Ohio Electricity Rates Likely to Increase in Summer 2023
Electric bills for many in Northeast Ohio will likely be higher this summer due to the recent auction results of FirstEnergy. The company agreed to pay $97.70 per megawatt-hour for a third of the electricity it will send to customers in June, which is a better price than the $122.30 per MwH seen at an auction in October but much higher than the $52 to $54 per MwH it is currently paying. The rates from multiple auctions will be merged to determine what customers pay from June 2023 through May 2024.
According to Matt Brakey, head of Brakey Energy, an energy management firm in Chagrin Falls, “It’s still producing prices so high that no customer will want to be defaulting to the (standard service offer) come June 2023.” The Public Utilities Commission of Ohio approved the auction results at a meeting on Wednesday. While Ohioans can shop for their own electricity deals, many people in the Cleveland area get their electricity by default through FirstEnergy.
It's important to note that there is still one more auction to come in March that will factor into what people pay starting in June. The Public Utilities Commission won't calculate prices until then. However, Brakey predicts that residential customers will pay 10 cents or more per kilowatt hour if they don't shop for their own power. Prices last summer maxed out at under 7 cents, and are currently at about 5.5 cents per kilowatt hour. This is a significant increase from the prices Ohio residents were paying last summer.
Last summer, many Northeast Ohioans who were using NOPEC were shocked when they were paying 12 cents per kilowatt hour for electricity. Brakey said, “I think the exact situation is going to happen in reverse,” saying the standard service offer will be overpriced compared to the rest of the market this summer.
So why do these high auction prices affect Ohio residents? It has to do with the way Ohio set up its energy market. The standard service offer is a variable price, a safety net and a supplier of last resort. If Ohioans don't pick their own supplier, and if they don't have local leaders or NOPEC shop for them, they get this option directly from their utility. Utilities, like FirstEnergy, buy electricity at auction for the standard service offer. Then they pass that power, and the cost, to consumers.
As of November, 74% of the customers in the Illuminating Company's territory and 32% of the customers in Ohio Edison's territory were using the standard service offer. In the past, wholesale electricity prices were cheap and so was the standard service offer. But Russia's invasion of Ukraine, rising natural gas prices, and weather have driven up wholesale prices.
Brakey said auction prices were likely lower in January than in October for two reasons: mild weather this winter and wholesalers being less risk-averse. When a wholesale electricity supplier wins the auction, they're locked in at the prices they bid for one year. If they bid high, but the market rate for electricity is lower, they'll make money. But if they bid low and the prices skyrocket, they're liable to lose a lot of money. The latter is exactly what happened late in 2021, and more and more people started to use the standard service offer. Brakey's company even advised larger industrial and commercial companies to use the standard service offer when historically, they could do much better by buying electricity on the open market. He said electricity wholesalers are bidding higher prices to offset the risk they are taking.
Brakey said many could get a better deal by shopping for their own supplier but advised waiting until March or early April because the standard service offer prices will be the lowest option until May. This will give Ohio residents time to compare prices and options before deciding.
In Ohio, electricity customers can't pick their utility, the company that transports their electricity. But they can choose their own supplier. Residents can protect themselves from this upcoming rate increase by shopping for the lowest electric rates in Ohio.
It is important to note that electricity prices only make up a small portion of the total bill. Other costs, such as distribution, transmission, and generation, contribute to the overall cost. However, it is still wise for Ohio residents to shop around and compare prices to ensure they get the best deal possible.
In conclusion, while it is disappointing to hear that electric bills will likely be higher this summer, Ohio residents have options. By shopping around and comparing prices, they can make sure they are getting the best deal possible. It's always a good idea to stay informed and aware of the options available to you to make the most informed decision for your energy needs.