The Public Utilities Commission of Ohio rejected Duke Energy Ohio's application to transition to a completely market-based system for establishing its electric generation rates. Duke's rates are currently set pursuant to a three-year price formula negotiated in an electric security plan (ESP) that expires on December 31, 2011.

Under Ohio law, a utility that still owns electric generating facilities, such as Duke, can transition to wholly market-based rates over a five-year period. In its application for a market rate offer (MRO), Duke interpreted the statute in question to mean that it could shorten the transition period to two years. The Commission disagreed and concluded that Duke's application cannot proceed as filed. The question now is whether Duke will re-file its application as an MRO or an ESP, the choice preferred by the Commission staff. The full order is available here.