Office of the Ohio Consumers’ Counsel
Before
The Ohio Senate
Energy Committee
Testimony on Sub. Senate Bill 2
(Increase power generation; improve Ohio’s electric grid)
Maureen Willis, Agency Director
Ohio Consumers’ Counsel
On Behalf of the Office of the Ohio Consumers’ Counsel
February 18, 2025
Hello Chairman Chavez, Vice Chair Landis, Ranking Member Smith, and Committee members. I hope you and your colleagues are well. Thank you for this opportunity to testify. I am testifying as an Interested Party on Sub. Senate Bill 2.
My name is Maureen Willis. I am the Ohio Consumers’ Counsel, the Director of OCC. OCC is the state agency that has been the voice for Ohio residential utility consumers for almost fifty years. I am testifying on behalf of the Office of the Ohio Consumers’ Counsel, for Ohio’s 4.5 million residential utility consumers.
There are many good aspects of Sub. S.B. 2 that provide much overdue and needed protection for utility consumers. We thank Senator Reineke for these pro-consumer provisions of S.B. 2:
Full and prompt refunds of PUCO-approved utility charges to consumers that the Court has found to be unlawful or unreasonable. To date, electric consumers have been denied refunds for over $1.5 billion in such charges since 2009, creating unwarranted windfalls for utilities.- An end to the coal subsidy charges consumers have paid under H.B. 6. These coal subsidies to AES, AEP and Duke have cost consumers $436 million2 since they were codified under H.B. 6. Ohio families and businesses pay $440,000 a day for these subsidies.3 The subsidies are not needed and should end now. And consumers should be refunded all that they have paid.
- An end to pro-utility, anti-consumer electric security plans that have allowed utilities to collect billions of add-on rider charges and subsidies from consumers without sufficient review and without the protections afforded consumers under standard ratemaking.
- Continuing to preclude utilities from owning power plants so that the competitive market can work for consumers, bringing lower prices and greater innovation. Deregulation of power plants works for Ohio families and businesses. Deregulation has contributed to competitive wholesale markets producing billions of dollars in savings for Ohio electric consumers. Researchers at Cleveland State University concluded that Ohioans had saved over $37 billion since 2011 due to deregulation and will save another $2.7 billion in 2024. (See https:www.nopec.org/media/iancc405/24nop032-wp_summarypage_r2_hi_20nov2024.pdf).
- Preserving the standard service offer which serves as a safety net for consumers who do not shop for their energy supply. This is important because it allows consumers who do not want to shop for electric generation to nonetheless benefit from the competitive electric market. Sub. S.B. 2 also strengthens governmental aggregation programs which are another safe way for consumers to save money on their utility bill.
- Protecting consumers from energy marketing offers that start with low fixed rates and turn into alarming, high variable rates. We call these teaser rate contracts. We suggest more protections for consumers in the form of a ban on door-to-door marketing to consumers.
For too long, the regulatory environment in Ohio has heavily favored utilities over consumers. Ohioans deserve legislation that restores fairness and balance to this system. Sub. S.B. 2, which mirrors key provisions of H.B.15, is a step in the right direction.
There are aspects of S.B. 2, going beyond H.B. 15, that could use some retooling so that the good being done for consumers in this legislation is not undone. The areas of concern for consumers arise under sections of S.B. 2 that implement new, untested programs and processes that include a consumer choice billing program, a mini rate case for economic development expenditures and fundamental changes to Ohio ratemaking. We offer recommendations on these topics in the testimony that follows.
I appreciate the opportunity to provide testimony on these important energy matters and look forward to continued dialogue with members. Thank you again, Senator Reineke, for your efforts on the many positive regulatory reforms presented in S.B. 2.
REFUNDS TO CONSUMERS (Lines 216-224)
You are doing a good thing for consumers by enacting the bill’s provision to enable refunds for consumers when the Ohio Supreme Court finds PUCO-approved utility charges to be unlawful. The Court has noted the unfairness of the lack of refunds for consumers and described it as a “windfall” for utilities. The Court has observed that it is a matter for the legislature to address. S.B. 2 does that (Lines 216-224).
