After an extensive four-month debate, on July 23, 2019, the Ohio General Assembly passed H.B. 6, a nuclear subsidy bill which will essentially eliminate energy efficiency programs in the state. Governor DeWine signed the bill into law the same day.

This legislation is the latest in a six-year fight over the fate of clean energy in Ohio. H.B. 6 makes significant changes to both the Renewable Portfolio Standard (RPS) and Energy Efficiency Resource Standard (EERS) that will have lasting impacts on the energy sector and Ohio’s economy.

Below, we answer 6 of the most common questions about H.B. 6 and look at Ohio’s uncertain clean energy future.

What is H.B. 6?

H.B. 6 authorizes a monthly surcharge on all customer electric bills to subsidize two nuclear power plants in the state. Beginning in 2021 and running through 2027, the surcharge is projected to raise $170 million annually, including $20 million annually for existing solar projects in the state. The bill also authorizes an additional surcharge from 2020 through 2030 on all Ohio customers to finance coal plants in the Ohio Valley Electric Cooperative (OVEC) located in Gallia County, Ohio and Jefferson County, Indiana.

Proponents justified cutting the renewable and energy efficiency bill charges in order to add the new nuclear and coal subsidies, which means customers likely won’t have a net increase in charges on their bills. The legislation changes the renewable energy target, lowering it from 12.5% renewable generation by 2027, to 8.5% by 2026.

The legislation also terminates the current energy efficiency resource standard after 2020. Under the final version of the bill, Ohio utilities are collectively required to reach a 17.5% cumulative energy savings goal, down from 22%. Previously, each utility was required to individually hit this savings target, but H.B. 6 allows utilities to count their savings collectively. With the lower target and pooling, utilities will likely reach this goal in 2020.

Is energy efficiency really going away?

H.B. 6 prohibits the Public Utilities Commission of Ohio (PUCO) from approving a cost recovery mechanism after the 17.5% standard has been met, which makes it very unlikely a utility will continue to offer energy efficiency programs after that point. While the statute does not out-right repeal the EERS, it most likely will have the same effect of ending energy efficiency programs in Ohio.

But it’s difficult to say exactly when the cumulative energy savings goal will be reached. That’s because H.B. 6 directs the PUCO to determine the energy baseline and “…energy savings that were estimated by the commission to be achieved as of December 31, 2020.” Based on the PUCO’s estimates, the collective banked energy savings are then subtracted from the baseline.

What are banked energy savings? Banked savings are reductions in energy use that a utility has already achieved above what is required by the EERS.

Allowing combined cumulative savings is also significant, because some utilities have more banked savings than others. A utility that hasn’t reached 17.5% energy savings on its own can use another utility’s banked savings to make up the difference. If 17.5% savings is not met, only then shall the PUCO approve additional energy efficiency plans after 2020.

Beyond the reduction in the cumulative energy savings goals and the pooling of banked savings, the bill expands the program opt-out to include mercantile customers (commercial and industrial customers that use more than 700MWh annually, or customers with “national accounts” such as gas stations or fast food chains). This change in law will lower the number of customers required to participate in energy efficiency programs. This will shrink the overall energy baseline, reducing the amount of kilowatt hours that need to be saved to meet the 17.5% threshold.

Using data from utility plan filings and the PUCO, MEEA’s analysis shows Ohio utilities will likely collectively reach 17.5% energy savings by the end of 2020 or shortly thereafter based on their current plan offerings and banked savings.

What are the impacts to customers?

H.B. 6 added additional surcharges for all customer classes to finance its nuclear and coal subsidies. Residential customers will pay $0.85 per month for nuclear and up to $1.50 per month for coal. Industrial customer surcharges are capped at $2,400 per month for nuclear and $1,500 per month for coal. This is significant because current rates that customers pay already include paying for these existing energy generation sources. These new surcharges are on top of the electric rate customers already pay.

Monthly customer charges for energy efficiency will end on December 31, 2020, but so will the programs. Energy efficiency is required to be cost-effective and historically has had a return of at least $2 for every $1 invested in energy efficiency programs providing substantive benefits to Ohio ratepayers. Currently, Ohio businesses and residents receive $2.65 in benefits for every dollar spent on energy efficiency programs.

H.B. 6 could end many popular utility programs like rebates for smart thermostats, fridge recycling and light bulbs, as well as custom programs for businesses to help improve their operations, upgrade HVAC and lighting systems and replace old office equipment.

How will H.B. 6 affect Ohio’s economy?

According to MEEA’s analysis, Ohio’s EERS has saved customers $5.1 billion in energy bill savings from 2009-2017. The energy efficiency programs have saved Ohioans 49 million MWh of electricity, which is enough electricity to power every home in Ohio for 10.5 months.

Ohio’s EERS not only returns cost-effective benefits to residents and businesses, it is also a huge economic driver. The clean energy industry employed 112,486 Ohio workers as of 2018. Of that, 81,676 (72%) are involved in the energy efficiency sector. These are good, local jobs that are seriously at risk due to the passage of H.B. 6.

What does this mean for utility EE portfolio planning?

Historically, Ohio utilities were required to get pre-approval for their energy efficiency programs. Pre-approval required a formal docket proceeding before the PUCO in which portfolio offerings were evaluated, stakeholders could comment on the energy efficiency programs and robust analysis improved portfolio cost-effectiveness and innovation.

In 2018 and 2019, the PUCO changed the energy efficiency portfolio planning process to eliminate pre-approval and instead implement a post-program annual audit. Under the new rules, existing plans are deemed reasonable unless the PUCO decides to take action.  

These regulatory changes, coupled with H.B. 6, mean that energy efficiency plans for 2020 could change. Several utilities will file their updated portfolio plans September 1. Upon receiving the plan filings, the PUCO could take action and open a docket proceeding, although they are no longer required to do so.

MEEA will be closely tracking and updating its members on these proceedings, as it is not completely clear how energy efficiency portfolio planning will occur this fall.

What’s next, should I be worried?

Yes, this is a huge setback for the clean energy economy in Ohio.

However, a potential referendum effort was announced that would allow voters in the 2020 election to repeal H.B. 6. Backers will need to collect 265,000+ signatures to qualify for the ballot. Referendums require considerable resources to be successful, but this could provide possible reprieve from the impacts of the new law.

Buckeyes deserve an energy policy that matches the modern 21st century economy. MEEA will continue to advocate and identify opportunities to promote energy efficiency while serving as a resource for our members, policymakers and other stakeholders in Ohio and throughout the Midwest.