In March of 2005, President George W. Bush visited Ohio to discuss the need for a national energy policy. During this visit, President Bush talked about promoting conservation and efficient new technologies, increasing and diversifying the domestic production of energy, and creating a more reliable infrastructure for the delivery of energy. The president also toured the Battelle Corporation headquarters in Columbus to see recent advances in energy-conserving products.

Addressing domestic energy production, President Bush touched on the issue of coal production, stressing that Ohio would be at the forefront of the national debate for the continued development of new emission technology. The goal, he shared, is to use this valuable natural resource to its full potential―approximately another 250 years.

Just a few months prior to the president’s visit to Ohio, Senate President Bill Harris (R- Ashland) illustrated the need for a statewide energy policy in his opening comments to the new General Assembly. He said, “I submit to you that a balanced budget, an improved economy, tax reform, Medicaid reform, school funding and a state energy policy are all within our reach…”

Using Senator Harris’ direction, Senator Robert Schuler (R-Sycamore Township), chairman of the Senate Energy and Public Utilities Committee, is leading an inquiry to determine what, if any, recommendations are needed to establish a statewide energy policy for Ohio. Along with the other members of the committee, Senator Schuler began hearing testimony and learning from presentations by interested parties in February 2005. While these presentations focused on a variety of issues related to an energy policy, including natural gas, petroleum and conservation, one area of interest has become a reoccurring theme throughout the committee hearings—the deregulation of the electric industry.

Deregulation was established through Senate Bill 3, sponsored by Senator Bruce Johnson. This legislation, enacted in July of 1999, changed the landscape of the electric

2 industry for generators, transmitters, distributors, commercial and residential users, and many others. Prior to SB 3, all prices for electric service were determined through government regulation of the industry. However, the 123rd General Assembly decided to take part in a growing national trend and move away from this regulated approach to let the open market determine the cost of electric service.

SB 3 opened the market to competition during January of 2001 in a number of ways. For generation, it directed that the certified territories controlled by Ohio’s incumbent for- profit electric companies were abolished and that any electric suppliers could compete for the previously off-limit customers. Territories that covered an estimated 91 percent of all electricity users were opened to the market. Deregulation also unbundled the vertical services provided by the electric companies for generation, transmission and distribution. After the passage of SB 3, transmission services had to be moved to a federally-approved transmission system, two of which currently operate in Ohio: the Midwest Independent Transmission System Operator, Inc. (MISO) and the Pennsylvania, New Jersey and Maryland (PJM) Interconnection.

With the demand for electricity in the current high-paced world, the General Assembly wanted to keep electric service both reliable and affordable when competitive service was initiated. To ensure that the there was no flash cut in prices with the start of deregulation, SB 3 put in place a market development period (MDP) of five years to permit new markets to develop. During this time, residential users would experience a 5 percent reduction in generation cost, while incumbent utilities were permitted to collect transition costs from both utilities customers and former customers who had switched generators.

As the close of the MDP approaches on December 31, 2005, approximately 22 percent of Ohio’s residential users have changed generation services. Most of the switching occurred in Northern Ohio. The Public Utilities Commission of Ohio (PUCO) has continued to work with utility companies to bring the reliable service sought under deregulation through its approval of Rate Stabilization Plans (RSPs). The PUCO hopes

RSPs will provide continued stability after the end of MDP, allowing competitive markets to continue to develop in Ohio.

Government Oversight Throughout the committee meetings, members have heard from government officials regarding the level of oversight needed for deregulation. Testifying before the committee, Chairman Alan Schriber said the PUCO is committed to keeping Ohioans connected to safe, efficient and reliable public utilities services. Since the PUCO regulates a wide variety of public utilities, the services it provides affect every household and business in Ohio.

Chairman Schriber testified that over the past four years, the PUCO has monitored the development of a competitive electric market and worked to ensure that Ohio’s electric customers do not face “sticker shock” from rates when the MDP ends in December of 2005.

