From the Statehouse 2008 No. 14
by Jennifer Garrison
Apr. 25, 2008
FROM THE STATEHOUSE- APRIL 25, 2008
As the ranking Democratic member on the House Public Utilities and Energy Committee, I have spent much of the past three weeks shepherding sweeping electric legislation that will shape Ohio’s energy policy for years to come. The bill passed the House Tuesday 93-1, and the Ohio Senate concurred unanimously on Wednesday.
What a difference a week makes. Just a week earlier, Democratic members of the committee walked out of committee at 2:00 a.m. to protest the process by which the bill and amendments were being considered. Among other problems, we were denied the opportunity to review amendments we had not seen before we were asked to vote. My mother always said, “Nothing good ever happens after 2:00 a.m.,” and was she ever right.
We worked hard to correct flaws in electric policy brought about after the Ohio General Assembly passed Senate Bill 3 in 1999. That bill allowed utilities to sell off their generation and go to market following a market development period. However, such a market did not develop.
Bills have not spiked because the utilities and the Public Utilities Commission of Ohio (PUCO) entered into rate stabilization agreements. However, those agreements (except for the one applying to Dayton Power and Light) are scheduled to expire at the end of this year, and if Senate Bill 3 was allowed to continue, the utilities were to go to market.
This new legislation, Substitute Senate Bill 221, had two distinct parts. One deals with diversifying our energy sources by creating portfolio standards with benchmarks for renewable energy, advanced energy, and energy efficiency standards. The second and most significant part was to restructure our electricity regulations for the future.
The first part of this bill was not controversial. My colleagues on both sides of the aisle saw investment in renewable and advanced energy businesses as a way to diversify our future energy supply and create jobs in Ohio. By 2025, 25% of a utility’s energy must come from renewable and advanced energy sources with approximately 2% coming from energy efficiency. If these portfolio standards would result in more than a three-percent increase in price to customers in any given year, the benchmarks could be suspended.
The concerns I shared with Governor Ted Strickland were based on ensuring electricity customers – residential and businesses – would not experience rate shock. Significant increases in electricity for businesses such as Ormet, Eramet, Kraton, Chevron, Globe, Plastech, and Metallurgical Vanadium, as well as small business owners, could affect jobs in my district and all over the state. I was not going to allow that to happen.
Look at what happened when unregulated utilities were allowed to operate in other states. Electric bills in Maryland went up 72 percent. In Illinois, bills increased 55 percent.
The bill as passed out of Committee allowed one utility, FirstEnergy, to fully go to market on January 1, 2009, and the remainder of the utilities to partially go to market on that date without much discretion of the PUCO.
Republican members of the House Committee wanted utilities to go to market … a market many of us believe does not exist. The wholesale electric market is based on the Federal Energy Regulatory Commission (FERC) price of the day.
This is how it works: If a business needs more power than a utility can supply, that business asks for bids. Let’s say one bid is to supply 80 percent of the energy request for five cents per kilowatt hour (KWH). Another bid is for 10 percent of the needed load at six cents per KWH. A third response is for 10 percent of the load at seven cents a KWH. FERC requires everyone be paid the highest price, even if they bid a lower price. This is not a market.
Democrats on the committee did not vote for the bill and very publicly pointed out the flaws. The Governor threatened a veto, and the Republican-controlled Senate did not support the House version of the bill as it came out of committee. The Senate passed version of the bill that had the support of the Governor, and the support of 120 different groups including the Ohio Manufacturers Association, the Farm Bureau, local governments and many others. The bill that came out of the House committee did not have that support.
Finally, after hours of negotiations on Monday and Tuesday, the House leadership agreed to our proposals to improve the bill. A significant amendment offered on the House floor provided an off-ramp to protect consumers from shouldering excessive earnings for utilities. It provided safeguards to retain and attract jobs in this state by avoiding rate shock for businesses looking to invest. It also provided a prudency review standard on all allowances in rates like the price of fuel and power purchased by an affiliate company so consumers are protected. With these monumental changes to the bill, I voted “yes.”
The price of fuel today will have an impact on prices, but the safeguards in this bill give the PUCO significant discretion to keep prices stable in Ohio and protect consumers from rate shock.
The bill now goes to the Governor for his signature.
You can reach Jennifer Garrison at her Columbus office at (614) 644-8728 or in the district at 373-2414 or by e-mail at jennifer@jennifergarrison.com. Her Web site is Riffe Center | 77 South High Street | Columbus Ohio 43215-6111 | (800) 282-0253 | District93@ohr.state.oh.us
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