Before
The Ohio House of Representatives
Select Committee on Energy Policy and Oversight
Testimony on House Bill 798
By
Bruce Weston, Ohio Consumers’ Counsel
Office of the Ohio Consumers’ Counsel
December 16, 2020
Hello Chair Hoops, Vice-Chair Abrams, Ranking Member Leland and members of the House Select Committee on Energy Policy and Oversight. I hope you and your colleagues are well. Thank you for this opportunity to testify on House Bill 798, which revisits House Bill 6. We appreciate Speaker Cupp’s appointment of this Select Committee to take a fresh look at the issues involved in House Bill 6.
Last year the Office of the Ohio Consumers’ Counsel (OCC) testified seven times against the now tainted House Bill 6. And now we’ve testified five times this year to repeal it. Under the circumstances, we support House Bill 772, with its broader repeal and consumer protection.
The taint on House Bill 6 is terrible and the response should include a repeal and a legislative investigation. I’ve also asked for an investigation by the PUCO, and that has been slow to materialize. The credit ratings agency, Standard & Poor’s, recently has this to say about the key proponent of House Bill 6, FirstEnergy:
We believe these violations at the highest level of the company are demonstrative of insufficient internal controls and a cultural weakness. We view the severity of these violations as significantly outside of industry norms and, in our view, they represent a material deficiency in the company’s governance. (Khalid, U., “S&P downgrades FirstEnergy following $1.95B draw on revolving credit facility,” S&P Global Market Intelligence (Nov. 25, 2020).)
At the outset and before discussing how House Bill 798 and Amendment 3757 are lacking for consumer protection, we thank you for proposing to repeal the so-called “decoupling” charge for FirstEnergy in House Bill 6. FirstEnergy’s recently fired CEO had described the charge as partly recession-proofing FirstEnergy. What an outrageous imposition that is on the two million FirstEnergy consumers who are paying to recession- proof FirstEnergy – and all the worse given the many Ohioans who are struggling in the current health and financial crisis.
But please take more steps for consumer protection on this decoupling issue. The bill should prohibit the PUCO from authorizing any decoupling charges, now that the green- energy mandates are repealed. Similar to House Bill 772, please require FirstEnergy to refund consumers for all the House Bill 6 decoupling charges that consumers will have paid up until the date of repeal. FirstEnergy should not be allowed to walk away from this issue with even a penny of Ohioans’ money. There should not be a repeat of the consumer rip-off that occurred when the PUCO enabled FirstEnergy to keep, without refunds, its charges for the so-called distribution modernization rider when the Ohio Supreme Court invalidated the charge on June 19, 2019.
Attached is an amendment (AM 3810) for refunds. Also, Amendment 3810 would prohibit the PUCO from allowing electric utilities to charge consumers for decoupling. Additionally attached is a pie chart showing how electric consumers have been denied $1.5 billion in refunds since 2009, after utilities collected charges that were invalidated by rulings of the Ohio Supreme Court.
And thank you also for proposing to repeal the provision that was slipped into House Bill 166 (the state budget bill) for FirstEnergy. That new provision (in O.R.C.4928.143(F)) could enhance FirstEnergy’s profits at consumer expense. That profits statute is a cousin of House Bill 6, as it was enacted for FirstEnergy during the time period of House Bill 6. This repeal provision should be added to House Bill 772, which is our preferred legislation for repeal of House Bill 6.
As mentioned, House Bill 798 has shortcomings that should be corrected for consumer protection. (Note that references in this testimony to “House Bill 798” should be understood to include Amendment 3757.) Principally, the problems are that House Bill 798 perpetuates the House Bill 6 subsidies for making millions of Ohio electric consumers pay corporate welfare. The charges to consumers are for the two former nuclear plants of FirstEnergy (now Energy Harbor). And the charges are for two uneconomic, polluting coal plants of AEP, Duke, Dayton Power & Light, and others.
The attached Amendment 3819 provides for a three-year phase-out of the coal plant bailout. OCC developed this approach per some interest expressed by a Select Committee member during OCC’s December 3rd testimony. Also, the attached Amendment 3808 would end the nuclear bailout.
Regarding the negative impact of House Bill 6 on the market (and related economic benefits), its passage already drove out investors from two Ohio natural gas plants. One was the Lordstown Energy Center’s 940 MW natural gas-fired plant (in Lordstown, Ohio). And the other was the Troy Generation Facility’s 700 MW dual fuel plant (in Luckey, Ohio). Further, if there is to be a nuclear bailout at Ohioans’ expense, then Energy Harbor’s CEO should be made to appear before this Select Committee. Energy Harbor’s CEO should testify, answer members’ questions and sign a form attesting to the need (if true) for a billion- dollar subsidy from Ohioans. And the CEO should state (if true) that it will close Davis-Besse or Perry or both nuclear plants in the absence of a specified bailout. The testimony of Energy Harbor’s CEO should be made under penalty of perjury. That’s what the state expects of Ohioans when they are in desperate need of financial assistance to pay utilities like FirstEnergy. Ohioans are required to sign their assistance application form (which is attached) under this declaration: “I declare under penalty of perjury that the information submitted in this application is true and correct.” Energy Harbor should be treated no differently right now, before further bailout-related legislation is passed.