Four major electricity providers in Ohio have filed RSPs for the next three years. Chairman Schriber said RSPs provide rate stability for customers, financial stability for electric utilities to ensure reliable service for customers, and promote further development of competitive markets. He added that the establishment of these plans was supported by the General Assembly in an October 2003 report, which encouraged the PUCO to “continue to take the necessary steps, whether by rule or a request for legislation, to ensure that a healthy competitive market is in place before full electric competition begins.”

Ohio Consumers’ Counsel (OCC) Janine L. Migden-Ostrander also said much of her work in recent months has been focused on electric restructuring and the end of the MDP. “While the OCC acknowledges that the competitive market has been slow to develop, we believe barriers still exist,” Counsel Migden-Ostrander said. She added that the RSPs proposed by the major electric companies are not the answer and that she believes they harm residential consumers and violate Ohio’s electric choice law.

In regard to natural gas, Counsel Migden-Ostrander said Ohio’s gas program is one of the best in the nation. Currently, she said, 50 percent of customers of large utilities have switched to alternative suppliers. The OCC also supports the continued development of natural gas choice programs, while working to identify and secure improvements to existing choice programs to increase customer participation and savings.

Utility Providers Although electric utility providers did not directly offer their opinions on deregulation and regulation, one clear theme did emerge from their testimonies. Each witness pointed to the uncertainty that utilities face now that Ohio is revisiting its energy policy. This uncertainty, witnesses said, is keeping them from investing more in Ohio.

Kevin Walker, president and chief operating officer of American Electric Power (AEP) Ohio, said AEP announced plans to add baseload generation by 2010. The baseload generation AEP proposes to build will take the form of an Integrated Gasification Combined Cycle (IGCC) clean-coal plant. More than 1,200 acres in Meigs County, owned by Columbus Southern Power, have been identified as a potential site for this construction.

However, AEP would like to have the assurance of cost recovery before making a large investment in Ohio. “It is in the best interest of Ohioans that a process be developed to facilitate and answer questions well before the end of the rate stabilization plans,” Mr. Walker added.

Another witness said investors need more certainty because generating plants are so capital intensive. Leila Vespoli of FirstEnergy Corp. stressed that baseload power plants can cost $1 billion or more and take years to build. “Investors are naturally risk averse.” Ms. Vespoli said. “It is difficult to imagine that, in today’s uncertain environment, we will see investment in baseload generation without some clarity with respect to recovering that investment.”

Greg Ficke, president of The Cincinnati Gas & Electric Company, a division of Cinergy Corp., also stressed that uncertainty was problematic for his company. Mr. Ficke said Cinergy hoped Ohio would pick one path or the other and avoid the uncertainty of being in a little bit of both.

Referring to why deregulation has not progressed as expected, Mr. Ficke said the anticipated amount of switching had not occurred. Less than 5 percent of Cincinnati Gas & Electric Company’s residential customers have selected an alternative supplier. Mr. Ficke attributed this to the company’s low cost and high customer satisfaction.

Arthur Meyer, vice president of Dayton Power & Light Company (DP&L), also testified that there might be a need for a legislative initiative that provides utilities, customers and the financial markets with more certainty in the Ohio electric utility market. From DP&L’s perspective, the issues that will need to be addressed include the ability for utilities to recover environmental compliance costs and increased fuel costs. Mr. Meyer also asked the General Assembly to consider the possibility that true competitive markets may never develop at the retail level in Ohio or in the Midwest.

However, other witnesses were hesitant to offer any advice to the committee about Ohio’s energy policy. Patricia Schaub, vice president of external affairs for Allegheny Energy (on behalf of Monongahela Power), said Allegheny has no recommendation on whether competition should proceed or not. Ms. Schaub added that Allegheny does not see either decision yielding appreciably different costs to its customers in the short term.

Marketers Witnesses on behalf of electricity marketers all urged the committee to continue with deregulation and allow more time for competition to develop.

Bob Korandovich, vice president of ECAR Region (Michigan and Ohio) of Constellation NewEnergy, the largest retail electric supplier in North America, said it is his experience

6 that competition works to bring real benefits to all electricity customers. He said Constellation has been involved in more transitions from regulated monopoly to competitive framework than any other company in North America.

