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An Ohio bill would begin to restore energy efficiency programs gutted two years ago by House Bill 6, but a new report shows that ratepayers in Ohio and other states will continue to miss out on huge savings due to recent policy changes.
The Midwest Energy Efficiency Alliance today released the report by Synapse Energy Economics that compares benefits before and after changes to state energy efficiency standards made over the last several years in Illinois, Iowa, Indiana and Ohio. The report also analyzed changes that had been proposed for Missouri and Wisconsin. Among the policy changes considered, HB 6 was the most recent and most severe.
“When you remove energy efficiency, you’re removing a ton of net benefits to ratepayers, to state residents,” said Nick Dreher, policy director of MEEA. “You’re unnecessarily burdening residents or businesses with costs.”
For Ohio, the MEEA report estimates that Ohioans missed out on roughly $980 million in net benefits for one program year. That figure includes savings on energy bills, as well as things like reduced capacity costs and avoided costs for transmission and distribution.
When avoided health impacts and the social costs of carbon are factored in, Ohioans would have saved more than $2 billion for a single program year, according to the analysis.
The report’s calculations of Ohio’s lost benefits are of the same order of magnitude as a separate analysis released earlier this year. The new report’s review of rollbacks in additional states reflects a broader trend in the Midwest over the past several years, said MEEA Executive Director Stacey Paradis.
“It started with the Tea Party Republicans, who were just very strident when it came to any kind of mandate, government forcing you to do something.” Paradis said. By their nature, though, energy efficiency standards are “very regulation heavy.”
Misinformation and the public’s lack of understanding also play roles, Dreher said, especially when opponents focus only on the costs of energy efficiency programs without considering their savings and other benefits. HB 6 supporters used that approach to falsely claim that the law would save customers money, because bills would no longer include charges for the clean energy standards.
HB 6 is at the heart of a $60 million corruption scandal, with allegations in multiple cases relating to FirstEnergy, former Ohio House Speaker Larry Householder, former PUCO chair Sam Randazzo, and others. The law removed net benefits from the clean energy standards while adding subsidies for nuclear and coal plants and recession-proofing utilities. Coal subsidies and gutting of the clean energy standards remain on the books.
Ohio’s energy efficiency standard “was a benefit to all Ohioans, so it’s no surprise — now that it’s been gutted and effectively repealed — Ohioans do not get the full financial, environmental, and public health benefits that come along with programs to reduce energy waste,” said Neil Waggoner, Ohio campaign representative for the Sierra Club’s Beyond Coal Campaign, who did not work on the new report.
‘A first step’
The Ohio legislature’s “corruption-driven mistake… also left it unclear whether or not Ohio’s utilities could offer any sort of programs that reduce energy waste,” Waggoner said. “Ohio needs to be able to offer those programs again. And while the best path would be to reimplement and strengthen the EERS [energy efficiency standard], legislation like HB 389 is a good first step and offers a path forward for Ohoians to start utilizing these programs again.”
Introduced in August, the bipartisan bill would let utilities propose energy efficiency programs aimed at achieving 0.5% energy savings for participating customers, compared to the prior year. Residential customers would be able to opt out of any program. Other customers would have to affirmatively opt in.
“For perhaps the first time, this energy waste reduction legislation relies on consumer choice and the free market to make sure reductions in energy consumption are being delivered efficiently and effectively,” sponsor David Leland, D-Columbus, said in his testimony on Sept. 22. “Consumers will be the ultimate decider in this process, and their ability to opt out means utilities that design and run new energy waste reduction programs will have to deliver tangible cost savings to those consumers.”
“The cheapest energy is the energy that isn’t used when common sense conservation measures help reduce usage and avoid the cost of building new generation. Most of us never doubted that truth, even as we opposed the energy efficiency mandates that were ultimately repealed in House Bill 6,” Seitz said in his sponsor testimony on HB 389. American Electric Power, Duke Energy and AES all support the bill, he noted.
“We listened to legislators’ criticisms and we’ve tightened up the law so that utilities don’t get credit for savings that would not take place absent the program,” said Rob Kelter, an attorney for the Environmental Law and Policy Center, in his testimony Sept. 29 supporting the bill. Meanwhile, the bill would support jobs.
“When the utilities shut down programs, Ohioans lost those jobs,” Kelter said, “and the faster we pass this legislation, the sooner utilities can implement the programs that bring those jobs back.”
Additional supporters who provided testimony on HB 389 included Waggoner for the Sierra Club, Miranda Leppla for the Ohio Environmental Council Action Fund, Tom Bullock for the Citizens Utility Board of Ohio, John Sarver for Ohio Partners for Affordable Energy, Dave Milenthal for Empower Saves, and Sarah Spence for the Ohio Conservative Energy Forum.
Even if HB 389 passes, however, it will leave huge savings on the table, based on the broader estimates from the MEEA report. The annual target for voluntary utility programs would be just one-fourth of the target that would apply now but for HB 6.
Paradis also sees an equity issue with the proposed Ohio approach. Energy efficiency programs for business and industrial customers tend to be the most cost-effective, she noted, although residential programs other than low-income programs are also cost-effective. Nonetheless, all customers save money from benefits to the energy system.
Ohio’s proposed policy would also make it “voluntary for anyone to choose ‘I do or do not want to pay this rider,’” Dreher said. In his view, the lack of certainty would hamstring or undercut the meaningful value of the program.
In contrast, after Indiana repealed its energy efficiency standard in 2014, lawmakers made it voluntary for utilities to offer programs. If they do, however, residential customers must participate, Dreher said. Critics have also noted that Indiana’s voluntary programs fell far short of what ratepayers would otherwise have saved in that state. The new report shows the state still misses out on roughly $80 million per year before considering health impacts and the social costs of carbon, especially with large customer opt-out policies.
Iowans have missed out on roughly $100 million per year in benefits after changes to electric energy efficiency programs were signed into law in 2018, according to the report. That’s in addition to the social costs of carbon and health impacts and separate from lost benefits under changes to the state’s natural gas energy efficiency programs.
Illinois gave up roughly $45 million in net benefits annually when it allowed automatic exemptions for large electric customers several years ago, not counting health impacts and the social costs of carbon, according to the report. The Energy Transition Act signed into law on Sept. 15 eliminates those automatic exemptions going forward and places conditions on large customers who want to opt out.
State impacts can’t be directly compared, Paradis and Dreher said. Nonetheless, they offer helpful case studies for lawmakers who may be considering policy changes.
Ultimately, Dreher said, the MEEA report aims to help policymakers understand “the unintended consequence of not understanding what energy efficiency’s value is,” so that value doesn’t get “traded away.”
Editor’s note: This article has been updated to correct the spelling of Stacey Paradis’s last name.