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Ohio Should Follow Indiana’s Lead and End its Electricity Mandate


Posted by Justin Sykes on Thursday, March 13th, 2014, 10:05 AM PERMALINK


The state of Ohio should take note of the recent legislative accomplishments in Indiana with regard to Indiana’s electricity reduction mandate.  Ohio currently has in place the Ohio Electricity Usage Reduction Mandate, which requires Ohio’s electricity distribution utilities (EDUs) to reduce their customer’s electricity usage in increasing amounts each year. Similar to the Ohio energy reduction mandate, the state of Indiana has an energy reduction mandate called the “Energizing Indiana” program. Unlike Ohio however, Indiana has realized that the costs of the reduction mandate greatly outweigh any potential benefits to rate payers and businesses.

Recently, Indiana State Senator Jim Merritt “authored a bill that would phase out the Energizing Indiana program by the end of the year.” As of Monday, Senator Merritt’s bill passed the Indiana General Assembly with a 37 to 8 vote.  Senator Merritt’s bill will now be presented to Governor Mike Pence for approval, and if approved Energizing Indiana would be phased out by December 2014. Gov. Pence, being the good conservative that he is, would do well to make this legislation law.

In support of the bill, Senator Merritt cited the fact that “since 2009, the Energizing Indiana program has cost rate payers $500 million and will cost as much as $1.9 billion more by 2019.” As a direct result of the Indiana mandate, residents were being charged $1.50 per month to fund Energizing Indiana.

Alternatively, Ohio residents are paying almost three times the amount of Indiana residents to fund the electricity reduction mandate. Currently Ohio rate payers are paying almost $4.00 a month for an energy reduction benefit of only $0.37 cents a month. The discrepancy between the cost and benefit of the Ohio mandate is blatantly obvious in that paying $4.00 for something worth only $0.37 cents is clearly illogical.

Additionally, the compliance burden under the Ohio electricity reduction mandate is so great that that Ohio EDUs will have spent over $1 billion in compliance costs by the end of this year.  Because the Ohio mandate increases each year, Ohio EDUs compliance budgets are increasing 12 percent each year in response. In turn, those compliance costs are passed onto Ohio rate payers. If the current 12 percent compliance budget growth rates continue, by 2020 “Ohio ratepayers will be paying over $500 million per year as a result of the Ohio mandate.

To show just how much of the cost of the Ohio electricity reduction mandate is passed on to Ohio residents, take a look at the Ohio EDU AEP-Ohio Columbus Southern (AEP-Ohio). AEP-Ohio began charging residential customers 0.289 cents per kWh ($0.00289) in September of 2012 to fund its energy use reduction mandate budget. A typical AEP-Ohio customer using 750 kWh per month would incur a charge of $2.17 per month to fund the energy reduction mandate. Thus, “the mandate cost paid by a typical AEP-Ohio Columbus Southern zone residential customer was at least seven times greater than the price suppression benefit.” Essentially, AEP-Ohio customers are required to pay one dollar for every 15 cents of claimed price suppression benefit they received. The results are the same compared to other Ohio EDUs. Dayton Power & Light residential customers were forced to pay $3.90 per month for a $0.37 cent benefit.

Just like Indiana’s Energizing Indiana program, the Ohio electricity reduction mandate is all cost and no benefit for consumers and businesses. Indiana Senator Merritt stated in support of his repeal bill that if “energy efficiency policies aren’t leading to cost savings, they aren’t doing their job.” Clearly, the Ohio electricity usage reduction mandate is an energy efficiency policy that isn’t doing its job. As such, Ohio should follow suit and take action to repeal the Ohio electricity reduction mandate before Ohio consumers and businesses further suffer. 

 

Photo Credit: Charles E. Carstensen (photo has been resized)

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