A bipartisan proposal advancing in the Republican-controlled Ohio House would allow gas and electric utilities to reintroduce programs designed to help customers save energy.
Prior utility-run programs to reduce electricity use ended after Ohio’s energy efficiency standard was gutted as part of House Bill 6, the 2019 law at the heart of the state’s still unfolding bribery and corruption scandal.
House Bill 79 would let utilities bring back some of those programs, but on a voluntary basis with capped monthly charges and smaller expectations for energy savings.
The legislation is co-sponsored by House Majority Floor Leader Bill Seitz, a Cincinnati Republican who was a perennial critic of the programs before HB 6 passed in 2019.
“The wide support that this bill has received from both sides of the aisle, all utilities, and all the environmental groups is a testimony to the fact that we have built a better mouse trap as we reintroduce responsible energy efficiency programming targeted to those who most need it — residential customers and small businesses,” Seitz said.
The other lead sponsor is a Democrat, Rep. Bride Rose Sweeney of Westlake.
While the bill has broad support, it has critics, too, including customer advocates who worry the programs will lack accountability and become another cash grab for utilities.
What’s in the bill
Under the new legislation, utilities would get to choose whether to offer a portfolio of energy efficiency programs. Utilities would need approval from the Public Utilities Commission of Ohio before offering their group of programs for a period of up to five years.
Residential customers would automatically be included unless they opt out, and their monthly charges would be capped at $1.50. Small commercial customers would also be automatically included, with a cap on monthly charges of $7.50. Mercantile customers would be automatically excluded unless they take action in writing to opt in.
Any portfolio of programs must be cost-effective. In other words, the charges to participating customers must be less than the programs’ combined savings on energy costs, reductions in energy market prices from lower demands, and other quantifiable system benefits. Utilities would have to make yearly filings with the PUCO to show if their portfolios were in fact cost-effective.
Any portfolio offered under HB 79 would have to be designed to achieve at least 0.5% of yearly energy savings, based on the prior year’s retail sales to participating customers. But for HB 6, utility energy efficiency programs would have had to show 2% savings per year from 2021 through 2027.
Additionally, at least one program and 15% of the proposed costs for residential customers must be geared toward low-income residential customers.
“The bill offers a balanced approach to lower energy use and is the result of the hard work of many parties,” said Scott Blake, a spokesperson for AEP Ohio. HB 79 would help “lower energy use for individual customers and the overall cost of energy.” Beyond that, “it creates economic opportunities and jobs through selling and installing energy-efficient equipment and offers opportunities for efficient new construction.”
Energy efficiency after HB 6
The lower targets mean the overall program savings and emissions reductions would be less than what utilities would have had to do without HB 6, but more than what’s been achieved in the last four years. Although some argue that Ohio law still allows voluntary energy efficiency programs, the PUCO rejected a voluntary plan by Duke Energy in June 2020, and agency staff balked about a proposed AEP plan that was ultimately withdrawn.
In some ways, though, HB 79 would improve on earlier programs, said attorney Rob Kelter of the Environmental Law & Policy Center. The bill would prohibit utilities from sending out energy savings kits to customers who don’t request them, and steps would be taken to avoid counting activities that customers would already take on their own.
“Moreover, HB 79 specifically emphasizes smart technologies that will help drive market changes,” Kelter said. In contrast to earlier programs that pushed customers to use different types of light bulbs, “today, the programs focus on innovative technologies that not only reduce overall usage, but reduce usage at peak times when prices are high.”
HB 79 would also complement federal rebates under the Inflation Reduction Act, said Nolan Rutschilling, managing director of energy policy for the Ohio Environmental Council Action Fund. For example, a 30% credit, subject to income restrictions, is already available for certain equipment, such as qualified heat pumps.
“Utility-run programs are easily accessible and navigable to consumers, establishing a ‘low hanging fruit’ that is necessary to create long-term buy-in,” Rutschilling said in his testimony on the bill. Without those programs, however, “only the most knowledgeable and experienced homeowners will enjoy the household benefits of efficiency.”
Critics are concerned about certain language in the bill and think the state should play a bigger role in connecting residents and businesses with efficiency funding and opportunities.
“Under the new federal programs, Ohio is receiving huge grants to administer its own programs,” attorney Thomas Hays said in his testimony for the Northwest Ohio Aggregation Coalition. “These programs are voluntary, the customer keeps every penny of the rebate or tax credit, and no charge is added to any electric bill.”
Rep. Sean Brennan, D-Parma, is among a dozen lawmakers who signed on as additional co-sponsors to the bill, but he became concerned after hearing opponent testimony from the aggregation coalition and the Office of the Ohio Consumers’ Counsel and voted against the bill in committee. Among other things, the groups object to provisions for utilities to collect “utility incentives” and “lost distribution revenue.” Vagueness or loopholes in the bill could turn energy efficiency programs into profit centers at customers’ expense, the groups fear.
Seitz said the bill won’t let utilities get incentives if they merely facilitate participation in the new federal programs. And allowing weather-normalized decoupling or lost distribution revenue aims “to keep the utilities whole against the declining sale of electrons brought about by the programs.”
But loose definitions for terms like “behavioral energy savings” are a problem, testified Lindsey Short, director of public policy services for the Ohio Manufacturers’ Association. “Moreover, electric utilities are already guaranteed to recover all of their costs through base distribution rates.”
The bill’s language calling for plans to improve “utility control to reduce demand or impacts of intermittent resources on the grid” also “stands out as odd,” Short said, noting that some types of renewable energy are intermittent resources.
The legislation cleared the Ohio House Public Utilities Committee on June 21. The next step would be a full House vote. The timing depends on whether Speaker Jason Stephens, R-Kitts Hill, schedules a vote right after negotiations on Ohio’s two-year budget wrap up, or if he opts to wait until September.