Before
The Ohio Senate
Public Utilities Committee
Testimony on Senate Bill 310
By
Bruce J. Weston
Ohio Consumers’ Counsel
Office of the Ohio Consumers’ Counsel
April 30, 2014
Chairman Seitz, Vice Chairman LaRose, Ranking Minority Member Kearney, and members of the Senate Public Utilities Committee, thank you for allowing testimony on this Bill that affects Ohio’s 4.2 million residential electric customers. I am Bruce Weston, the Ohio Consumers’ Counsel. I thank the Chairman and Members for the process on these issues.
For your consideration, I recommend a number of revisions to the Bill, for purposes of consumer protection. My recommendations are:
1. Thaw the freeze. I appreciate, in concept, the idea of a Study Committee. It would be preferable, however, to not freeze the energy efficiency and renewable benchmarks while the study of the benchmarks is in progress. Any changes to the 2008 energy law could be made after the Study Committee completes its report.
2. The study of Senate Bill 221 could incorporate some of the format of the study of the Florida energy efficiency law by the Florida Legislature. The Florida study included an analysis by a separate entity that took input from stakeholders.
3. The scope of the study (of Senate Bill 221) should be broadened to include the examination of other issues in the 2008 energy law that tilt the balance of ratemaking in favor of Ohio’s electric utilities and against Ohio’s electric customers.
4. If shared savings are allowed, then the electric utilities should be restricted to charging customers for shared savings on the energy efficiencies that exceed the statutory benchmarks. This restriction should apply to protect customers even if benchmarks are eliminated and the utilities continue to offer programs. And shared savings, if allowed, should be capped at a level to protect customers.
5. The Bill should protect consumers from paying so-called “lost” transmission and distribution revenues to electric utilities.
6. The Bill’s requirement to list the costs of benchmark compliance on customers’ electricity bills should be expanded to include listing the benefits of energy efficiency programs.
7. Consumers should be protected from paying charges while the Ohio Supreme Court decides if those charges are lawful and reasonable.
1. The Freeze (and Related Matters)
In lines 530 through 534, the cumulative energy efficiency benchmark is frozen at 4.2 percent. This provision of Senate Bill 310 is premature. That is, Senate Bill 310 freezes the cumulative energy efficiency mandate at 4.2 percent prior to the completion of any study that could determine whether a freeze or other action is warranted. Similarly, the Bill freezes the renewable energy benchmark at 2.5 percent. The benchmarks should continue during the study as in current law. Continuing the energy efficiency benchmarks during the study can also be justified by the benefits of the programs. For example, Dayton Power & Light stated that: “In keeping with the energy efficiency goals of Ohio Senate Bill 221, DP&L launched a series of energy-efficiency programs in 2009 designed to help customers save energy and money. DP&L believes that these efforts to-date have been a success.”1
It should be noted that the 2008 law allows the Public Utilities Commission of Ohio (PUCO) to act if the benchmarks need to be revised. R.C. 4928.66(A)(2)(b)) allows the PUCO to amend annual benchmarks if a utility cannot “reasonably achieve the benchmarks due to regulatory, economic, or technological reasons beyond its reasonable control.”
While the PUCO has this authority to change the benchmarks, some have expressed an interest in changing the energy efficiency benchmarks in the law. In this regard, the benchmarks could be revised to eliminate the two percent annual increases that commence in 2019 and limit increases to one percent per year.
2. The Study
Lines 679 to 743 of the Bill create an “Energy Mandates Study Committee” to study Ohio’s renewable energy, energy efficiency, and peak demand reduction mandates. This review process could be improved by having a separate entity review and report on Senate Bill 221, with the input of the stakeholders. In 2012, the Florida Legislature directed the Florida Public Service Commission in consultation with the Florida Department of Agriculture and Consumer Services, to contract for an independent evaluation to determine whether Florida’s energy efficiency law remained in the public interest.2 To gain a “fresh, independent” look at their law, the Florida Legislature selected the research consortium of the University of Florida’s Public Research Center and Program for Resource Efficient Communities, and the National Regulatory Research Institute to conduct the evaluation.3 As part of the study, several focus groups were convened to identify the range of issues and concerns that different stakeholders might have concerning the law.