Mr. Korandovich added there is more work to be done―additional reforms to the utilities’ retail access tariffs, successful transition to a fully competitive wholesale market, and embracing the utility auction process for supply are all critical.

Eric Stephens, director of government and regulatory affairs for Direct Energy Services, LLC, also said Ohio should continue with deregulation. Direct Energy is an affiliate of Centrica, a British based international supplier of natural gas, power and other home services. Centrica grew out of the deregulation process in Great Britain and now has 33 million customers worldwide. Mr. Stephens said the structure put in place by SB 3 is the way to promote a competitive environment and bring providers like Direct Energy into Ohio. Mr. Stephens noted that Direct Energy recognizes the structure of retail electric competition in Ohio is very new when compared to the 100-year old regime that was the paradigm until SB 3 was adopted. Mr. Stephens said the retail framework needs time to develop.

Other witnesses said competition has been slow to develop because generation rates are not market based. Ronald Prater, general manager of Midwest and East Regions of Green Mountain Energy Company, illustrated this sentiment. “The main reason that competition has not developed as quickly as we all anticipated is that generation rates are not market based and do not reflect the full cost of providing retail generation service,” Mr. Prater said.

Ivan Henderson, manager of regulatory affairs for WPS Energy Services, Inc., also said not all is well with SB 3. However, Mr. Henderson said the problems are not with the bill itself but rather the partial implementation of key provisions in SB 3. He added, “Rate stabilization plans are not market based and do nothing to encourage the development of a competitive market.”

Mr. Henderson concluded his testimony by saying it would be premature to judge the success of Ohio’s deregulation efforts. He stressed that Ohio should stay the course, focus its efforts and proceed with due care as it continues to open its retail electric market.

Oil and Gas Although representatives from the oil and gas industry cited different reasons for the increasing prices for petroleum, natural gas and electricity, each witness agreed that prices are increasing and will likely continue to increase if steps are not taken.

John Felmy, chief economist for the American Petroleum Institute, said the costs for petroleum products, natural gas and electricity are all rising because of tight markets, limited supplies and strong demand. He also said that the high worldwide demand, especially in the United States and China, is driving up crude oil prices. He stressed that the petroleum industry is working hard to meet the needs of consumers, but that restrictive, out-dated energy policies make efficiency difficult. The remedy for this is comprehensive energy legislation, which is pending in the U.S. Senate. Mr. Felmy added that inaction by the federal government has raised the cost of energy to consumers and reduced economic output by billions of dollars.

However, Jonathan Airey of Vorys, Sater, Seymour and Pease, LLP said uncertainty and limited supply appear to be driving the energy markets. He added that despite drilling increases, experts estimate flat to declining year-on-year domestic production for natural gas. In addition, the uncertainty about production appears to be overcoming the beneficial effects of record storage levels.

Mr. Airey also quoted the Federal Energy Regulatory Committee Chairman Pat Wood’s letter to Congressman John Dingell, “In my view, price swings in the natural gas markets have been driven by market fundamentals, but these swings may have been exaggerated by the paucity of statistics on gas supply and demand, and the over-reliance on gas storage as an indicator of supply and demand.”

Finally, Mr. Airey added that speculative trading appears to be less significant to price behavior than supply and demand conditions. He also said the U.S. Commodity Futures Trading Commission does not believe that hedge funds are the major source of price volatility in the natural gas market.

Two witnesses illustrated the need for increased production of natural gas in Ohio. Thomas Stewart, executive vice president of the Ohio Oil & Gas Association, said Ohio has an abundant natural gas resource base, but a shortage of viable drilling locations. Mr. Stewart added the General Assembly took a significant step in the last session to address the issue when it enacted Substitute House Bill 278, which granted the Department of Natural Resources comprehensive authority to regulate the industry.

However, Mr. Stewart said the General Assembly has a new opportunity to benefit state resource management and revenues while expanding the native natural gas resource base. He then urged the General Assembly to consider expanding opportunities to lease and develop oil and gas resources on state-owned properties.

