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Critics: Ohio energy bill boon for utilities, bad for consumers

Ohio Sen. Bill Seitz, seen in this 2011 file photo, has tried for several years to weaken the state's renewable energy laws. (Associated Press)

Ohio Sen. Bill Seitz, seen in this 2011 file photo, has tried for several years to weaken the state’s renewable energy laws. (Associated Press)

An Ohio lawmaker’s latest attempt to weaken the state’s energy laws is a “giveaway” for utilities that flies in the face of consumer and business interests, say critics.

The legislation, Substitute Senate Bill 58, is less ambitious than earlier attempts to repeal energy efficiency and renewable energy benchmarks set five years ago. The bill leaves those targets intact, but would eliminate an in-state requirement for renewable energy purchases and loosen efficiency rules for utilities.

Current law says 25 percent of Ohio’s electricity must come from renewable and alternative energy by 2025. Existing law also calls for a 22 percent cut in retail electricity sales by 2025.

At a hearing last week, sponsor Bill Seitz, a Cincinnati-area Republican, stressed that the bill keeps the mandates, “even though I would have preferred repealing them outright if left to my own choices.”

However, utilities will have to do less under the new bill.

“The meat and potatoes of this thing makes those benchmarks irrelevant,” says Dan Sawmiller of the Sierra Club’s Beyond Coal program. “That’s on both the energy efficiency side and on the renewable energy side.”

“It’s a terrible bill,” says Eric Zimmer, CEO of Tipping Point Renewable Energy in Dublin, Ohio. “It’s an end-around on the advanced energy industry, and frankly on common sense.” Zimmer chairs the board of Ohio Advanced Energy Economy, a business coalition that aims to expand Ohio’s alternative energy industry.

Current law says half of the renewable energy must come from within Ohio. Seitz’s bill would let that entire share come from or through any of the 20-plus states served by the PJM and MISO grid operators.

“From an Ohio perspective,” Zimmer says, the bill would have Ohioans “subsidizing renewable energy projects in other states.”

“If we’re going to make this investment, we ought to make this investment in this state where we create jobs and businesses,” adds Zimmer. The current bill “destroys any sort of conducive business environment in Ohio.”

Relying on research by The Ohio State University’s Center for Resilience, Zimmer says the current standards have created more than 3,200 jobs for Ohio. The research says Ohioans could lose out on more than 3,000 jobs between now and 2025.

The same research shows Ohioans would pay $3.65 billion more for electricity over the next dozen years if the bill becomes law, says Zimmer. The calculations consider both the renewable energy requirements and the energy efficiency provisions.

Toilets ‘water down’ efficiency mandate

The bill would also let a broader range of actions count for compliance with Ohio’s energy efficiency standards, as well as cap the amount spent to achieve reductions in electricity demand. And consumers would save less from the programs they pay for.

“The substitute bill guts the energy efficiency standards in a big way,” says Trish Demeter, Director of Clean Energy Campaigns for the Ohio Environmental Council. “There’s a ton of handouts to utilities and big businesses. On the losing side are Ohio small businesses and consumers.”

“Utilities now will be able to count power plant upgrades and improvements to transmission and distribution as energy efficiency,” notes Rob Kelter, an attorney with the Environmental Law & Policy Center.

The Sierra Club, ELPC and the Ohio Environmental Council are members of RE-AMP, which also publishes Midwest Energy News.

Energy companies already have incentives to upgrade generation plants and transmission facilities. “The more efficiently they can produce their power, the more profit they can earn,” says Sawmiller. Such upgrades, however, don’t change overall demand for electricity.

The bill would even let low-flow toilets and recycled glass count towards energy efficiency. While such measures do save some energy by requiring less wastewater processing or manufacturing, they don’t directly reduce retail electricity demand. Also, all reductions won’t necessarily occur within Ohio.

“Those things undermine the integrity of the efficiency standards,” says Kelter. “They diminish their meaning.”

Letting non-electric things count “waters down real customer-focused energy efficiency,” agrees Sawmiller. “This will lead to zero electricity savings, yet Ohio customers will be required to pay.”

Consumers pay

Ohio consumers already pay for energy efficiency programs through a rider on their monthly electric bills. Under current law, programs must save customers more than they cost, and customers benefit from all savings until the law’s targets are met. Small incentives let utilities share in additional savings beyond those targets.

The new bill would let utilities keep one-third of all after-tax benefits until the law’s targets are met. Utilities wouldn’t get anything after meeting the targets, so the bill eliminates any incentive to do more than the law requires.

“Those shared savings are really paid for by the customers,” notes Kelter. In his view, letting utilities keep one-third is “just a giveaway.”

“The bill turns energy efficiency, which is supposed to be about saving money for consumers, into a profit center for AEP, DP&L, Duke, and FirstEnergy,” says Scott Gerfen at the Office of the Ohio Consumers’ Counsel. “And the bill takes away from customers some of the key benefits they’re now receiving from energy efficiency.”

