BY JAMES BURKHAMER
AES Ohio just raised their rate per kilowatt-hour on June 1. This was not in the Dayton media as it’s not good news - the supply rate increased 15 percent to 10.9 cents/kWh.
This applies to residential and small commercial utility customers. People might remember the cheap “pandemic” rate of 4.8 cents back in 2021; however, those days are long gone. The energy markets skyrocketed when Russia invaded Ukraine in 2022 and haven’t slowed down since.
People’s immediate reaction is how dare AES rake in the profits like this! A rate of 10.9 cents/kWh is bad enough, but when coupled with high electricity usage in the summer, it’s a double whammy.
The truth surprises people though when they learn that AES does not make a dime off the supply rate. Ohio is a deregulated energy state, which means that utilities do not determine nor profit from the supply (generation) rate. Utilities in Ohio simply pass on the supply rate through to the consumers.
In fact, AES Ohio does not own power generation facilities in Ohio at all. So where does the 10.9 cents per kWh come from?
Like all utilities, AES Ohio purchases wholesale electricity for their entire territory from energy suppliers throughout the United States. Utilities have the option to just purchase hourly electricity directly from the power grid, but these prices change hourly and are extremely volatile.
Therefore, it’s a safer option for utilities to simply purchase contracted electricity from suppliers through auctions.
Energy suppliers come in all shapes and sizes, however the ones that bid on a utility’s customer base are enormous. Most, but not all, of the large energy suppliers (Constellation, Direct, NRG, etc.) do own and operate power plants in America.
Years ago, AES Ohio decided to hold these electricity auctions in the “shoulder” months of April and October. Shoulder months are not too hot or cold, and the assumption is the electricity purchasing is cheaper during that time. This may or may not be the case – as AES Ohio consumers have discovered the hard way.
The AES Ohio rate has consistently averaged 10 to 11 cents per kWh for the last six years, and this rate is updated every June. Yet savvy residential and commercial customers can almost always find a better deal than the utility for the supply generation rate.
Let’s back up for a minute. Unlike the power supply charge per kWh, half of your power bill for transmission and distribution is regulated by the Public Utilities Commission of Ohio (PUCO). Publicly-traded utilities can’t just make whatever profits the shareholders would like, because they are indeed monopolies. It’s not as if you can go out and shop for a different company to put up electricity wires in your neighborhood.
Because of this conflict of interest, PUCO regulates utility profits through hearings and rulings. There’s not much we can directly do about this, so back to the exciting deregulated wild west.
Everything clear as mud? Regulated, deregulated, suppliers, power grids… it’s enough to fry one’s brain.
The fun part of this exercise is that residential and commercial customer do have options. Just like the utilities, you too can sign up for an electricity contract from a supplier!
Sometimes local villages and towns do this for you through what’s called a community aggregation, which is voted on in November. Again, this may or may not be the best deal for consumers, which will be covered in a future article. Residential customers can shop for deal on PUCO’s “apples to apples” website, on which energy suppliers can publish their offers.
Be wary though – suppliers offer gimmicks and cheap teaser rates which explode later – or worse have squirrely monthly fees or cancellation charges. (If you see one of these energy reps in Walmart, run away. Fast).
Small commercial customers, on the other hand, should never use apples to apples. Energy consultants like Miami Valley Power and Gas have access to supplier offers that are not made public. These offers can save small commercial and nonprofits thousands of dollars per year from AES Ohio’s annual rate.
Electricity contracts are very simple in how they work. Instead of paying 10.9 cents/kWh to AES, you pay 8.9 cents to whatever supplier you contract with. AES is even generous enough to put this rate on your bill and collect the money for the supplier! (OK they don’t have a choice because of state law, but let’s show AES some summer love).
Contracts range in length from one month (very bad idea) to three years or longer (very good idea). “But wait!” you might say.” What if I sign a long contract and the utility price comes down?” Have you seen the price of anything coming down recently?
Think of an energy contract like an insurance policy. There’s no cap on AES Ohio’s unregulated supply rate. If things break bad in the future, like extreme weather, more Middle East turmoil or 100 more data centers built – that rate could jump to 15 cents. It’s always better to be on a contract. It’s best for small commercial and nonprofits to use the free services of an energy consultant to find the best suppliers out there, instead of relying on internet gimmicks and slick-talking sales reps.
So yes, there are options for residential and commercial consumers to beat the summer sticker shock of AES Ohio’s convoluted auction process. Proper navigation and care are needed to do this properly, however.
Unfortunately, higher electricity prices are here to stay in an increasingly electrified world. But there’s hope, please don’t let the high temperatures and summer heat get you down!
James Burkhamer is the owner of Miami Valley and Power Gas, a local energy consultant dedicated to helping small businesses and nonprofits reduce their risk and spending. Learn more at www.mvpg.org.
