Ohio’s benchmarks for renewable energy and energy efficiency are getting a five-year checkup that some defenders fear will turn into an amputation.
An Ohio Senate panel began hearings last week to examine the rules and figure out whether there is a way to address some businesses’ concerns that the mandates are too costly.
“Anytime you pass a 20-year plan, it’s prudent to check in and see how you’re working,” said Sen. Bill Seitz, R-Cincinnati, chairman of the Senate Public Utilities Committee.
The law’s defenders include environmentalists and renewable-energy companies. They say the benchmarks have contributed to economic growth and cleaner air.
“If the standard is weakened or goes away, a lot of investment will dry up, and investors and project developers will feel like the rug has been pulled out from under them,” said Terrence O’D onnell, a Columbus attorney who represents Mid-Atlantic Renewable Energy Coalition, a group that wants to maintain the rules.
Under Senate Bill 221, passed in 2008, Ohio’s investor-owned electric companies must get
25 percent of their energy from renewable or advanced sources by 2025. The utilities also must help customers use energy-efficiency tools to reduce certain types of power use by
22 percent by 2025.
The electric companies – which include American Electric Power and FirstEnergy – must meet annual benchmarks for both renewable energy and energy efficiency, or they face penalties. The costs get passed on to consumers through their electricity bills, translating to about $5 per month for a typical AEP household.
Since the law took effect, regulators have approved more renewable-energy projects, with a total capacity of 3,800 megawatts, and the energy-efficiency provision helped to reduce the state’s capacity needs by about 125 megawatts. One megawatt can supply enough power to run roughly 1,000 homes.
Last fall, FirstEnergy unsuccessfully tried to get lawmakers to approve a freeze of the energy-efficiency standard at the 2012 level. That was the most recent of several attempts by businesses to change the rules without a full debate, and it inspired the effort that is taking place in Seitz’s committee.
The panel will hear from people who want to maintain the current rules, and from those who would like to dramatically reduce or eliminate them.
“What are the chances of consensus? Probably remote,” Seitz said.
The first person to testify last week was Todd Snitchler, chairman of the Public Utilities Commission of Ohio, the agency that enforces the 2008 law. Unlike most of the speakers to come, he made no recommendations.
“In my opinion, the success of each utility’s energy-efficiency program depends largely upon its design and management,” he said. “A well-designed, well-managed program will yield positive results and build confidence among customers. A poorly managed program will yield the opposite.”
Committee members asked him several questions about a provision of the law often called the “ cost cap,” which says utilities do not need to meet the renewable benchmarks if doing so would increase overall rates by at least 3 percent in a year.
At least that’s how the PUCO has interpreted the law. Seitz said his impression in 2008 was that the cap was supposed to mean something different – that individual renewable-energy sources could be no more than 3 percent more expensive than a fossil fuel, such as coal. That is a much lower bar that would allow utilities to routinely invoke the cap.
Seitz said the wording of the law is “not a model of clarity.” Snitchler agreed and said the legislature might want to reword it to make it clearer.
Senate Bill 221 was a wide-ranging measure that set new rules for how utilities can set rates. The provisions about renewable energy and energy efficiency were “almost thrown in, casually,” Seitz recalled.
Utilities didn’t object to the rules at the time. “They said, ‘We don’t care, as long as we can pass the cost onto our customers,’ ” Seitz said.
O’Donnell, the attorney for the renewable-energy group, said the rules were thoroughly vetted before the bill was passed in 2008.
“We worked on this for the better part of a year,” he said. “This isn’t something that was slipped into a budget bill in the middle of the night. This had months and months of hearings.”
The objections began to intensify when it came time to meet the standards. FirstEnergy argued that the cost of meeting the rules would be substantial, leading to a big increase in electricity rates.
There is also a philosophical difference. Some utility executives didn’t like the idea of helping customers find ways to use less electricity.
The hearings are to continue on Tuesday with testimony from renewable-energy advocates and staff members for several groups that oppose the mandates.
A 2008 state energy law includes these two provisions:
Electric companies must get 25 percent of their kilowatt-hours from renewable and advanced sources by 2025, with annual benchmarks toward that target for renewable energy. Of that total, 12.5 percent must come from renewable sources such as wind and solar; another 12.5 percent must come from so-called “advanced” sources, which includes certain types of coal, nuclear and other types of power that use advanced technology to reduce pollution. The renewable-energy standard requires a certain amount of solar power.
Electric companies must work with business customers to improve energy efficiency and reduce electricity demand by 22 percent by 2025. Examples could include replacing lighting systems, adding insulation and getting new heating and cooling systems. The customer gets a partial rebate for doing the work.
Source: Public Utilities Commission of Ohio
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