Budget would charge Ohio consumers for industrial energy discounts

On Thursday, members of a H0use subcommittee questioned Public Utilities Commission (PUCO) Chairman Todd Snitchler about language in Governor Kasich’s two-year budget (House Bill 59) that would allow utility companies to recover costs associated with rate discounts they provide to large energy users from consumers outside of their territory.

Currently, utilities like First Energy or AEP can negotiate “reasonable arrangements” with large industrial users — oil refineries or auto factories, for example — who consume large amounts of energy. These arrangements allow the industrial users to pay a discounted rate, typically in exchange for a plant expansion that creates jobs and boosts the local economy. In exchange, the cost of the discount is spread across the bills of all the other consumers within the utility’s service territory.

HB 59 includes a change that would allow those costs to be picked up by utility customers all across the state. For example, if First Energy decides to enter into a reasonable arrangement with a factory in Northeast Ohio, the cost of this rate reduction could appear on the bill of customers in Southeast Ohio.

The policy shift caught the attention of subcommittee members. Reps. Mike Ashford and Denise Driehaus both asked Chairman Snitchler whether this policy is fair to ratepayers in other utility territories who are unlikely to share in the expanded economic activity, even while picking up the tab.

Staff from the Ohio Consumers Counsel were also questioned about the wisdom of this policy change. They suggested lawmakers should examine the fairness aspect and whether it would be reasonable to ask the utilities themselves to bear some of these costs. They also suggested that the policy change was a departure from the efforts of recent years to move the utility industry toward market rates.

In response, Chairmen Snitchler said that he believed the policy change is consistent with current policy, would lower government costs, and the economic benefit would be shared by all Ohioans.

We are concerned with the apparent inconsistency at PUCO. In January, the Commission dealt a major blow to the Turning Point Solar Project that would have created 600 new jobs, against the recommendation of career staff. In that instance, PUCO members refused to allow AEP to recoup the cost of purchasing renewable energy from a planned new Ohio solar facility. The contradiction between allowing utilities to charge customers for investment in some industries, while rejecting investment in new, clean energy facilities requires further exploration by lawmakers.