The 131st Ohio General Assembly is just past the mid-way point of its two-year session, which means Governor John Kasich (R) has eleven months to reach agreement with Republican legislators on energy standards/mandates, among other issues – matters that are unrelated to his presidential ambitions.

Current Political + Legislative Landscape

In the current legislative session, which ends December 31, 2016, Republicans dominate Democrats in both the House (65-34) and Senate (23-10), which means their priorities are the state’s public policy agenda. This November, each of the representatives’ districts will have a chance to elect a House candidate for a two-year term. Incumbents who have already served for four consecutive terms must sit out for two years before regaining eligibility for those seats under Ohio’s Constitution. About half of the senate seats are also on the fall ballot, with senators serving four-year terms but still subject to the same eight-year term limits as House members. Don’t expect any significant partisan makeup shift in either legislative chamber since the district lines have been drawn to ensure its current composition until 2021.

Aside from a presidential bid, Governor Kasich’s second term will likely require action on important energy matters on which he disagrees with the General Assembly.

Ohio’s 3 Key Energy Developments

  1. Status of the Advanced Energy Initiative Review (SB 310)

Gov. Kasich signed into law Senate Bill 310 in 2014 to review the state’s six-year-old Advanced Energy Initiative (aka SB 221), which enacted broad electric industry restructuring legislation containing advanced energy and renewable energy generation and procurement requirements that apply to investor-owned utilities (IOU) and Certified Retail Electric Service (CRES) providers under Public Utility Commission of Ohio (“PUCO”) jurisdiction. The 2014 bill brought with it several changes to the original legislation.

Advanced/Alternative Energy Mandate

In 2008, SB 221 mandated that IOUs and CRESs were required to provide 25 percent of their retail electricity supply from advanced and/or alternative energy resources by 2025. SB 310 in 2014 reduced this requirement by half and eliminated the requirement that some of these resources be acquired from in-state sources.

Peak Demand Reduction, Energy Efficiency + the Energy Mandate Study Committee

In 2008, SB 221 also required IOUs to implement peak demand reduction (PDR) and energy efficiency (EE) programs that achieve a cumulative energy savings of 22% by the end of 2025, and reduce peak demand by 1.0% in 2009 and 0.75% annually thereafter through 2018. 2014’s SB 310 temporarily freezes the prior law’s energy generation and PDR/EE benchmarks at 2014 levels for two years, and created a legislative panel – the Energy Mandates Study Committee – to re-examine these standards and benchmarks and to issue a report of findings and recommendations, a task completed last September. Should the legislature not act on any of the panel’s recommendations, most original SB 221 standards – except for those provisions expressly modified or eliminated by SB 310 – would automatically resume in 2017 and continue through 2027.

The panel’s primary recommendation was to extend the freeze indefinitely, which Gov. Kasich quickly rejected, calling it “unacceptable.” As of now, the panel is dissolved and there are no legislative bills pending that would change the status of the freeze or its expiration. No proposals have been publicly floated, but you should anticipate that some activity before the summer will force activity by both branches of government.

  1. Special Energy Improvement Projects (SB 185)

Other unrelated pending legislation would modify law governing special improvement districts to provide for their creation to develop and implement plans for special energy improvement projects. Senate Bill 185 would permit property owners to petition local governments for special assessments to pay for the costs without creating such a district, permit a port authority to cooperate with a district to provide financing or other financial assistance to the districts or property owners along with other changes. The bill continues to be considered by the Senate Committee on Energy and Natural Resources.

  1. Critical PUCO Cases Pending for AEP + FirstEnergy

Two sets of cases pending before the PUCO may prompt additional legislation subsequent to their outcomes. AEP and FirstEnergy separately requested subsidies for particular units of their aging fleet of coal-fired generation in the form of “power purchase agreements,” or PPAs, between the regulated distribution utilities and their unregulated generation affiliates. FirstEnergy is also requesting a subsidy for the Davis-Besse nuclear facility, while AEP added a request to include 900MW of wind and solar development as a part of its approved PPA rider. The utilities describe these proposals as providing retail rate stability for their customers.

Some opponents have characterized these proposals as a “return to regulation.” Gov. Kasich has declared that deregulation of electric generation was perhaps not “the smartest thing we have done in the state of Ohio,” but also reiterated that the state must move “onward” with deregulation. Senator Bill Seitz, chairman of the Senate Public Utilities Committee, stated that the renewables provision in particular is contrary to “a legislative decision [SB 310]” and that the proposal is unfair to certified retail electric service providers because it may thwart competition. Senator Seitz added that “things will not go well for PUCO if they continue to defy the will of the General Assembly,” indicating that legislation may be proposed if the PUCO approves the AEP proposal.

Meanwhile, on the campaign trail, Governor Kasich declared “In Ohio, we are going to have development of solar and wind.” The governor further stated that if the legislature wanted to “gut” the current standards (#1 above), that he would return to the previous standards of SB221. The circumstances surrounding the utility proposals and the legislative study committee recommendations highlight the differences in energy policy that the governor must work out with Republican legislators.