Ohio utility consumers have lost hundreds of millions of dollars for lack of refunds. Our attached pie chart shows that since 2009, on electric cases alone, consumers have lost $1.5 billion in refunds. It’s well past time for that unfairness to end.
REPEAL OF COAL SUBSIDIES5 (Lines 1834-1855)
Subsidies disrupt markets and in turn harm Ohio families and businesses. State government should stop propping up old, inefficient power plants that cannot compete in the wholesale market, at consumer expense. The market development period for utilities ended more than a decade ago. And during that period Ohioans paid a lot of money ($11.8 billion) to allow utilities to transition to competition and divest their power plants.6 After the market development period utilities were to be fully on their own.
But Ohio utilities are benefitting from corporate welfare from state government, at public expense. Consumers bear the enormous cost of the coal subsidies received by AEP, AES and Duke. Since the coal subsidies were written into law in 2020, Ohioans will have paid close to half a billion dollars through the first half of 2025.8 The coal subsidies are costing utility consumers $440,000 a day.9 S.B. 2 ends those subsidies. That is good news for consumers. More is needed though for consumer protection.
These H.B. 6 subsidies should not continue to be collected from consumers through the end of the currently existing utility plans. The H.B. 6 coal subsidies have nothing to do with the utilities’ approved electric security plans.10 Extending the coal subsidies beyond the effective date of S.B. 2 will be very costly for Ohio’s utility customers. If the coal subsidies continue through the end of Ohio utilities’ approved plans as this bill allows (Lines 4332-4337), it will add another $240 million to Ohioans’ electric bills.
Another important consumer protection that should be written into the bill is that consumers should be refunded for what they’ve paid since 2020 for the H.B. 6 coal plant subsidy.12 That would do much to restore the public’s trust in their Ohio government. Refunds of the coal subsidies paid under H.B. 6 can be legislated. For example, through House Bill 128 (134th General Assembly), the decoupling provision written into H.B. 6 was repealed and refunds to consumers were required.
Notably, the two coal plants operate and will continue to operate without subsidies from utility consumers. According to a Duke executive, the plants will continue to run even if the subsidies from consumers end.13 This is not about preserving jobs or electricity generation for Ohioans. And it’s not about national security, as the proponents of H.B. 6 claimed.
Subsidizing these plants is unfair to Ohio families and businesses who pay for the subsidy. Thank you, Senator Reineke, for ending these subsidies through S.B. 2.
REPEAL OF ELECTRIC SECURITY PLANS (Lines 2143-2190, 4328-4331)
OCC has been a strong advocate of regulatory reform of electric security plans.14 OCC supports the repeal of the electric security plan statutes. S.B. 2 delivers for consumers on this. S.B. 2 ends utilities’ costly electric security plans.
Electric security plans allow utilities to charge consumers for costly “riders.” Riders are add-on charges that allow utilities to cherry pick expenses and investments for expedited recovery with limited review. Under an electric security plan, there is almost no limit on the type of riders the electric utilities can ask for. Our recent tally shows that Ohio Power has twenty-eight riders, Duke has thirty-eight riders, and AES has fourteen riders. The FirstEnergy Utilities take the prize with 46-48 riders.
Utilities also use electric security plans to obtain millions of dollars in subsidies from their consumers. These subsidies come in many sizes, shapes, and forms: lost revenues, decoupling, stability riders, distribution modernization charges, credit support, etc. OCC’s subsidy scorecard gives you an idea of the magnitude of the subsidy problem for utility consumers, with approximately $3.7 billion for subsidies paid under electric security plans. I have attached OCC’s subsidy scorecard for reference.
It's time to put a stop to this pro-utility, anti-consumer ratemaking. Ending these plans will go a long way in providing much-needed financial relief to Ohio families who are facing affordability challenges. Thank you, Senator Reineke.