The bill also caps spending for energy efficiency. “By virtue of putting in an artificial cap, you’re guaranteeing the customers will be paying more for their electricity,” says Kelter. That’s because the cap would limit spending on steps that would cut customer demand and electric bills.

Consumers would also pay more for the capacity part of their electric bills. Earlier this year, the Public Utilities Commission of Ohio ruled that FirstEnergy must bid all projected energy efficiency savings into the annual PJM capacity auction. The auction buys electric generation capacity for three years in the future. Seitz’s bill would require bidding in energy efficiency only if demand cuts have already been achieved.

“Energy efficiency and peak demand reductions can lower the wholesale cost of capacity,” the OCC’s Wilson Gonzalez told the state Senate Public Utilities Committee this spring.

Compared to other types of capacity, energy efficiency is usually the cheapest option. Thus, the less energy efficiency that gets bid into the annual capacity auction, the more all Ohioans can expect to pay for the capacity part of their electric bills.

Industry responds

FirstEnergy spokesperson Doug Colafella says the company is neutral on the renewable energy portions of Seitz’s bill. However, FirstEnergy favors changing the energy efficiency provisions. The bill provides “better accounting for all the energy efficiency that’s taking place in Ohio,” says Colafella.

“We believe that’s a win-win for everyone, if we can keep the targets in place but put some modifications in place that reduce the future price tag of meeting the standards,” says Colafella.

Representatives of the Industrial Energy Users of Ohio and the Ohio Energy Group, which both represent large power customers, testified before the state Senate Public Utilities Committee last week. Both groups support Seitz’s bill.

OEG’s David Boehm argued that the current law is “markedly skewed in favor of residential and commercial participants.” Like other customers, industrial users must also pay to lower the state’s overall electricity demand, even if they’ve already taken steps to save electricity.

Boehm complained about the law’s overall costs too. Customers statewide have already paid more than $500 million, he said, “and it’s just getting started.”

Focusing on costs is a “flaw” because it ignores savings, says ELPC’s Kelter. “You’re replacing more than $500 million that they would have had to spend on generation or buying power on the wholesale market.”

Indeed, the Ohio Manufacturers Association has said it favors the state’s energy efficiency requirements and does not want them watered down. In April, the group released a study that projected almost $5.57 billion in savings from $2.7 billion in energy efficiency investments.

And what do Ohioans think?

The new bill contrasts sharply with survey results showing that a majority of Ohioans want energy policies that do more—not less—to address global warming. The Yale Project on Climate Change Communication conducted the survey.

“Given that it is such a pivotal swing state, we were pretty surprised and impressed to see that most Ohioans do think that global warming is happening,” says lead author Anthony Leiserowitz at the Yale School of Forestry and Environmental Studies. Furthermore, “two-thirds say that the issue is important to them.”

Survey results say a majority of Ohioans want the state government to do more to address global warming, and 69 percent want corporations and industry to do more.

Renewable energy requirements and energy efficiency standards aim to address global warming by reducing emissions of carbon dioxide and other greenhouse gases. The latest report from the Intergovernmental Panel on Climate Change says “substantial and sustained reductions” of greenhouse gas emissions are necessary to prevent the worst impacts of climate change.

Ohioans are willing to vote with their dollars too. A majority—59 percent—want to require electric utilities to produce at least 20 percent of their electricity from wind, solar, or other renewable resources, even if the average household pays an extra $100 per year. The survey has a margin of error of +/-3 percent.

How Ohio lawmakers respond to the survey results will become clear in the coming weeks.

“There’s already majority support for taking a lot of these actions,” notes Leiserowitz. And while some people may support energy standards because of global warming, others may want more options for how they spend and save money.

“People can come to support the same policy for very different reasons,” Leiserowitz says.

Kathiann M. Kowalski is a freelance journalist based in Ohio who writes often on science and policy issues.

Comments (2)

Hi Kathiann,

Can you point me to where in the revised SB 58 you found the following information: “The new bill would let utilities keep one-third of all after-tax benefits until the law’s targets are met. Utilities wouldn’t get anything after meeting the targets, so the bill eliminates any incentive to do more than the law requires.” I missed this when I had read the bill. I was under the impression that the revisions were trying to reduce electricity costs and allow more business EE/DR (energy efficiency/Demand response) programs to count, so it sounds counterintuitive that the bill would disincentivize programs that go above and beyond.
Good meeting you at SEJ 2013.
Thanks,
Steph

By Stephanie Tsao on Oct 5, 2013

Hi, Stephanie. I enjoyed meeting you in Chattanooga too. For the benefit of other readers who may want to follow up on this issue, the cost-sharing provisions start at line 1759 of the bill. Just follow the hyperlink in the story, scroll down to line 1759 at page 58/90, and go from there.

By K.M. Kowalski on Oct 7, 2013