Joel Rudicil, a partner in Bass Energy, Inc. in Akron, said he is seeing the tangible results of good Ohio energy policy with increased drilling activity. HB 278 provided access to urban areas that had previously been undeveloped because of local regulation. He also said he had been contacted by public schools, public and private golf courses, land conservancy groups, public park systems, and private property owners who would like to discuss well drilling for natural gas.

Mr. Rudicil added that access to the resources is vital. The State of Ohio is the largest single owner of properties in Ohio with undeveloped oil and natural gas reserves. To round out his testimony, Mr. Rudicil said the need for local supply and the potential revenue stream from producing natural gas wells have never been greater.

Energy Cooperatives and Users Energy cooperatives and users offered varied opinions on the deregulation of electricity and discussed their concerns with the transmission of reliable energy.

Representatives from the Northeast Ohio Public Energy Council (NOPEC) favored deregulation. Mayor Michael Canty of Bentleyville, the Cuyahoga County representative of the NOPEC board, said Ohio could not go back on deregulation now because the people have already paid for it. Mayor Canty contended that consumers in Northern Ohio have paid billions in stranded costs, which will total more than $9 billion by the end of the MDP. In exchange, he says, they were promised deregulation and the chance to shop in the open market.

Randy Statzer from the Whirlpool Corporation, on behalf of the Ohio Manufacturers Association (OMA), also favored deregulation. Mr. Statzer said competition offers the best hope for a low cost, sustained and environmentally friendly energy supply in Ohio. However, Sam Randazzo of the Industrial Energy Users-Ohio said that the process of making any changes to deregulation must begin sooner rather than later. Mr. Randazzo added the expectation was that competition would lower prices, improve services and encourage innovation, but it has not been able to deliver any of the three.

In addition, the Ohio Energy Group cited its concerns with deregulation. David Boehm, counsel for the group, said everything indicates there are grave problems in the marketplace and that market-based rates are likely to stay higher than cost-based rates indefinitely. “Utilities say this, consumer groups say this, and conservative former champions of deregulation, such as the CATO Institute and the ELCON Institute say this,” Mr. Boehm said.

Mr. Boehm then offered an alternative solution―a hybrid model. The hybrid model, he said, would have many of the protections of regulated rates, while still allowing for a market to develop and compete with cost-based rates. It would also provide some

10 encouragement to construct coal-fired generation plants in Ohio since there would be a regulated rate base that could include the plant and guarantee the utility a reasonable rate of return and recovery of its investment.

However, other witnesses said factors aside from deregulation were to blame for the current state of energy. John Bentine, of AMP-Ohio, said the regional transmission structures envisioned in the late 1990s to provide efficiencies and market benefits have evolved into costly and unwieldy bureaucracies. He added that AMP-Ohio estimates the annual cost to its members for just the administrative and ancillary charges associated with PJM and MISO are $5.9 million—more than what AMP-Ohio spends annually to operate its own 24-hour, 365-day-a-year Energy Control Center to dispatch approximately 5.5 million megawatt hours of power to its members.

Anthony Ahern, president and CEO of Ohio Rural Cooperatives echoed AMP-Ohio’s concern with the state being split between PJM and MISO. Mr. Ahern said this split puts transmission reliability and statewide planning for transmission expansion at risk. Rocky Black, of the Ohio Farm Bureau Federation, also said his organization believes Ohio should simplify its interstate transportation and delivery infrastructure.

Regional Transmission Organizations Regional Transmission Organizations (RTOs) were created by the Federal Energy Regulatory Commission in 1999 to promote efficiency in the wholesale electricity markets and help ensure that electricity consumers pay the lowest price available for reliable service. There are currently two RTOs operating in Ohio: MISO and the PJM Interconnection. Representatives from both organizations testified about their role in Ohio’s energy policy.

Ron McNamara, the vice president of market management for MISO, said MISO’s management system works to ensure reliability and make the best use of the region’s assets. Utility providers in MISO’s footprint (the geographical area that MISO covers) can maximize generation and distribute it to where it is needed through MISO’s

11 coordination efforts. Mr. McNamara said the cost-benefit analysis for Wisconsin showed the benefit of a centralized coordination was more than $50 million a year.

