Your electric bill is about to get a lot more expensive

War in Ukraine, other factors pushing wholesale power costs up

Electric power generation rates are going up — way up, industry observers say.

After a recent wholesale energy auction, electric generation rates are expected to rise in June, largely due to market pressures, said Matt Schilling, a spokesman for the Public Utilities Commission of Ohio (PUCO).

The upshot for AES Ohio customers who have not chosen an alternate electricity provider is higher bills.

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Effective June, for AES Ohio customers using 873 kilowatt-hours (kWh) each month (matching the average residential Ohioan’s usage), the “standard offer rate” portion of their bill will be $95.25, more than double the current $41.95, according to the PUCO.

The increase reflects the costs of the electricity AES Ohio provides to customers who do not choose an alternative supplier, Schilling emphasized.

All Ohio utilities are affected by rising wholesale prices. Not all utilities have filed their tariffs as AES Ohio has, Schilling said.

“But they’ll all kick in in June,” he added.

Mary Ann Kabel, a spokeswoman for AES Ohio, cited a number of factors.

“Due to a number of conditions including the situation in Ukraine, inflation, price of natural gas and market conditions our customers will see rates increased by $0.06 per kWh, potentially doubling the price of the standard service offer,” she said in an email. “The new rates will go into effect in June 2022.”

‘Incredible volatility’

These price hikes are being felt nationwide. Natural gas produces about 40 percent of America’s electricity.

Maha Kashani, senior regional sales manager for Dublin, Ohio-based retail energy supplier IGS Energy, said she and her colleagues have seen an “incredible amount of instability in the natural gas and electricity markets over the past year.”

“We have seen an incredible amount of volatility in the natural gas and electricity markets over the past year,” Kashani said in an email Wednesday. “Limited production response coupled with increased demand and perceived risk have led to a rapid run-up in prices. I haven’t seen anything like this before in my career, and I’ve been doing this for more than 10 years.”

She advises consumers to educate themselves on their options. Customers can choose a different energy supplier, and they might be able to lock in lower rates that way. One way to explore options is on the PUCO website, energychoice.ohio.gov, the PUCO’s Schilling said.

The Ohio wholesale generation auction process finished at the end of April.

To determine if you’re an AES Ohio standard service customer, look at your electric bill. Under “Supply Charges,” the name and logo of a supplier should be listed. If you are taking the AES Ohio standard offer, you should see an AES logo.

Some history: In the late 1990s, about eight Ohio investor-owned utilities powered about 90% of electric customers. Those companies, including what was then Dayton Power & Light, oversaw how electricity was generated and sold.

But Ohio restructured its energy market in 1999 with an Ohio Senate bill that was designed to let consumers choose energy providers. Consumers could elect to buy power from retail suppliers instead of automatically getting it from a local utility.

Then in 2008, then-Gov. Ted Strickland signed into law a bill that required “incumbent utilities” to offer “standard service offers” (or SSOs) for customers who had not chosen a unique retail supplier.

Power companies were expected to nail down energy capacity for SSO customers via competitive wholesale auctions. Those auctions set generation rates.

As PJM (a regional transmission organization that coordinates wholesale electricity) puts it on its web site: “The clearing price for electricity in these wholesale markets is determined by an auction in which generation resources offer in a price at which they can supply a specific number of megawatt-hours of power.”

Any customer who does not have a fixed price contract in place with a supplier as of June 1 can expect higher generation charges.

Unfortunately, PUCO’s ability to mitigate that increase is limited, Schilling said.

Typically, the commission orders utilities to hold multiple auctions at different times, blending those auction results to “mitigate market volatility,” he said.

But recent federal regulatory and other actions delayed auctions to the point where utilities were unable to blend results, he said.

In an April 20 release, AES Ohio said the PUCO accepted the results of an April 18 wholesale auction.

Schilling said that while the commission has to officially sign off on the new rates, “It’s more or less a perfunctory task as these prices are set by a series of auctions. These rates will take effect in June.”

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