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Charlotte Hickcox: Ohio’s energy picture has changed. So should its efficiency standards

By Charlotte Hickcox

COLUMBUS: After a year of intense debate and evaluation, the General Assembly is poised to decide if Ohio’s five-year-old energy efficiency standards should be fine-tuned to reflect the state’s changing realities.

The Ohio Chamber of Commerce — along with hundreds of job creators across the state — believes Ohio’s economy would be well served to pass the reforms proposed in Senate Bill 58.

The bill, introduced by state Sen. Bill Seitz, a Cincinnati Republican, pushes for common-sense changes intended to halt the rising costs due to the mandates. For nearly five years, Ohio electricity customers have been footing the bill for utility programs to entice customers to use less electricity. The programs are required under Senate Bill 221, Ohio’s 2008 energy law that mandates annual reductions in electricity use, culminating in a 22 percent overall reduction by 2025.

The current law was passed with the best of intentions. The prevailing view at the time was that the price tag of mandated energy-efficiency measures was a better alternative than paying skyrocketing electricity prices in the future. After all, when Senate Bill 221 was passed our economy was still booming, energy prices were increasing, and it appeared that our energy options were limited. Then everything changed. We faced a near collapse of our economy. Electricity demand dropped well below pre-2008 levels and has remained flat ever since. Throw in the development boom of local shale gas, and we’re now witnessing electricity prices at their lowest levels in a decade.

Despite this, Ohio continues to doggedly pursue aggressive, mandated reductions in electricity use that are quietly costing our consumers and businesses hundreds of millions of dollars every year. Many customers are unaware they are picking up the tab for these programs through a surcharge on their monthly electric bills. As the compliance requirements rise in the coming years, so will the costs borne by businesses and consumers alike.

As a member-driven organization, the Ohio Chamber’s decision to support Senate Bill 58 takes into account the best interest of businesses of all sizes. We have a long track record of promoting market-driven policy solutions, as well as helping our members reduce the cost of regulatory compliance.

Reducing the compliance price tag of Ohio’s energy efficiency mandates — while managing to keep the ambitious targets within reach — will remove a significant hurdle to our state’s economic recovery. For some of our members, the cost is significant. It’s not uncommon to talk to a member paying more than $20,000 a month in energy efficiency surcharges alone.

There’s no doubt that energy efficiency is a valuable tool for electricity users to reduce consumption. We expect our members will continue to undertake market-driven energy efficiency projects that make sense whether we have mandates or not. But keeping the energy efficiency law in its current state adds a costly redundancy that Ohio businesses cannot afford.

Supporters of the mandates insist that according to basic economics, if there is less demand for electricity, then market prices will be lower. However, outside of those who participate in the energy-efficiency programs, there is no indication that mandated energy efficiency programs put any downward pressure on overall energy prices, especially since they are established through a multistate, deregulated, competitive market. Even if we were to accept this proposition, Ohio alone bears the burden of the cost of these mandates, while the benefits of reduced energy costs are diffused among the entire multistate market.

In the simplest sense, this legislation is a regulatory reform bill. The facts clearly illustrate that a lot has changed since 2008: the economic decline of the great recession, a natural gas boom that has reduced the cost of producing electricity, and a drop in previously forecasted utility demand. As the General Assembly considers the reforms in Sen. Seitz’s bill, it should remain open to a more current view of the facts and circumstances and allow the market to drive investments in energy efficiency. Energy customers, particularly businesses, will continue to invest in energy efficiency projects if it makes good business sense.

Hickcox is director of energy and environmental policy for the Ohio Chamber of Commerce.


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