CONSUMER CHOICE BILLING PROGRAM (ELECTRIC AND GAS) (LINES 3640-3864)
Under the bill there is a new, untested Consumer Choice Billing Program, administered by the PUCO (See Lines 3640-3657), funded by non-shopping utility consumers. For many reasons this program should be written out of S.B. 2. It will harm, not help consumers with higher prices for Ohioans and greater profits for marketers. Please do not allow this provision to remain in S.B. 2. The program allows marketers and third parties (Lines 3723-3726) to bill (and collect from) consumers for non-competitive utility services. Currently marketers and third parties can only bill for the competitive services (energy) they (and not the utility) provide. The program is to be paid for by non-shopping gas and electric consumers who have already paid and are paying for expensive utility billing systems. And it threatens to impair the standard service offer safety net that consumers have come to rely on for electric and gas utility service.
Under this program energy marketers would bill and collect for the utility’s distribution and transmission charges (Lines 3644-3648). Allowing energy marketers and unregulated third parties to provide billing and collection services for utility service is not a good idea. We are aware of far too many instances of energy marketers taking advantage of utility consumers in Ohio. We are not convinced that a certification process and additional financial assurances (Lines 3662-3720) from marketers will protect consumers. Manipulative and deceptive marketing to consumers may even become more widespread with marketers having greater interface with consumers through the consumer choice billing program.
Additionally, the costs of the duplicative billing program would be paid for (subsidized) by Ohio families and businesses through utilities’ distribution rates (Lines 3818-3822). That is unfair and unreasonable. Costs related to a marketers’ billing services are costs that should be paid by the cost causer – the marketer.
The electric utility’s standard service offer is essential to protect consumers and S.B. 2 recognizes its importance by making sure it continues. (Lines 1881-1883). The utilities’ standard offer has been a competitive success story for consumers over many years.15 Consumers get the benefit of a market rate offer without the challenges of door-to-door sales, telemarketing and so forth.
But under the consumer choice billing program, the standard service offer is under attack. That’s because the costs of the duplicative billing systems established under S.B. 2 would be loaded onto the standard service offer consumers through a bypassable billing service charge that shoppers don’t have to pay. (Lines 3721-3736). This will artificially increase the standard offer, pushing consumers off the standard service offer onto marketer offers. It’s a part of marketers’ playbook, given their end game is to get rid of the standard service offer to occupy the entire retail market space.16 And, as evidenced by a recent study from The Ohio State University, most retail choice offers for electricity don’t save consumers money. Rather the safe choice for consumers is the standard service offer or government aggregation.
Please shelve this provision to protect your constituents.
CHANGES TO ELECTRIC UTILITY RATE CASES
Sub. S.B. 2 makes substantial changes to the standard rate case process in Ohio. The standard rate case process is not perfect, but it has served Ohio utility consumers well for many decades. We recommend any proposed modifications regarding existing Ohio rate case law be considered only after a clear showing of a need for changes and demonstrated benefits to consumers.
Also, a better, more protective approach for consumers is to consider incremental modifications in phases, instead of all at once. Specifically, we suggest the modifications start with the rate case process (i.e. the timing of discovery and PUCO decisions). Later, after we see the effect of the process changes played out, it may be useful to reassess whether further changes (such as the use of a fully forecasted test period) are truly needed and beneficial to consumers.
Filing a Rate Case No Later Than December 31, 2029
This legislation requires an electric distribution utility to file a rate case application no later than December 31, 2029 (See Lines 1289-1295). We support this provision.
This mandatory rate case filing requirement is long overdue. The proliferation of riders or trackers under electric security plans gave utilities no need to file a rate case. For example, FirstEnergy filed it first rate case in 2024, after staying out for seventeen years. During the stay-out, FirstEnergy continuously increased charges to consumers through distribution riders such as the Delivery Capital Recovery (DCR) Rider. OCC estimates FirstEnergy has charged approximately $2.8 Billion to its consumers in distribution charges from 2012 to 2022.
It is beneficial to the utility consumers as well as to the regulated utilities to have a timely and comprehensive review of the costs of providing utility services and the rates charged to consumers. This timely review is consistent with long established regulatory principles and in the public interest.
