Energy efficiency faces a critical test this month in Ohio. Its tremendous progress in the state could be slowed unless Governor John Kasich vetoes a recently passed bill by the 28th of December.
What’s at stake are jobs and cost savings. Energy efficiency is an economic engine for Ohio, supporting more than 78,000 jobs in the state. To maximize its benefits, a nearly unanimous Ohio legislature passed a 2008 law that set a timetable for electric companies to meet one-fifth of energy needs with energy efficiency by 2025. More energy efficiency programs ensued, saving two dollars for every dollar spent. The result? Ohioans saved hundreds of millions of dollars.
Opponents have moved to threaten this progress. In 2014, they passed SB 310, which put a freeze on the energy efficiency targets for two years. That freeze was due to expire at the end of this year, but the Ohio legislature passed another bill (HB 554) last week that, if enacted, would thwart state efforts to reduce energy waste. Fortunately, Governor Kasich has vowed to veto it.
The bill would extend the freeze of the state’s utility energy efficiency targets by keeping them voluntary for the next two years, and then reduce the required savings targets to just 1% per year from 2019-2025, before finally increasing them to 2% per year in 2026 and 2027. This would reduce total savings to Ohio consumers by nearly one-fourth, resulting in hundreds of millions of dollars in higher utility costs, not to mention the loss of jobs in the energy efficiency field.
The benefits of increasing energy efficiency are clear, so there is no reason to delay the work of the original 2008 legislation. Research shows that setting utility energy efficiency targets is the most effective policy to achieve large energy savings. Also, ACEEE research has documented how several utilities achieve annual savings of 2%, and how Ohio has real potential to achieve the original targets.
Extending the savings freeze isn’t the only negative impact of HB 554. The bill would allow “mercantile energy users” to opt out of the state’s energy efficiency requirements. It would expand the state’s existing opt-out policy by lowering the size threshold for eligibility to one of the lowest in the country and even allow national accounts to opt-out regardless of size (e.g. potentially gas stations and restaurants). Letting more businesses opt out would essentially make all the smaller ratepayers subsidize the efficiency resource for the largest customers. And if more customers opt out, rates go up for all customers as the lost savings from cost-effective energy efficiency programs need to be replaced with more expensive power purchases.
The bill would also allow utilities to count “savings” that have nothing to do with customer energy efficiency. For example, it would allow utilities to count energy intensity reductions resulting from heat rate improvements at electric generating plants, either owned by the utility or their affiliates. These types of allowances could mean that utilities drastically cut customer energy efficiency programs while meeting the targets.
If no bill is enacted by the end of the calendar year, the very effective original efficiency standards, along with the renewable energy standards, would go back into effect in 2017. That would be a wise course of action. Based on many years of evidence that prove energy efficiency is a good deal for Ohioans and their economy, we think good policy should get back to work.