What you pay for power over the next decade is still in the hands of a powerful Ohio Senate committee.
The Senate Public Utilities Committee has held five contentious hearings since September on an overly complicated bill that has been endorsed by the state’s largest industries but attacked by the Ohio Manufacturers’ Association, by consumer groups and by environmentalists.
Sen. William Seitz, a Cincinnati Republican, chairman of the committee and sponsor of the measure, Senate Bill 58, has not yet called for amendments, though there have been private and apparently unsuccessful closed-door meetings on the issue.
Seitz and the bill’s industrial supporters say that state laws enacted five years ago requiring utilities to sell or generate more power from wind and solar are no longer relevant because the use of plentiful and low-cost natural gas from shale wells to generate electricity has made power cheap.
They argue that mandatory programs to help customers cut consumption by installing energy-efficient lighting and equipment will end up costing more than it saves them.
They base their argument about escalating costs on the 2009 law’s provisions that utilities step up efficiency programs annually so that by 2025, the programs will have reduced demand by 22 percent, compared to 2009 levels.
Those opposed to changing anything say that the current law requires the savings from energy efficiency measures to be greater than the cost to install them – or they will not have to be done.
And widespread energy efficiency programs not only in Ohio but also in the region do – and already have – reduced electricity prices for all customers because the programs have cut demand. The market has responded, they say, with falling prices.
As for wind and solar, they argue that state lawmakers five years ago decided it would be smart to add renewable energy to how Ohio utilities generate electricity and to jumpstart solar and wind industries in Ohio.
This past week, the Ohio Manufacturers’ Association, whose members include both the state’s largest and its smallest businesses, presented its case before the committee with a panel of witnesses.
The OMA’s star witness, Richard Hornby, a utility expert with Boston-based Synapse Energy Economics, took aim at a provision deep in the bill that would allow an electric utility to give itself a bonus amounting to 33 percent of the “net benefits or dollar savings” that its customers achieved though energy efficiency programs.
In other words, the utilities would have the ability to pay themselves – with extra rate increases – for upgrades they helped customers install.
Currently, the Public Utilities Commission allows such bonuses, between 5 percent and 13 percent of the dollars saved, but only when the utility has exceeded the energy efficiency benchmark for the year.
In contrast, said Hornby, the bill would allow the bonus for any and every upgrade at a rate unheard of in the industry.
The utilities would get “one of the highest – if not the highest – levels in the country,” he said. “Meanwhile, utilities in other states are achieving comparable reductions with much lower incentive levels.”
The bottom line, he argued, is that there would be fewer dollars left over to pay for actual efficiency programs while the utilities enriched themselves for doing less.
Hornby was not the first to point out this provision as anti-customer.
Ohio Consumers’ Counsel Bruce Weston pounced on the provision in testimony he delivered on Oct. 9
“This provision is extremely generous to utilities . . . (and) means that for every $100 million the energy efficiency programs save customers, the utility would reward itself by taking $33.3 million from customers.
“But it gets worse,” he added. “Consumers also would be required to pay for the utilities’ taxes on their profit from the percentage payment. The utilities would take an additional $20 million from customers for every $100 million in efficiency savings.”
The largest power users have argued that they don’t need a utility to tell them how to save money on electricity. They want the ability to opt out of the requirement to participate in order to avoid rate increases used to pay for the programs – increases they fear will be “an economic albatross.”
The Timken Co., for example, argued in a letter to Seitz and submitted to the committee this week that it supports the bill’s provisions allowing large industrial power users to opt out.
“Standard, utility-managed energy efficiency programs are not designed to benefit customers, like Timken, that were early adopters of measures such as lighting retrofits, high efficiency motors and HVAC upgrades,” wrote Robert Lapp, vice president for government affairs and community relations.
“We have been implementing not only the low-hanging fruit, but mid-range as well,” he wrote, adding that Timken’s new caster and ladle refiner projects will likely save energy when they go into operations in 2014 and 2015.
In contrast to Timken, the Belden Brick Co., which is also headquartered in Canton, is opposed to the Seitz bill also because the price of electricity is crucial to its competitive edge and it has benefited already from the state-mandated programs.
Bradley Belden, director of support services for Belden and an OMA witness, said the company has used the program to help pay for more efficient lighting at its six brick plants and to purchase a more efficient air compressor. The company plans additional upgrades, he added, because of the program.
“About 3 percent of our electric bill goes towards the energy efficiency (rate) rider,” he testified. “To date, we have recouped about 65 percent of our rider costs in incentive payments for efficiency projects.
“We estimate our annual electricity cost savings due to these efficiency upgrades amounts to about 5 percent of our prior spending and . . . the payback timeline for our investment in these efficiency projects was reduced by more than a year.”
The state’s electric utilities, which have not testified this fall, have been represented by a lobbying effort headed by FirstEnergy Corp.
During a public teleconference with financial analysts this week, Leila Vespoli, FirstEnergy’s general counsel and executive vice president, noted that Sen. Seitz “is pushing to get these modifications passed by the end of the year.”
Vespoli said the measure has the support of all of the state’s investor-owned utilities.
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