling its customers to expect higher prices after its own recent auction.
AEP last week said the cost of electricity starting this June is expected to rise from $155 to about $198 for a “typical” electric residential customer using 1,000 kilowatt-hours of energy, a monthly increase of about 28%.
In the Dayton area, AES Ohio’s own energy supply auction is scheduled for April 4.
“We should know the results of the auction the morning of April 5,” said Matt Schilling, a spokesman for the Public Utilities Commission of Ohio (PUCO).
AES Ohio’s November 2022 auction result was just over $113 per megawatt hour. An AES Ohio customer using 1,000 kWh this March would have had a bill of $163.99 under the November result. (1,000 kilowatt hours equals 1 megawatt hour.)
But that’s not the final result. The outcome of the April 4 auction will be blended with November’s outcome to get a clearing price, according to the PUCO.
The clearing price will determine the rate for AES Ohio customers who have not chosen an alternative electricity provider.
The PUCO recently accepted the results of the “standard” electric service offer auction that sets the per-kilowatt-hour price of generation supply provided to AEP Ohio customers who don’t have another supplier, the Columbus-area utility said.
“When the new generation supply rates take effect in June, impacted customers will see a noticeable increase in their bills,” Marc Reitter, AEP Ohio president and chief operating officer, said in a release from his company last week. “We want to let customers know about these changes now so they can begin to prepare.”
A spokeswoman for AES Ohio (formerly known as “Dayton Power & Light”) recently said the company monitors the market daily and regularly communicates with customers on payment assistance programs.
Maha Kashani, senior regional sales manager for Dublin, Ohio-based retail energy supplier IGS Energy, said market prices for energy have been trending down in recent months. So a price drop may still be a possibility, she said.
“Long answer short, wholesale power prices have declined and AES Ohio still has a substantial chunk of their load to hedge” after the November auction, Kashani said. She believes it would be prudent for residents and businesses to evaluate third-party supplier offerings.
Last year, AES Ohio customers faced higher electric rates after a wholesale electric auction in the spring.
Electricity is a tradeable commodity, like corn or oil. But it can’t be stored like tangible products. Even so, electric companies are expected to meet demand. They do that with their own generating capacity, or with capacity purchased through market auctions, such as the one AEP Ohio recently had or AES Ohio is scheduled to have April 4.
The alternative to auctions would be to purchase power in real-time markets, which can be volatile on a day-to-day basis.
Such auctions are a major input into the price of electricity. Under Ohio electric market deregulation after the year 2001, the generation part of a customer’s electric bill is set by the supplier they choose or by auctions.
The war in Ukraine, driving up the price of natural gas, has been cited as a big reason for rising electric bills. In 2020, 61% of U.S. households used natural gas for at least one energy end use, according to the U.S. Energy Information Administration.