Mr. McNamara said one way that MISO ensures the maximization of the territory’s assets is through economic dispatches sent every five minutes to every generator in its footprint with the value of electricity in their area. In regard to its relationship with PJM, Mr. McNamara said MISO has codified relationship with PJM in the form of a joint operation agreement.

Although previous witnesses had complained about the costs of RTOs, Mr. McNamara said cost containment is paramount for MISO. Start-up costs, for items like software, accounted for much of the high costs that witnesses have complained about. To lower costs, MISO is looking at rate freezes.

Andrew Ott, of the PJM Interconnection, also said that managing costs is among the highest priorities for his organization. PJM has one of the lowest unit costs for all RTOs and independent system operators.

Mr. Ott discussed the joint operating agreement between PJM and MISO, which he said would improve coordination and efficiency of operations between the two large regional markets. Under the joint operating agreement, PJM and MISO will periodically develop and execute a coordinated system plan “to ensure that coordinated analyses are performed to identify expansions or enhancements to transmission system capability needed to maintain reliability, improve operational performance, or enhance the competitiveness of electricity markets.”

Since electricity cannot be stored, Mr. Ott said PJM must balance electric supply and demand on a minute-by-minute basis. PJM performs a region-wide balance of load and generation on a real-time basis while guaranteeing all regional transmission reliability constraints are managed appropriately.

Energy Reliability The issue of reliability has become increasingly important since the blackout of 2003 and the power outages of December 2004. During committee hearings, many witnesses talked about the importance of reliable energy.

Energy users from all over the state described the importance of reliability. Randy Statzer of Whirlpool, on behalf of the OMA, said that his company needs affordable, reliable and clean energy. In addition, Bradley Belden of The Belden Brick Company, also on behalf of the OMA, stressed the importance of reliability to his company. “In manufacturing, it is imperative to have a constant, predictable supply chain, yet natural gas has proven to be neither,” Mr. Belden said.

Witnesses offered varied opinions on the issue of whether electric deregulation or regulation would help more with reliability. Sam Randazzo of the Industrial Energy Users-Ohio said current regulation is not serving the public interest and in order to attain reliability, there must be a difference between a utility provider’s generation and its load. While David Boehm, counsel for the Ohio Energy Group, said that reliability is not an issue in deciding between deregulation and regulation since the transmission problems occur on distribution level and everyone is using the same distribution lines.

Anthony Ahern, president and CEO of Ohio Rural Cooperatives, Inc. and Buckeye Power Inc., echoed this sentiment. Mr. Ahern said the split between PJM and MISO put transmission reliability at risk and, perhaps more important for Ohio’s future economic growth, statewide planning for transmission expansion.

Utility providers also weighed in on the importance of ensuring reliability to their customers. Greg Ficke, president of Cinergy, said that recent events have put a spotlight on the importance of reliability. He added that since 2001, Cinergy has increased tree trimming and has seen storm related outages decrease significantly because of its efforts.

Mr. Ficke said Cinergy continues to invest in reliability and that there is technology built into their systems to help with this issue.

Several government entities also described their efforts to ensure reliability to consumers. Chairman Schriber said service reliability remains a top priority for the PUCO and that RSPs would help electric utility providers ensure reliable service for customers.

However, Consumers’ Counsel Janine L. Migden-Ostrander said electric utility providers should focus on vegetation management to avoid power outages. She added that the OCC believes that uniform tree trimming measures should be developed and that electric companies should be held financially accountable if they do not perform proper maintenance on the distribution system.

Energy Efficiency Multiple witnesses stressed using energy efficiency programs to help offset the state’s high demand for electricity. Erin Bowser, of the Ohio Public Interest Research Group, said the quickest and most effective way to guarantee savings for everyone is by promoting smart energy use through energy efficiency standards.