3. The Scope of the Study
Senate Bill 310, on lines 679 through 743, proposes that the “Energy Mandates Study Committee” review Ohio’s energy efficiency and renewable energy standards, and conduct a cost-benefit analysis. The scope of the study should be broadened to examine ratemaking issues in Senate Bill 221 that tilt the balance of ratemaking against Ohio’s electric consumers and in favor of electric utilities. In the first Attachment to this testimony, there is a list and discussion of recommendations by the Consumers’ Counsel and the Ohio Manufacturers’ Association. These are recommendations for improving the 2008 energy law to protect customers of electric utilities. While these issues would be appropriate for study, these issues would also be appropriate for addressing right now in this Bill for revising the 2008 law.
4. Limiting or Eliminating Charges for Shared Savings
If shared savings are allowed, then the electric utilities should be restricted to charging customers for shared savings on only the energy efficiencies that exceed the statutory benchmarks. This restriction should apply to protect customers even if benchmarks are eliminated and the utilities continue to offer programs. And shared savings, if allowed, should be capped at a level to protect customers. In this regard, the Industrial Energy Users-Ohio recently described (in testimony before this Committee) AEP-Ohio’s shared savings award as a “bounty.” And the Industrial Energy Users-Ohio also expressed concern that Senate Bill 310 would automatically extend the cost recovery associated with utilities’ currently approved portfolio plans (including shared savings) beyond their expiration dates.5 We share this concern. And we are concerned that the Bill could allow utilities to extend the period of settlements that we and others negotiated with utilities, when the settlements by their terms do not provide for extension.
5. Limiting or Eliminating Charges for Lost Revenues
A mechanism for lost distribution or transmission revenues allows a utility to charge customers for the revenues it does not collect when customers save money through the utility’s energy efficiency programs. Instead of lost revenue collection, decoupling programs should be considered, which provides a more fair result for consumers.
6. Information for Customers on Utility Bills
Senate Bill 310, on lines 653 through 676, requires the itemization of costs for energy efficiency and renewable energy on customers’ bills. Customers’ bills should also inform customers that energy efficiency programs can yield savings.
7. Consumers should be protected from paying charges while the Supreme Court decides if those charges are lawful and reasonable.
The law should provide residential customers protection from paying charges as part of their utility bills while the Supreme Court of Ohio decides whether those charges are lawful and reasonable. For example, last February, AEP was permitted to keep $368 million (plus carrying charges) that it had collected from customers from 2009 to 2011 even though the Supreme Court determined that AEP’s original rate proposal was unjustified. (The second attachment to this testimony is a news story on this subject.) A legislative solution, specific to the Consumers’ Counsel, could be made by clarifying R.C. 2505.12 to provide for a stay of utility charges without the posting of a bond in our appeals of PUCO decisions. R.C. 2505.12 exempts the State from giving a bond in connection with appeals. (We believe that this statute should already exempt the Consumers’ Counsel from a requirement to post a bond.) Current law (R.C. 4903.16) requires a bond to obtain a stay of a PUCO order by the Supreme Court. The Consumers’ Counsel, a state agency, does not have the resources to post such a bond. This imbalanced process for staying PUCO orders, where utilities can obtain stays and we cannot, should be cured by the Legislature.
Ohioans are already paying more on average for electricity than residential consumers in 32 other states.6 Ohio can do better for consumers, and improvements to Senate Bill 221 can help reduce electricity costs for consumers. That concludes my testimony. Thank you again for the opportunity to make recommendations on issues important to Ohio’s electric consumers.
1 In the Matter of the Application of The Dayton power and Light Company for Approval of Its Energy Efficiency and Peak Demand Reduction Program Portfolio Plan for 2013 through 2015, PUCO Case No. 13-833-EL-POR et al., Portfolio Plan (Apr. 15, 2013) at 5.
2 See http://warrington.ufl.edu/centers/purc/docs/FEECA_FinalReport2012.pdf, Evaluation of Florida’s Energy Efficiency and Conservation Act (hereinafter “FEECA Evaluation Report”) at 1.
3 FEECA Evaluation Report at 4.
4 FEECA Evaluation Report at 7.
5 Reforming Ohio’s Portfolio Mandates Senate Bill 310, IEU-Ohio Testimony of Sam Randazzo, (April 8, 2014) at 8 and 9.
6 See U.S. Energy Information Administration, EIA Electric Power Monthly with Data for August 2013 (October 2013) at 119, Table 5.6B (http://www.eia.gov/electricity/monthly/current_year/october2013.pdf).