Time Limits on Discovery
This legislation cuts off new discovery 215 days after the utility files its application in a rate case proceeding (See Lines 82-86). We understand that the discovery process is a source of frustration for utilities as well as parties seeking discovery and commend Senator Reineke for attempting to tackle this rather thorny issue. And we see improvement on the discovery front from past General Assembly legislation such as the S.B. 102 and H.B. 260, introduced in the 135th General Assembly.
But we still have concerns about time limits on discovery that may inhibit the truth finding sorely needed in rate cases where consumers are being asked to pay many millions of dollars for utility service. In practice, there are many events that may cause the need for discovery beyond an arbitrary 215-day deadline. Events like the Staff Report being issued after day 215. Or the utility amending or revising its application after day 215.19 Or a non-unanimous settlement being reached after day 215. All these events rightfully would allow for additional discovery beyond day 215. And under current Ohio law parties have full and ample rights to discovery, without limitation. Ohio Revised Code 4903.082.
We recommend this discovery cut-off time of 215 days be modified to allow the PUCO the discretion to extend the discovery cut-off. Inserting “Unless otherwise ordered” in front of the provision would help. We further suggest that the discovery response time be shortened to no more than 14 days (vs 20 days that now applies in most cases) as an accommodation to the more limited time frame for discovery.
Shot Clock on PUCO Orders
This legislation requires the PUCO to issue an order in a rate case proceeding no later than two hundred seventy-five days from the date of application. If the PUCO does not issue an order within the time period required by this section, the application “shall be deemed approved by operation of law.” (See Lines 1356-1373).
Setting a deadline for PUCO orders may be helpful to the utilities seeking rate increases, but it means that consumers will be likely paying rate increases (not yet found to be just and reasonable by the PUCO) sooner. And allowing the utilities’ proposed rates to go into effect on the 275th day, without recourse, will harm consumers by taking away the protection currently written into Ohio law. Under this provision, consumers could be stuck with paying rates that may be (and probably will be)20 ruled unjust and unreasonable by the PUCO when it issues its final order on the utility’s application.21 And with no consumer refund for the rates paid pending the issuance of a final PUCO order, the utility may be given an unwarranted windfall during the period that the interim rates are in effect. This provision fails to hold the PUCO or the utilities accountable for any delay in issuing a final order. Consumers will pay the price for the unfairness.
We support the requirement of a shot clock on the PUCO orders. But don’t change the refund provision under the law. Existing Ohio law allows (but does not require) a utility to put rates in effect after 275 days with no final order from the PUCO. Under existing law, the rates are refunded to consumers if the proposed rates differ from the final PUCO-approved rates. Only after five hundred forty days, without a final order, are consumers denied a refund on the interim, non-final rates. The law as written is protective of consumers. Please do not change it.
Use of A Fully Forecasted Test Period in A Rate Case
This legislation allows the electric utilities to use a fully forecasted test period for setting base rates (See Lines 1025-1045). This provision changes existing Ohio rate case law for electric utilities. The proposed language would allow initial utility distribution rates to be set based on forecasted rate base (investments), revenues, and expenses. The rate base used in setting initial rates would be property projected to be used and useful during the fully forecasted test year, using a 13-month average. (Lines 886-891).
The proposed legislation creates a true-up process that seems to rectify rates (“final rates”) on a going forward basis, establishing final rates using the lower of forecasted or actual plant investment, revenues and expenses. (Lines 1033-1036). And, the rewrite of Ohio law also requires the PUCO, in establishing final rates per the true-up, to “exclude any cost components that have not been found by the commission to be used and useful in rendering public utility service.” (Lines 1040-1043). For consumer protection the actual revenues and expenses used in the true-up should include modifying language to ensure that expense are “ongoing and ordinary and necessary in providing utility service” and that the revenues are “recurring.” The true-up process, however, does not seem to allow a reconciliation (refunds or charges) of initial rates with actual plant investment, actual revenues and actual expenses. In other words, the difference consumers are charged between the initial rate and the final true-up rate will not be recognized. If this provision stands, a symmetrical reconciliation mechanism should be written into the law for consumer protection.
