Big Changes in the Northeast Ohio Energy Markets

by Adam Miller, NorthEast Energy Advisors

What is going on and how does it affect me?

The Ohio deregulated electric market has changed dramatically in the last few months. Whether it was the record setting winter pushing prices to new levels, FirstEnergy Solutions effectively leaving the market for many customers, new regulation, or record new capacity costs, the costs savings and the market that we have known has changed dramatically in just a few short months. Because it will have a major impact on who you buy your power from and what your costs will be going forward, here's some important information:

  1. On August 12, 2014, FirstEnergy Solutions (FES) confirmed the swirling rumors that it would be exiting major parts of the electric choice markets and laying off many employees. "We intend to EXIT the medium commercial and industrial and mass market," stated Anthony Alexander, FirstEnergy President and CEO in a released statement. For the vast majority of us, this means that FES will not bid or entertain supplying your accounts in the future. Only the largest of consumers and selection municipal aggregations will be of interest to FES going forward. FES will continue to serve existing customers under existing contracts, but when that contract comes to an end, it is up to you, the customer, to find a new source of supply. The timing may be very painful depending on when your contract comes up. Be prepared!
  2. The general movement of the market has been remarkable this year. With the record setting cold this winter, we saw natural gas prices spike. And, with the increased dependence on natural gas (courtesy of so many coal plants being shut down by harsher EPA rules), electricity prices followed. We saw wholesale prices in May and June that we have not seen in several years. As the natural gas prices have slid back toward "normal" we have seen prices moderate, but not to the levels we got used to last fall. See below. If you have not reviewed prices recently, you need to get a reality check from the market in order to set your budget for 2015.
  3. Capacity costs are going to be nasty in the summer of 2015. Simply, capacity costs are the cost that every supplier (including the utility) has to pay to "rent" or guarantee space on the transmission lines in order to move power to their customers. This space is auctioned off years in advance, so we know prices already for the next several years. The bad news is that capacity prices increased 218% from the summer of 2014 to the summer of 2015. For most customers that will mean an additional $0.01 per kWh that you are used to paying. And it cannot be avoided; you will pay that even if you stay at the utility.
  4. But, all is not hopeless. On the positive side, we have seen new, quality market entrants into our Ohio market. As FES became less dominant, we have seen new, investment grade suppliers enter our market.
How do I sort through this and who can help?

We suggest a few ways to navigate this new challenging market:

  1. It is critically important that you know what your choices actually are to bring sanity to this market. Whether you work with a consultant or do the work yourself, you need to understand what suppliers are available to you. And there are many, so do not let yourself get pushed or talked into a bad deal. Make sure you have access to all viable suppliers to make your decision. Understand the financial stability of your electric supplier and their long-term commitment to the Ohio market. It can be very expensive to have a supplier drop you and leave the market!
  2. Many new products are coming into the market. Many of have gotten used to the "all in" pricing that FES offered. There are a lot of hidden charges that we see poor suppliers sliding past customers, read those contracts and know what it means! Make sure you know the details of the contract, do not commit to anything over the phone.
  3. Lastly, know with who you are talking. Be careful who you share your energy invoices with. Know their process. Ask for references. "Slamming" complaints are at an all-time high.

Our general rule of thumb is that you should ask for a meeting with a supplier or a consultant. If they are not willing to meet with you at your office, you should be concerned. After all, with this expensive of a decision, you need to know, like and trust your energy partner!

Wholesale Electric Trending Chart

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