A transition into competitive regulation has created market fluctuations which, at least for now, will result in increased electricity costs for Upper Arlington residents.
Beginning in September, UA residents will see a rate hike of more than 15 percent in their monthly electricity bills.
In May, Upper Arlington City Council approved a nine-month contract with FirstEnergy Solutions to be the city's new electricity supplier. FirstEnergy will provide services at a generation rate of 7.84 cents per kilowatt hour.
That's up from the 5.45 cents per kilowatt hour the city had with AEP Energy for 2013 and 2014.
City officials said last week the FirstEnergy contract was the lowest of the rates offered by four other companies, including AEP.
"The nine-month program rate offered by FirstEnergy was the best proposal received," said Emma Speight, UA community affairs director. "The electricity generation market is currently in a state of fluctuation as electricity providers transition to new competitive regulation.
"As a result, the rates and term lengths currently offered by electricity providers are not as favorable as they were in 2012 when the city first embarked on an electric aggregation program."
In November 2000, residents passed a ballot issue allowing city leaders to negotiate special utility deals with suppliers.
Upper Arlington is one of several central Ohio communities where residents voted in favor of residents and businesses automatically receiving electricity services under the program, known as aggregation, unless they opt out.
According to a staff report from UA City Manager Ted Staton, more than 9,600 local residents have participated in the city's electrical aggregation program since its inception in August 2012.
However, the staff report noted that generation prices for electricity have "changed significantly" since 2012, with wholesale prices going up and retail prices going down as companies make the transition to new competitive regulation.
"There is significant market uncertainty from these changes and it is difficult to estimate future retail prices to compare," the May 5 report stated.
Including delivery charges and fees, the new rate in Upper Arlington will yield a monthly bill of $147.50, up from $124.55 under the AEP Energy deal. The bill totals are computed using the summer residential rate for a household using 1,000 kilowatt-hours.
Both the old and new bill totals are lower than AEP's regulated price, which has a generation rate of 9.64 cents per kilowatt-hour and would lead to a total monthly bill of $165.46.
"When we launched the first aggregation program, the market was much more competitive and we were able to secure a lower rate for a longer time period than is possible in today's market," Speight said. "The rate we have secured for this new program is still competitive, compared to what's currently available in the market. The spread between best- and worst-rated is much smaller and alternate provider rates could fluctuate more through this nine-month period."
Speight added that providers are less inclined to offer longer contract terms at this time.
Customers enrolled in UA's previous electric aggregation program or who have been receiving electricity from the AEP Ohio utility and not through a contract with another provider will automatically be included in this new program unless they opted out by the July 7 deadline.
Speight said local customers were notified about the changes via a letter.
"They will continue to receive their bills from AEP Ohio, but the bill will indicate that they are part of our program and their electricity usage is being billed by FirstEnergy," she said.