Race To Ohio’s Energy Past
by Mark Shanahan

Ohio’s clean energy future is in grave peril.  Senate Bill 310 as passed by the Senate now is scheduled to be voted out of the House and sent to Governor Kasich for signature. (Committee vote currently scheduled for Tuesday.)

What’s in the bill?  The main elements are:

  • “Freeze” the renewable energy and energy efficiency requirements for Ohio’s electric distribution companies at 2014 levels through 2016.  Theoretically, if the General Assembly does not act, the current standards then resume.
  • Sets up the Energy Mandates Study Committee to make recommendations to be implemented by 2017. The committee is made up of 12 legislators (8R, 4D) to be named by leadership and the (non-voting) chair of the PUCO.  It is to do a cost-benefit analysis of the mandates. The law states, however, “it is the intent of the General Assembly to enact legislation in the future…that will reduce the mandates…” (Not that the conclusions are pre-determined)
  • Requires future contracts for renewable energy to include a change of law clause that if there are any changes to the renewables law, the contract can be voided. (Would you invest $500 million with that clause?)
  • Requires utilities to list the individual cost of renewable energy and efficiency on each customer’s bill.  It does not require identification of any other riders. For example, it will not list the cost of the $104 million subsidy given to Timken through its special arrangement. Nor will it list any benefits achieved through the riders. Nor will it require utilities to report on the cost of different sources of electric generation.  For example, there are price spreads between older coal plants, new combined cycle gas plants and nuclear plants.  Apparently, even partial transparency only applies to renewables and efficiency.
  • Redefines how efficiency is counted and allows utilities to go back as far as 2006 and recalculate.  It allows the utilities to take credit for efficiency savings even if the utility played no part in achieving it. It allows the utility to count upgrades to transmission lines even though there is already regulated cost recovery for those upgrades.
  • Changes the definition of renewable energy resources that count for the electric mandate to say those resources “do not have to be converted to electricity” to earn renewable (electricity) energy credits (RECs).  So, for example, landfill gas captured and prepared to fuel CNG vehicles counts.
  •  Allows the largest customers (industrials and large commercial) to opt-out of the efficiency rider more easily. Unlike current law, those companies do not have to submit evidence they are achieving the same level of efficiency as required for the distribution company. They merely have to submit a report to PUCO that says they did what they could; there are no defined metrics. PUCO can ask for more information but the company does all verification.  All information submitted by the company is deemed to be proprietary and trade secret; the public will never know.
  • Any current efficiency plan in place can be continued or amended at the utility’s discretion and an amended plan can be in effect through 2016.  Any pending plan cannot be reviewed or approved or have action taken on it until 2016.

There are myriad other, even more technical changes.

What has the debate been like? In the Senate hearings, run by ALEC national board member Bill Seitz, no one can remember opposition witnesses being treated with such arrogance, condescension and disrespect.  This was balanced by almost fawning treatment of a string of “free market” acolytes.  Seitz enlivened the debate with repeated references to “enviro-socialist mandates,” “Stalinist planning,” and the “Bataan death march to renewables” sometimes delivered in either a German or Russian accent. Working through a number of same subject bills, the Senate spent almost18 months on the subject.

Supporters of the bill argued that government mandates never work and if there were any viable options out there for a clean energy economy the market would implement them.  A parade of witnesses representing large users of electricity argued the standards cost them too much and could threaten jobs.  Many chambers of commerce (mostly from FirstEnergy territory) toed the party line and testified the true cost of the standards was jobs in their areas. When asked, none could name a single company for which this was true.

Opponents presented significant data that the standards resulted in billions of dollars invested in Ohio, thousands of jobs created in Ohio and contributed to lower costs for electricity. A number of self-identified conservative Republican business owners testified that the standards helped them. Any business or trade association that dared to oppose the bill was dismissed as a self-interested “rent seeker.”

The House hearings, all three of them over two weeks, have been more staid.  The material presented to the committee was much the same.

Interestingly, no investor owned utility presented testimony to either committee.  The Senate’s chief legal counsel told the House committee that there was no way to tell what the utilities thought because they never testified! (Perhaps the utilities should request refunds from all their lobbyists who crowded the hearing rooms and hallways!)

It was only in the House hearings, after questions by Rep. Kevin Boyce, that the environmental impacts of the mandates were addressed in substance. Apparently, a large coalition of Ohio environmental groups were convinced by their leaders that only business based arguments had any hope of protecting the portfolio standards. In fact, they were specifically asked not to raise those environmental issues in testimony and, for the most part, did not.

The Kasich fig leaf.   For a Governor who kicked off his administration with an energy summit that produced a ten-pillar energy plan, Kasich was surprisingly silent through much of the debate.  Three of his pillars (renewables, efficiency, and combined heat and power) will be seriously damaged by the bill.  His silence led some to hope for a veto. At the last minute, according to Senate President Keith Faber, Kasich insisted that the bill “freeze” the standards through 2016 with the possibility to resume in 2017. This fig leaf allows Kasich to avoid the label of being the first Governor in the nation to repeal renewable requirements and efficiency requirements.  The label might not serve him well in the 2014 campaign or in the 2016 Presidential primaries.

What about a compromise?  That’s always the key question in any legislative debate.  The problem with SB 310 is that it is fatally flawed at its core.  It represents a “compromise” with the folks who wanted full and immediate repeal of the standards.  But its “freeze” combined with other language changes and the directed results of the study committee will halt investment in both renewable and efficiency; it will in effect kill the standards.

A number of groups (Ohio Advanced Energy Economy, the Ohio Manufacturers Association, the American Wind Energy Association, Ohio Consumers Counsel) proposed a compromise on May 21; it would limit the freeze to one year, modify the industrial efficiency opt out provisions and create an efficiency cost cap for other customers.  In the release, put out by Republican warhorse Curt Steiner’s PR firm, the group argues its compromise would “create less disruption” for Ohio’s clean energy industry.

The bottom line is that any version of SB310 that can pass and be signed will seriously damage Ohio’s progress on clean energy and turn us to the past rather than the future. The genesis of this bill was a template prepared by ALEC to launch an attack on renewable standards across the nation. ALEC board member Seitz was smart enough to avoid the template and work with key entrenched interests to craft it to Ohio.  A letter sent out last week by the other Koch Brothers supported entity, Americans for Prosperity, urging support of the bill, undercuts his recent scoffing at any role by ALEC.

Elections have consequences. The Kasich victory and overwhelming Republican majorities in the Ohio Senate and House make it very difficult to defend the leap forward Ohio made on clean energy under Ted Strickland.  There is no choice but to fight on.

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Mark Shanahan provides strategic advice on energy policy and clean energy technology deployment through New Morning Energy LLC. He served as Governor Stickland’s Energy Advisor.

 

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