Ms. Bowser said that her organization’s energy policy would save Ohio consumers $2.3 billion by the year 2030, ease the pressure on our overburdened electric grid by increasing reliability of our electric system, improve energy security by decreasing demand for imports of oil from foreign sources, and ease the overall pressure on energy prices by reducing demand for oil and natural gas. The policy, she added, would set minimum efficiency standards for a list of commonly used appliances.

Ned Ford of the Sierra Club also discussed how he believed energy efficiency programs should be used in state policy. Mr. Ford said U.S. energy intensity has fallen over 50 percent since 1970 and this could mean that by merely doubling the current rate of efficiency adoption, the United States could completely eliminate growth in carbon dioxide emissions and provide billions of dollars in economic benefits.

In addition, John Felmy said the American Petroleum Institute is committed to developing a national energy policy that improves energy efficiency and conservation. Consumers’ Counsel Janine Migden-Ostrander also suggested that the state integrate energy efficiency to help slow the growth in demand for electricity. The OCC would do this through demand-side management programs, which would give customers incentives through rebates. She said that 5,300 new jobs could be created through the promotion of energy efficiency by 2010.

Alternative Energy Sources and Environmental Issues Environmentalists pointed out that alternative sources of energy are not the entire solution to Ohio’s efforts to provide reliable and affordable energy. However, witnesses said these alternative sources could help offset pressure on the state’s traditional energy sources.

Bill Spratley, the executive director of Green Energy, a non-profit organization dedicated to promoting environmentally and economically sustainable energy policies and practices in Ohio, testified about the potential for wind power in Ohio. He said wind energy is not the panacea for Ohio’s energy problems, but it can help prevent problems by providing more electricity during peak usage times. Mr. Spratley added that Ohio has the energy efficiency and renewable energy potential to produce as many as 26,000 net new jobs by 2010.

Mr. Spratley then recommended that both national and state energy policies be adopted with established renewable energy standards to stimulate development of renewable energy sources such as wind, solar, fuel cell, bio-gas and other technologies.

Sam Spofforth, of the Central Ohio Clean Fuels Coalition, also discussed the potential for alternative sources of energy. The coalition works to increase the use of cleaner American fuels, efficient vehicles, and energy-saving transportation technologies in order to improve air quality and health, reduce climate change, curb dependence on petroleum,

15 and support Ohio’s economy. Mr. Spofforth said that corn-based bio-fuel could displace about 10 percent of our natural gas use without impeding food production. He also asked that state policy support bio-fuels, other American fuels such as natural gas, propane, hybrid electric vehicles, and idle reduction technology.

In regard to deregulation, Jack Shaner of the Ohio Environmental Council said its impact on environmental issues is mixed. When real choices between providers have been available to residential customers, Mr. Shaner said, green power has developed with that choice. However, he added that the average residential customer has seen very little in the way of choice since deregulation went into effect.

In addition, Mr. Shaner said AEP’s proposal to develop an IGCC plant in Meigs County was a welcome advancement. He added that while moving forward on this project is a very positive development, his organization believed that having default service customers pay for the facility in a tariff approved by the PUCO is unusual.

Ohio Coal Ohio Coal Association members gave a series of suggestions as to how the General Assembly could encourage the use of Ohio’s coal resources. Witnesses voiced their concerns with the current regulatory structure that they must work within, along with their ideas to make Ohio’s coal industry competitive with those in neighboring states.

Robert Murray, president and CEO of Murray Energy Corporation, said Ohio has missed a huge opportunity to help the Ohio coal industry and subsequently hold down the price of electricity by not extending the $3 per ton Ohio coal credit. Mr. Murray said independent studies presented to the Legislature showed that the $3 per ton Ohio coal credit cost the state $30 million, for a yearly return of $3 billion.

Another witness, Bonny Huffman of the Sands Hill Coal Company, finds the current regulatory system to be increasingly difficult. Ms. Huffman illustrated the difficulty of the process permit filing process with two examples. In 2002, the permit filing was for a

240-acre tract of land. The Ohio Environmental Protection Agency (EPA) required three permit conditions and no special conditions in this instance. Nine months later, the Corps of Engineers Permit required five special conditions. In 2005, the permit filing was for an adjacent property. In this instance, the Ohio EPA required 10 conditions and 19 other restrictions, with 20 special conditions from the Corps of Engineers.