House Bill 798 and Amendment 3757 create an audit as a consumer protection solution to the problem of allowing the nuclear bailout. We do appreciate that there at least would be an audit. But the audit falls short. The audit standard is not effective for consumer protection, giving too much of consumers’ money to Energy Harbor and too little protection to consumers. The attached Amendment 3806 would make important improvements for the audit to provide it a chance of protecting consumers.
The audit should be improved in at least three ways. First, the bill language for the audit should be changed to expressly disallow Energy Harbor from collecting a subsidy from Ohioans for non-cash expenses like depreciation. Depreciation is not an expense that Energy Harbor pays to anyone. No vendor is trying to collect a bill for depreciation from Energy Harbor. The most assistance Energy Harbor should receive from a bailout is help paying operating expenses, that in theory need to be paid to keep the plants running. Depreciation and other non-cash expenses do not need to be paid to keep the plants running and should be expressly disallowed in the bill from the subsidy charged to consumers.
Second, the bill should be changed to involve the PJM Independent Market Monitor in the audit. The Market Monitor is an expert in the costs of competitive power plants. That expertise should be brought to bear as a participant and watchdog in the PUCO’s audit process. That participation would be important for consumers because, as can be seen on the Subsidy Scorecard and elsewhere, the PUCO has had a subsidy culture that benefits utilities at consumer expense.
Third, House Bill 798 and Amendment 3757 lack a public process that would allow stakeholders such as the consumers’ representative (OCC) to participate in the process. We appreciate that OCC’s suitability for the audit process was noted by the Ohio Energy Group’s witness, during the Q and A segment of his December 8, 2020 testimony before this Committee.
Finally, there is a shameful provision in House Bill 6, Section 5 (O.R.C. 4928.75), that diverts some federal financial assistance away from consumers who desperately need it. It involves the federal Home Energy Assistance Program (HEAP) funds. House Bill 6 requires the Ohio Development Services Agency to annually seek a waiver from the federal government to allow diverting some HEAP funds away from consumers for bill-payment assistance and toward subsidizing low-income weatherization. This part of House Bill 6 should be repealed. House Bill 798 fails to repeal it.
In this regard, House Bill 772 would have Ohio lead with its heart to repeal this provision and protect important financial assistance for Ohioans who are in desperate need of money during the current health and financial crisis. Attached is Amendment 3771 to repeal this section of House Bill 6, for the protection of so many who are in need. Too many of our fellow Ohioans lack adequate funds for basics like food, rent, healthcare, and utilities. Weatherizing a home (that likely would be done for a landlord, not for the consumer) is a far greater expenditure of the limited HEAP funds per consumer than bill payment assistance. That means using HEAP funds for weatherization helps just a fraction of the Ohioans who can be helped using HEAP for bill payment assistance. Especially during these desperate times for many, funds for assistance should be focused on helping Ohioans pay their energy utility bills.
To conclude, FirstEnergy (and its former generation subsidiary, now Energy Harbor) like to make money the old-fashioned way – by convincing government to give them other people’s money. Business has been good, with FirstEnergy collecting $10 billion dollars in subsidies from Ohioans since Ohio’s landmark electric deregulation law in 1999. OCC’s Subsidy Scorecard shows that, since 1999, consumers have paid Ohio electric utilities nearly $15 billion in subsidies. The Subsidy Scorecard is attached. At this point, enough is more than enough.
The “business” of public bailouts for energy companies should be shut down, and House Bill 772 (not House Bill 798) does that. Market competition, not government, should decide where to allocate capital. Increasingly, a competitive market will send capital to renewable companies. See “The New Energy Giants are Renewable Companies,” Bloomberg Green, by Eckhouse, et al. (Nov. 30, 2020).
House Bill 772 strikes the right tone for this moment in time, in repealing billion- dollar subsidies to coal and nuclear power plants. House Bill 798 falls short. Ohio should stick to its pro-market deregulation law. Ohio should send a clear message of disapproval about the scandal. And Ohio should address in this legislation the current social context of an ongoing health and financial crisis where many Ohioans lack adequate money for food, rent, healthcare, and utilities. Please enact House Bill 772.
Thank you for your consideration.