A “fixed-rate” is only as good as the fine print: FirstEnergy Solutions customers to face additional charges due to polar vortex

FirstEnergy Solutions (FES) recently announced that its residential and small business customers will see a one-time charge between 1 percent and 3 percent of their annual electricity bill. The charge is to be levied on customers’ May or June bills.

According to FES, the purpose of the charge is to recover a portion of the ancillary service costs related to the purchase of additional reserve generation by PJM Interconnection — the regional transmission organization that coordinates reliability and movement of wholesale electricity in Ohio and other nearby states — during January’s extreme weather and record levels of energy use. These costs are billed to retail suppliers, such as FES.

FES now seeks to pass these additional costs along to its retail customers, even to customers with so-called fixed rate contracts. Many such contracts have language allowing suppliers such as FES to pass through costs caused by “regulatory events.” The situation highlights that retail customers’ fixed-price contracts are dependent on the wording of the arrangements and the importance of contemplating such events when drafting contracts with electric suppliers. For example, although many of FES’s “fixed-rate” retail customers will face the surcharge, municipal members of the Northeast Ohio Public Energy Council (NOPEC) will not face the additional charge because the NOPEC contract prohibits it.

Notably, although PJM charged every retail supplier for the reserve power, many are choosing not to pass through the additional costs to their retail customers. For example, major suppliers, Constellation and Integrys Energy Services, have indicated they do not intend to pass along these unusually high costs from PJM. The Public Utilities Commission of Ohio has indicated it will likely examine whether the attempt by FES to pass the PJM-imposed additional charges along to customers is appropriate.