Office of the Ohio Consumers' Counsel

Energy law will shape the future of electricity

After more than a year of hard work, Ohio now has a new energy law that provides landmark changes in energy policy and that may have mixed results for Ohioans. Gov. Ted Strickland signed the electric legislation into law and it will go into effect July 31. But the potential for significant rate increases will require stronger vigilance as rules for the new law are made to protect residential customers. From the beginning, the Office of the Ohio Consumers’ Counsel (OCC) worked diligently to deliver a consistent, logical message that advocated for fairness, consumer protections and the lowest cost electricity options for residential customers.

The OCC was able to accomplish a number of key benefits for customers.  Major gains were made to adopt alternative energy solutions as the OCC led the effort to adopt energy efficiency standards. The standards proposed by the OCC were adopted in the law and will require a reduction in electricity demand of 22 percent by the end of 2025. An important benefit of this win is the ability to provide low-income consumers with ongoing energy efficiency programs over, at least, the next 17 years. Other energy efficiency programs will also be offered to all of Ohio’s residential consumers.

Working closely with the environmental community and the legislature, renewable energy will become a part of the electric supply. Utilities will be required to make renewable energy 12.5 percent of electricity sold by 2025. Annual benchmarks and penalties for noncompliance will ensure regular progress to meet the goal. This hard-fought battle to achieve a renewable energy standard will enable Ohio to develop lower cost and environmentally friendly energy supply options. Also, the restrictions on existing net metering laws were repealed, opening the door for customers to supply portions of their own energy through roof-top solar panels, geothermal units and other renewable energy technologies.

Throughout the debate in the Ohio legislature, the OCC focused on the way electricity will be priced under this new energy policy. Transition charges that could have led to continued payment of more than $590 million per year for FirstEnergy customers will expire as scheduled, while other utilities will see lesser amounts also fall off; a comparison between a regulated rate and a market rate option for a utility will be performed to determine which costs consumers the least; due process for regulated rate plans allows the OCC and other groups to properly prepare for cases where utilities may be seeking significant rate increases.

The OCC also was able to successfully advocate for the installation of a standard of prudence. This standard ensures that when an electric distribution utility applies for the recovery of fuel, purchased power, emission expenses or environmental upgrades it has to be done in a prudent manner. Also, any new power plant to be constructed must be competitively bid, achieving the lowest cost for these expensive facilities. Another win the OCC secured is that subsidies for large companies will expire. These special contracts were not retained in the law and will need to be revealed in rate cases, if requested, so the OCC can protect consumers from overpaying the utility and ensure that rates are fair.

While the OCC worked to secure as many protections as possible for residential consumers, there were issues that did not come out in the favor of consumers. Some negative aspects of the law that the OCC unfortunately could not get changed include automatic increases for fuel, purchased power and emissions allowances; utilities may be allowed to recover costs for power plants before they are generating any power; increases to rates on single issues without any consideration of other costs which may have decreased; the phase-in and delay of rate increases which masks the true impact of a rate increase; and side deals were not outlawed as they negatively affect all residential consumers and are bad public policy.

The OCC is very proud of what it accomplished in this complex, multi-faceted legislation, but disheartened by what it was unable to prevent. The rulemaking process at the PUCO will be critical in order to protect customers from unbridled rate increases. The OCC is already internally preparing for this critical phase in the implementation of the new energy law.

See Also:

• Restructuring policy charts

• What you need to know about Ohio’s electric energy policy (Senate Bill 221)

Fact Sheets:

• Need to Know AEP Electric Security Plan

• Need to Know Duke Electric Security Plan

• Need to Know FirstEnergy's Electric Security Plan and Market Rate Offer