Ms. Huffman added that because the Ohio EPA does not have clearly defined standards for the permit inspections, the requirements often change from inspection to inspection and are becoming increasingly difficult to meet. To remedy the complexity of the permitting process, Ms. Huffman suggested there should be one agency directing the permitting process, possibly the Department of Natural Resources.

There was a general agreement that the State of Ohio should be active in providing incentives for the construction of IGCC facilities. Gregory Honish, chief mining engineer from the Oxford Mining Company, said America’s electric utilities have invested over $50 billion in clean coal technology. Future public and private investment in this technology will ensure environmentally friendly power with a low cost fuel readily available here in Ohio.

Mr. Murray also stated that other states such as Indiana and Illinois have been more progressive by offering tax credits and other economic incentives to utilities for the construction of IGCC facilities. With a 250-year supply of coal available at about half the cost of other fossil fuels, this technology will ensure that Ohio has a reliable source for affordable energy for years to come.

The Ohio Coal Association members encouraged other reforms that would help Ohio coal stay competitive with surrounding states. First, the association would like the state regulatory departments to approve the use of diesel equipment underground. The surrounding states have the freedom to use this cost effective equipment, putting Ohio coal producers at a competitive disadvantage. Second, the association would like the state to increase the truck weight limits on our highways. The association feels these

17 weight limits were appropriate in the past, but with improvements in truck technology higher weights can safely be carried. Finally, the Ohio Coal Association feels that the surety bonding requirements put for surface mines and the decrease in available long- term bonds is harming the industry.

Mr. Murray was the only member of the Ohio Coal Association to address the question of electric utility deregulation or regulation. “From my experience, there is no connection between utility deregulation or regulation and the state’s coal industry,” Mr. Murray said. “Further, it is the view of Murray Energy and the undersigned that deregulation or regulation is under the purview of our electric utility consumers and the state’s electricity consumers, and not the Ohio coal industry or any producer in it.”

Conclusion Throughout the five-month period of committee hearings, various stakeholders offered differing opinions about Ohio’s energy policy. Some asked that deregulation of the electricity industry be given more time, while others said that it is critical to begin a new direction and provide certainty for utility providers wanting to invest in Ohio.

Oil and gas experts also testified, saying that prices for crude oil and natural gas will likely continue to increase. Many witnesses also pointed to the state’s abundant source of coal. Witnesses said IGCC technology could ensure that Ohio has a reliable source for affordable energy for another 250 years. However, the witnesses said environmental restrictions are often arbitrary and cumbersome to the coal industry.

The issue of reliability also came to the forefront during committee hearings. OMA members said reliability is extremely important because in manufacturing, it is imperative to have a constant, predictable supply chain. Multiple witnesses also stressed using energy efficiency programs to help offset the state’s high demand for electricity, saying that energy efficiency programs are the quickest and most effective way to guarantee savings for everyone.

Although the hearings were meant to cover all issues related to Ohio’s energy policy, the issue of the degree of regulation of the electric industry did become a reoccurring theme. The Senate Energy and Public Utilities Committee will continue to hold hearings to gather information from stakeholders. Although it is unclear which direction Ohio should take, it is clear that stakeholders will be looking to the General Assembly for a definitive answer regarding energy policy.

Energy and Public Utilities Committee:

Chairman Robert Schuler Vice Chairman David Goodman Ranking Minority Charlie Wilson

Senator Kevin Coughlin Senator Jeff Jacobson Senator Thomas Niehaus Senator Robert Spada Senator Tom Roberts Senator Kimberly Zurz

Report Prepared By:

Stephanie Koch

With Support From:

Tony Seegers Charlie Solley Aaron Crooks

Appendix A

PUCO Web site. Service Territories of Ohio Electric Utilities 2005. 16 June 2005 . 21

Appendix B

MISO Web site. Midwest ISO Current Operations. 16 June 2005. . 22

Appendix C

PJM Members

PJM Web site. PJM Maps.16 June 2005. 23 .

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