A key component of the energy efficiency benchmarks set forth in Senate Bill 221 (SB 221) involved a provision allowing mercantile customers (those having an annual electric usage of 700,000 kilowatt-hours or more) to "opt-out" of the responsibility for paying the Ohio electric distribution utilities’ (EDUs) costs of compliance with those benchmarks—costs recovered through an energy efficiency rider. The lone requirement was that the mercantile customer commit its energy efficiency or demand-response program to the electric distribution utility (EDU).

For nearly a year and a half, Ohio’s EDUs have been building "portfolios" of energy efficiency programs undertaken by these mercantile customers. To date, a significant backlog of mercantile customer applications remains pending at the Public Utilities Commission of Ohio (PUCO), which may be causing considerable difficulties for the EDUs efforts to comply with the energy efficiency benchmarks set forth in SB 221.

Summary of the Pilot Program

On September 15, 2010, the PUCO issued an Entry establishing an 18-month pilot program for applications filed by mercantile customers seeking to commit their energy efficiency and peak demand measures to the EDU’s programs. Designed to simplify the application process, the PUCO committed to:

  • develop a “standard application template for use by mercantile customers;
  • expedite the approval process through the implementation of an automatic approval process; and
  • simplify the incentives available to mercantile customers.

The Standard Application Template

The PUCO’s Entry committed to posting a standardized template and corresponding filing instructions on its website. The standardized application form will be used for all EDUs and all EDU service territories. In addition, the PUCO emphasized that all mercantile customer applications filed before September 15, 2010, should be refiled if the applicant wants to be considered for the automatic approval process. Mercantile customers that do not withdraw their pending application and refile will remain in the queue, but there was no guarantee of expedited approval.

The Automatic Approval Process

The automatic approval process only applies to a mercantile customer who agrees to take a cash incentive rather than an exemption from the applicable EDU’s energy efficiency rider. From a procedural standpoint, the automatic approval process commences once a mercantile customer application is filed. Unless the automatic approval process is suspended or the application denied, approval will automatically be approved on the 61st day after filing.

Simplified Incentives

In order to simplify the incentive programs available to mercantile customers, the PUCO established the following guidelines:

  • Cash incentives are only available for projects involving a monetary investment, not projects resulting solely from behavioral changes (presumably, monetary investments causing behavior changes would count).
  • Cash incentives will only be available upon the mercantile customer’s demonstration that "it has installed more efficient equipment than was otherwise available." As a result, the replacement of failed equipment will not be available for an incentive.
  • Reversing course, the PUCO agreed that cash incentives would be allowed for projects having a payback of less than one year. The sole caveat is that the incentive be less than 50 percent of the total project cost.

Conclusion

While it remains unclear exactly how the Ohio EDUs will implement the PUCO’s pilot program, its guidance is a significant improvement from the regulatory limbo caused by the PUCO’s prior pronouncements on the approval of energy efficiency projects for mercantile customers.