Current Ohio rate case law (not the ESP law) has worked well for Ohioans for many years. Under this regulatory framework, utility investment is measured at date certain, reflecting actual, not projected investment. Utility expenditures are measured during a test year that may include a combination of actual and projected data. This framework properly balances the interests of consumers and regulated utilities. It provides fair rates for consumers while providing utilities the opportunity to earn fair and reasonable profits.
With fewer (or no) riders, and the more frequent rate cases called for under the legislation (for example, Lines 1287-1295, 1396-1409), we would expect that utilities would be coming in for rate cases much more frequently. Frequent rate cases, along with an appropriate shot clock on PUCO orders, should address concerns some may have with setting rates based on stale data. Let’s implement those process changes (subject to OCC tweaks discussed) and see how it goes before moving forward with changes to the ratemaking formula (use of a fully forecasted test period).
MINI RATE CASE FOR ECONOMIC DEVELOPMENT (Lines 1396-1409)
S.B. 102 appears to be intended to promote “economic development.” The bill allows “mini-rate cases” to collect a utility’s capital expenditures from consumers outside of a standard rate case. This language, as written, is very broad and does not define “economic development.” Nor does it define the parameters of the mini-rate case or the standards to be used for determining whether and under what conditions the utility’s capital expenditures may be collected from utility consumers to fund economic development.
Details of the mini-rate case matter. One concern we have is that we do not want to promote utility gold-plating investment at the expense of utility consumers under the pretense of responding to “economic development.” Utilities stand to profit by making capital investments as they earn a return on and of investment under standard ratemaking. An important consumer protection that exists under standard ratemaking is the “used and useful” standard. For a utility to charge consumers for investment, the utility must show at a given time (date certain) that the investment is being used (and is useful) to provide service to consumers. While the utility may install plant with more capacity than needed (allowing for future expansion), they cannot charge current consumers for investment that will serve future consumers. This consumer protection is especially important in keeping rates to consumers affordable and reasonably related to the cost of providing them essential utility service.
Economic development is good for the state. It can bring jobs, tax revenues, and other benefits to the public. But it raises the question of who should pay for utility investment or discounted utility rates that are offered to induce businesses to locate in Ohio. We urge the General Assembly to take a measured approach that does not require utility consumers to subsidize the development to such a degree that it makes utility service unaffordable for Ohioans. And, between the utility consumer, the utility, and the potential business (i.e. Meta, Amazon, Google), the Legislature should consider many factors, including who can best afford to underwrite the investment or discount.
Additionally, the mini-rate case provision, while well intended, may not be necessary given that the PUCO already has a process in place. Utilities, as well as mercantile customers, can file for an economic development arrangement with the PUCO under existing Ohio law (R.C. 4905.31) and PUCO rules (Ohio Adm. Code 4901:1- 38). This process has worked well in the past and has not created undue delays in getting arrangements approved.
We should also consider that there are other provisions in this bill that may establish an expedited process for standard PUCO proceedings (Lines 82-86, 1356-1373). Economic development arrangements could be considered within those processes, precluding the need for the mini-rate case.
Something the Legislature should consider is a yearly cap on the capital expenditures related to economic development. We do not favor the type of caps proposed in past legislation that are tied to a % of a utilities’ base distribution revenues. While a 3% or 4% cap based on a utility’s distribution revenues may seem de minimus, it is not, especially if the cap is not cumulative, but starts afresh every year. For instance, if the General Assembly were to enact a 4% cap based on 2024 base distribution revenues for Ohio electric utilities, it would create a yearly charge to consumers of about a $100 million per year.22 A better solution is to set a cumulative cap that pertains to a charge on consumers’ bills, such as a $.35 cents per month charge.
CONCLUSION
There is little doubt that many challenges lie ahead in ensuring all Ohio families and businesses have reliable and affordable energy. It will be a long and winding journey.
Thank you again for this critical legislation