Over the past year, and particularly the past month, many news organizations or even utility companies themselves have warned consumers of upcoming higher electricity costs in Ohio.
It’s true. For most customers who are on the default plan known as the standard service offer (SSO), the average price of electricity will increase approximately 58 – 88% from the current price. (AES Ohio’s SSO customers will see an approximate 2.5% decrease.) Those increases come from direct cost increases in the competitive energy market; your utility is passing those costs along to you, not making a profit.
This SSO price, combined with other administrative fees and riders, makes up about 40% of your bill. The other 60% comes from the delivery costs required to provide electricity to your home.
Behind the rising costs is a complicated web of geopolitical, macroeconomic and governmental forces. Let’s break it down:
What’s on my bill?
The first thing to know is that the electric industry consists of three main phases: generation, transmission and distribution. Your bill is determined by the price of electricity, aka the generation, along with the price for the transmission and distribution of that electricity. In Ohio, you can choose which company supplies the generation portion of your bill, while your electric utility continues to handle the transmission and distribution. If you decide not to choose a different supplier, you are automatically enrolled on the standard service offer (SSO) with your electric utility.
The SSO is the default rate for generation supply that your utility charges. In order to secure electricity for customers on the SSO rate, companies participate in competitive wholesale auctions. The average price of the electricity secured through the auction is the main component of the SSO. Other components of the SSO rate are PUCO-approved riders and administration fees.
The PUCO does certify the results of those auctions and ensure that they were conducted in a fair manner. But the Commission cannot change the actual prices determined by the market.
Why are prices higher now?
The price of electricity in our region is determined by two major factors: capacity and energy prices. Capacity is a commitment to provide energy when needed for a specific period; capacity auctions are held by PJM, the regional grid operator. These capacity auctions, separate from Ohio’s competitive wholesale auctions mentioned earlier, have been subject to a series of delays ordered by the Federal Energy Regulatory Commission (FERC). This has caused a chain reaction that has also delayed Ohio’s competitive wholesale auctions.
Following the Ohio competitive wholesale auctions, the results of each auction are blended with previous auctions. Blending the prices helps mitigate any price volatility that may occur during a certain time period. In the graphic below, you can see how AEP Ohio’s auctions prior to this year blended two or three results in varying amounts to help create an average price.
Due to multiple delays in the auction schedule, Ohio’s regulated utilities have not been able to procure the SSO supplies the way the Commission originally intended. In the graphic, you can see how the utility is now limited to one-year products only, instead of the usual blend.
The PUCO has repeatedly warned FERC about the harm these delays will have on electricity markets. Unfortunately, these auction delays have come precisely as energy prices have been high.
When will SSO prices start to rise?
New SSO rates will start to go into effect across all electric utilities on June 1, 2023.
When will SSO rates be back to normal?
PJM capacity auction prices have now been set through May 2025. However, it’s difficult to predict whether high prices will be temporary, as electricity prices are elevated globally, not just in Ohio.
How can I minimize the impact of these prices on my bill?
As mentioned previously, Ohioans can shop around for generated service from a variety of suppliers. Using the Price to Compare listed on your bill, visit EnergyChoice.ohio.gov and use the Apples-to-Apples tools to compare offers. Check out this video for a step-by-step walkthrough on understanding energy choice and comparing supplier offers.
You may also live in a community that has decided to participate in what’s known as “government aggregation”. In Ohio, local communities are allowed, by law, to join their citizens together to buy electricity as a group. Search the government aggregation map to see if an electric or natural gas government aggregation is available in your community. Each aggregation may have different rates and terms, so check with your community for more details.
If you’re struggling with your bills, assistance options may also be available depending on your income level. Keep in mind that some assistance programs, such as the Percentage of Income Payment Plan, do not allow participation in energy choice programs. Find a complete list of energy assistance programs here.
Finally, using less energy will always result in lower costs. Find ways to be more energy efficient in your home here.