This is the first in a series of blog articles exploring a report issued by an Ohio legislative committee regarding the future of Ohio’s energy efficiency, peak demand reduction and renewable benchmarks for Ohio regulated electric utilities, as outlined in the Ohio Revised Code Sections 4928.64 and 4928.66.
On September 30, 2015, the long awaited report by the Ohio Energy Mandates Study Committee was released. The Committee consisted of members of the Ohio House and Senate, along with the Ohio Public Utilities Commission Chairman (who served as an ex-officio, non-voting member). The committee was charged with studying the statutory energy efficiency, renewables and peak demand reduction requirements. The report contained several recommendations; the first of which – that the original two-year “freeze” of the benchmarks be extended indefinitely – was immediately criticized by a range of interested parties, including Governor Kasich, who called an indefinite freeze “unacceptable.” (See In addition to the recommended “freeze,” the report set forth four additional recommendations worthy of scrutiny in relation to the committee’s responsibilities as conferred by Senate Bill 310.
Senate Bill 310 established a committee, which was obligated to research and summarize a cost-benefit analysis of the energy efficiency benchmarks, create a standard for reviewing the mandates in the future and to study and recommend changes to the so-called “opt-out system” for certain customers. Subsequent to the passage of Senate Bill 310 on June 13, 2014, the 12-member committee held several hearings with multiple witnesses (testimony can be found here). This post and subsequent posts in this blog series will focus on specific recommendations or conclusions presented in the report and will explore the likely on Ohioans, Ohio businesses and Ohio’s future energy landscape.
The first charge of the Committee was to perform a cost-benefit analysis:
“A cost-benefit analysis of the renewable energy, energy efficiency, and peak demand reduction mandates, including the projected costs on electric customers if the mandates were to remain at the percentage levels required under sections 4928.64 and 4928.66 of the Revised Code, as amended by this act.”
According to Webster’s dictionary, cost-benefit analysis is commonly defined as “denoting or relating to a method of assessing a project that takes into account its costs and its benefits to society.” The committee report focused on costs, but provided no mention of any benefits or positive impacts to customers, businesses or to the electric grid (report pp. 3-5; the report may be found here). Thus, the “benefit” portion of the cost-benefit analysis is missing. Although former PUCO Chairman, Tom Johnson, devoted the bulk of his testimony to program costs, he also noted that, overall, energy efficiency and peak demand reduction programs were cost-effective:
“The PUCO has reviewed each utility’s energy efficiency and peak demand reduction programs and determined that, thus far, the programs of each utility are cost effective. In other words, the total energy cost savings of the customers, in the aggregate, exceeds the total costs of the programs”(Johnson Testimony, page 5 (December 8, 2014)).
This conclusion is reasonable, given that the programs are required by Ohio law to achieve calculable energy savings (R.C. 4928.66(A)(1)). Commission rules further require programs employed by utilities to achieve savings that are cost-effective – as noted above – or to provide “substantial non-energy benefits” (Ohio Adm. Code 4901:1-39-04(B)). As noted by Chairman Johnson, these programs have achieved savings that exceed their cost. This is demonstrated periodically by each utility in their portfolio filings (which must then be approved by the PUCO), and in reports submitted to the PUCO on an annual basis.
Countless hours have been spent by utilities, the commission and interested parties to review and document the cost-effectiveness of programs offered, subsequent savings achieved and other benefits that accrue directly or indirectly to Ohioans and Ohio businesses. Thus, the committee had material readily available to them in commission dockets and in testimony submitted directly to the committee (see, for example, the testimony of Bruce Weston, Ohio Consumers’ Counsel on June 1, 2015). The exclusion of a discussion of the benefits achieved by these programs renders the committee’s report incomplete and calls into question the committee’s recommendations, which could have dramatic effects on Ohioans, Ohio businesses and Ohio’s future energy landscape. These recommendations will be discussed in subsequent blog postings.
Read Gov. John Kasich’s view on the matter here.