Where’s The Math in Ohio’s Efforts to Gut Energy Efficiency Standards?

Nov. 8, 2013
Ohio’s energy efficiency standards are under fire by a new bill backed by one of Ohio’s utilities. But the math doesn’t pencil out.

In Ohio—where proposed legislation would essentially gut the state’s energy efficiency standards–the math isn’t making sense.

If the bill–proposed by Sen. Bill Seitz (R-Cincinnati), chair of the Senate Public Utilities Committee—passes, Ohio residents would pay $3.65 billion more on their electricity bills over the next 12 years, according to a study by Ohio State University’s (OSU) Center for Resilience.

As a result of the state’s Renewable and Energy Efficiency Standards, citizens save an average of $300 million a year, according to the OSU study. If the standards remain intact, they are supposed to create 3,000-plus new jobs in the advanced energy economy. What’s more, the standards are expected to reduce greenhouse gas emissions by more than 7.5 percent by 2025.

So where did Sen. Seitz learn math and what exactly is he up to?

In an interview with Energy Efficiency Markets, Ted Ford, president and CEO of the Ohio Advanced Energy Economy, shed some light on this question.

“We have a particular utility here, FirstEnergy, that has a business strategy that’s different from most utilities today,” Ford says. “The whole company is focused on selling more power. Their business model is not ready for the 21st Century. They are pushing hard for this bill.” The company has convinced many of its industrial customers that they will get a short-term cost reduction if the bill passes, he adds.

“The bill has a very short-term kind of perspective,” he says.

A spokesman for FirstEnergy says the company supports the bill because it will lower for customers the costs of complying with the energy efficiency mandates. His company spends $70 million a year to meet the mandates, he says. Modifying the bill will allow the company and other utilities to meet the energy efficiency targets at lower costs, he says.

Contributing to Ohio’s anti-efficiency bill was the emergence of shale gas as a less expensive fuel source, says Ford. In 2008, when the standards were enacted, it was assumed prices would keep rising. But when shale gas came along, “folks started believing we’ll have cheap electricity as far as the eye can see and we can get rid of the energy efficiency standards because we don’t need them anymore,” he explains. “That’s partially what’s behind the push here.”

Ford’s group set the record straight with its release of the OSU study that explained the economics behind the energy efficiency standards, he says.

“We’ve done the economic models that blew away the opponents of the bill,” he says. As a result, movement on the bill has slowed to a crawl, he says.

“We’ve mobilized the business community,” Ford says. That includes about 400 companies in the state that are part of the advanced energy economy.

The Ohio Manufacturers’ Association (OMA) also opposes the bill.

“If approved, Senate Bill 58 could wipe out $2.5 billion in projected savings from energy efficiency from 2014 through 2020 and drive up electricity costs for manufacturers for years to come,” the association says on its website.

The bill would allow utilities to ‘count” new categories of efficiency that add no value for customers and produce no additional direct or indirect savings, says OMA. “This will make it easier for utilities to meet the energy-reduction targets without doing anything to reduce demand for power and achieve real energy savings,” it says. In addition, the bill would provide for high energy-efficiency cost recovery for utilities—four to five times higher than Ohio’s normal utility rates of recovery. “Utilities will be guaranteed a 33% profit on net benefits regardless of whether they meet the energy efficiency standards or not,” says OMA.

The bill would also limit utilities’ ability to bid energy efficiency into regional capacity auctions. This would lead to higher wholesale prices for everyone, the association says.

Ford thinks his group has done a good job convincing businesses that they have a lot to lose from the bill, and he’s pretty sure it won’t pass.

However, the bill scares some energy efficiency providers enough to put some projects on hold. For example, Kastle Group has put two projects on hold due to the uncertainty created by the bill, according to a press release from the Ohio Advanced Energy Economy. The company could be forced to close down as a result of the bill.

If the bill is enacted, yielding higher electricity costs, fewer green businesses, and higher carbon emissions, will other states put away their calculators and follow Ohio’s lead?

Do the math and let us know what you think. Be sure to join the discussion on our Energy Efficiency Markets LinkedIn Group

About the Author

Lisa Cohn | Contributing Editor

I focus on the West Coast and Midwest. Email me at [email protected]

I’ve been writing about energy for more than 20 years, and my stories have appeared in EnergyBiz, SNL Financial, Mother Earth News, Natural Home Magazine, Horizon Air Magazine, Oregon Business, Open Spaces, the Portland Tribune, The Oregonian, Renewable Energy World, Windpower Monthly and other publications. I’m also a former stringer for the Platts/McGraw-Hill energy publications. I began my career covering energy and environment for The Cape Cod Times, where Elisa Wood also was a reporter. I’ve received numerous writing awards from national, regional and local organizations, including Pacific Northwest Writers Association, Willamette Writers, Associated Oregon Industries, and the Voice of Youth Advocates. I first became interested in energy as a student at Wesleyan University, Middletown, Connecticut, where I helped design and build a solar house.

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