Advocates for industry, consumer and environmental groups expressed strong support for a bill to reform state utility law at a hearing before the Ohio House Public Utilities Committee this week.
House Bill 247 would end the current practice of Electric Security Plans, which allow a variety of nonbypassable charges, regardless of whom customers choose to buy electricity from. The bill would also prohibit utilities from owning electric generation facilities. And it would require refunds if utility charges were later found to have been unlawful or unreasonable.
“With more Boomers headed to retirement, and on a fixed income, we must keep utility bills in check,” AARP Ohio’s Trey Addison told lawmakers on November 28. Among other things, he noted, “the legislation would protect consumers from subsidizing the operations of utility corporate affiliates.”
Some of those so-called bailouts are currently being challenged in the Ohio Supreme Court. But, the Office of the Ohio Consumers’ Counsel reported, subsidies to Ohio utilities have gone on for a long time. According to the agency, those payments have exceeded $14 billion since 2000.
Encouraging a freer market
Since 1999, Ohio law has let customers choose their electricity supplier. But lawmakers worried that electricity prices might zoom up and down unpredictably while a competitive market developed, said Teresa Ringenbach of DirectEnergy, a retail supplier serving Ohio and other states.
Electric Security Plans were supposed to protect consumers from drastic rate hikes during that period, she continued. “Once we’d gotten over the hump in Ohio, we were all supposed to go to a market rate option.”
Instead, Ohio Consumers’ Counsel Bruce Weston told lawmakers earlier this month, utilities began folding in many different charges. Utilities’ reliance on Electric Security Plans also led to more “single-issue rulemaking”— approval of piecemeal charges and fees, rather than the comprehensive ratemaking review that had taken place before the plans.
The result has been a series of riders on the distribution portion of all customers’ bills.
“In addition to increasing consumers’ bills, some riders can also undermine competition in the generation sector,” Dylan Borchers told lawmakers, speaking on behalf of the Ohio Independent Power Producers, which are natural-gas power plant businesses. “In effect, these riders provide a cross subsidy from the regulated distribution utility to affiliate-owned generation assets,” he added.
The current law on Electric Security Plans also lets each utility just withdraw its plan and try again if it doesn’t like any modification that regulators might require, said Kim Bojko, speaking on behalf of the Ohio Manufacturers’ Association. “This is a decidedly anti-customer policy.”
HB 247 would be a big step forward, agreed Trish Demeter, speaking for the Ohio Environmental Council Action Fund. First, she told lawmakers, the bill would “finally achiev[e] full corporate separation.” Beyond that, the bill would “eliminat[e] what has become the default process for rate-setting, which has led to unfair charges on consumers that provide no direct or indirect benefit to them.”
HB 247 would also help move Ohio toward a cleaner energy future, Demeter continued. Specifically, “competitive markets for the supply of electricity and capacity are encouraging cleaner, more efficient resources to come online, and can stem harmful air pollution at a pace necessary to address immediate and long-term public health and environmental damage,” she said.
“Currently, Ohio’s utilities are granted the ability to keep monies they have collected that are later deemed unlawful by the Ohio Supreme Court,” Jenn Klein of the Ohio Chemistry Technology Council added in her testimony. “HB 247 would reverse these provisions and return these unlawful charges back to the consumers. With the chemical industry in Ohio being a large scale consumer of electricity, these unlawful costs create an unwarranted financial burden and should be returned to the consumer.”
The role of the utilities
House Bill 247 also calls for full divesture by utilities of owned or affiliated generation facilities. Although that was contemplated in 1999, Bojko noted, various utilities spun off generation facilities to corporate affiliates. HB 247 would solve that problem, she said.
“Ohioans no longer need the utility to fill the generation supply role. We haven’t needed this for a very long time,” Ringenbach agreed. “We do, however, need our utilities to be the wires platform for us to move into a brighter energy future. A role only our utilities can fill.”
“The operational capabilities to move generation supply to different customers, maintain reliable delivery and provide smart metering data services is a critical piece to Ohio’s electric service,” Ringenbach continued. “However, to do that we need to eliminate the confused system we have today and make it clear that what Ohio and Ohioans need is a focused monopoly utility providing wires-only service.”
Utilities have expressed opposition to House Bill 247.
“We think eliminating the important backstop ESPs provide against the volatility of the energy market would be a mistake,” American Electric Power’s Scott Blake said. “We have worked with many of the same organizations that are pushing this proposal in our previous ESP cases and have come to solutions that allow us to continue supplying reliable power and offer Ohio customers some predictability and certainty in their electricity costs.”
Some lawmakers also oppose the bill, including House Majority Floor Leader Bill Seitz (R-Cincinnati), whose top campaign contributors include utility and fossil fuel interests.
HB 247 “does not deserve passage in its current form,” Seitz said. During Tuesday’s hearing, Seitz also balked at the bill’s “Venezuelan notion” that utilities should exit the generation business and concentrate only on distribution and grid services.
Seitz has also said that “until we dispose of HB 239 and HB 381, it is premature to consider HB 247.”
Opponents of HB 239 include some of the same groups that support House Bill 247, as well as conservative organizations, such as the Buckeye Institute.
“The Buckeye Institute supports the policies in Ohio House Bill 247, as they would expand competition and roll back subsidies,” said Joe Nichols, strategic partnerships officer at the Buckeye Institute.
“At the heart of the debate over Ohio’s regulatory framework is this question of risk,” Demeter said, “and who takes it on, who earns when the risk is rewarded, and who pays when the risk causes losses?”
“The solutions in HB 247 are sound, and there is no reason why any group who is supportive of their customers, the consumer, or their constituent would be against this legislation,” AARP Ohio’s Addison said.