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The Electric Competition Debate in...Ohio

Fortnightly Magazine - May 15 1998

solves all the issues."

A Final Footnote

None of these problems promise to be settled soon because, for legislators, tax matters are, indeed, pressing.

Some 35 Ohio school districts have generation property in their boundaries and will be significantly affected by changes in tax funding formulas necessitated by the Ohio State Supreme Court's DeRolph decision.

On May 5, state voters were to decide whether to accept the Legislature's recommendation that sales tax be increased by 1 percent, says Rob S. Tongren, Ohio consumers' counsel. The tax is designed to raise money for the poorer school districts and to reduce local property taxes.

"If the people say 'no,' we're back to the drawing board," Tongren says. "It's very dicey and it has got to infect this whole issue with respect to electric restructuring."

Mead says under the Johnson-Mead plan, the state would tax all electric generation property other than transmission and distribution property on 25 percent of its assessed value, not at the old rate of as much as 100 percent. That will mean a $210 million loss in revenue. Gross receipts tax also would be eliminated, meaning a loss of $452 million in revenue. However, a kilowatt-per-hour commodities tax would bring in $617 million. Lastly, utilities would no longer be exempt from corporate franchise tax, meaning an additional $50 million in revenues.

All of the tax changes equalize on paper, but for legislators, it is a balancing act.

FirstEnergy officials are telling stockholder analysts that because 1998 is an election year, it makes it almost impossible for the General Assembly to pass a restructuring bill, although there's a Republican governor and a Republican majority in the General Assembly. Post-election, the political margins are expected to be the same.

Rose says there's a good chance the school funding ballot will be defeated.

"That's more important, politically, than the fact that this is an election year," he says. "I remain optimistic that the Joint Committee has done the ground work. I think it's possible to pass something this year."

Joseph F. Schuler Jr. is senior associate editor at Public Utilities Fortnightly.

Smooth Slamming?

Committee Legislators Rap RMAs

MEMBERS of the Joint Select Committee on Electric Utility Deregulation have mixed

emotions on RMAs and other pieces of the Johnson-Mead restructuring report.

SEN. LOUIS W. BLESSING JR. (R): "The intent and intended result of the framers of the RMA structure is noble, [but] there are problems that make RMAs the least desirable option¼ Marketing RMAs may present a problem. If this is done via bill inserts, it won't happen. No one reads those things¼ if things go wrong or even if things go right, consumers will reject a change if it is forced upon them. And legislators respond to constituents."

SEN. LEIGH HERINGTON (D): "I believe the report has resulted in more questions being raised than answered. It is therefore my recommendation that the co-chairs¼ provide for additional hearings¼ that may result in consensus support of the entire joint committee. Why are customers who are satisfied with their current electric supplier arrangement be forced into an