Study reveals market failures in Ohio electricity

Farah Siddiqi

Ohioans have long had the ability to choose their electricity providers but new research highlighted the financial consequences of such decisions.

A study examined how competitive retail electricity service options stack up against standard utility rates.

Noah Dormady, associate professor of public policy at Ohio State University and the study's lead author, said an analysis of nearly 3 million records over a 10-year period revealed approximately three-quarters of offers were more expensive than the utility's default service rate.

"Consumers in these markets are oftentimes unaware of the options available to them," Dormady observed. "They're oftentimes unaware that most competitive offers have prices far exceeding the default standard service offer rate historically."

While consumers may expect to save money through retail choice, Dormady's study found median price increases often exceeded 25% to 35%, compared with potential savings of just 5% to 10%.

Dormady's research found the same general effects across service territories, including AEP Ohio, Duke Energy, DPL of AES and FirstEnergy regions, which raises questions about market efficiency and the persistence of high prices.

"As an economist, I can tell you, if this market were efficient, you would not see the prevalence and persistence of above-market rates," Dormady asserted. "We're seeing offers that are 400%, 500%, 600% above the default service rate and they continue to be posted every day for well over a 10-year period."

Dormady's findings emphasized the need for increased consumer awareness and potential policy reforms, including the creation of an Independent Market Monitor to oversee pricing practices. While retail choice provides flexibility, the data underscored the importance of Ohioans understanding their options to make informed decisions about their electricity costs.