Dear senators and representatives,
Ohio Senate Bill 221 placed aggressive Energy Efficiency and Peak Demand Reduction (EEPDR) mandates on Ohio’s investor-owned utilities. Ohio ratepayers have absorbed the costs associated with these mandates, to the tune of hundreds of millions of dollars. These costs have only impeded Ohio’s economic progress.
Fortunately, Ohio Senate Bill 310 instituted reasonable reforms on the SB 221 EEPDR mandates. These reforms have included: (1) the broadening of what projects count for compliance; (2) a streamlined opt-out mechanism that allows certain customers to exempt themselves from the program; (3) a two-year mandate freeze; and (4) the creation of your committee to explore the effects of the mandates on ratepayers and come up with further suggested reforms.
Brakey Energy has gained a unique perspective on how the EEPDR mandates are affecting Ohio ratepayers. Our company provides comprehensive energy management services to about 90 commercial, industrial, and institutional energy users that operate here in the state of Ohio. I respectfully offer the following additional recommendations for your consideration.
Continue the Freeze
Your committee has a very difficult task because it is impossible to quantify just how damaging the re-escalation of the EEPDR mandates might be. Given the newly proposed federal CO2 rules, a decision out of a federal court restricting customer emergency demand response participation, and recent changes to the PJM Interconnection wholesale electricity market structure, there is no telling what the unintended consequences of renewed compliance may be.
The most prudent course of action would be to extend the freeze indefinitely until certainty is brought to how these variables will affect Ohio. I assure you, freezing the EEPDR mandates is not synonymous with freezing energy efficiency. Customers have and will continue to take measures to reduce their energy intensiveness for the simple reason that it makes economic sense to do so.
Expand Counting Reforms
In the drafting of SB 310, there were many counting reforms and expansions proposed. It seems elementary that when counting EEPDR mandate compliance, it is appropriate to include all energy efficiency projects. Despite SB 310’s much-needed counting reform, there are still many efficiency projects that fall outside of the dragnet.
I would strongly encourage the committee to include things such as all reductions in Btu input per unit of production, water and wastewater efficiency, and any and all actions that reduce energy intensiveness.
One of the best parts of SB 310 was the creation of a streamlined opt-out mechanism from the mandates. Unfortunately, this opportunity is limited only to customers that accept voltage above primary.
The streamlined opt-out that was created by SB 310 should be expanded to include all mercantile customers effective January 1, 2017. Many of our subtransmission and transmission clients have elected to opt out and are pursuing self-directed energy efficiency projects. There is no reason something as arbitrary as voltage level should exclude customers from taking advantage of this opportunity.
Institute a Price Cap
For all customers subject to the mandate costs, a price cap should be implemented. The mandates passed in 2008 were done so with no consideration of cost. Mandate compliance should not be a suicide pact with Ohio’s economy. A not-to-exceed threshold of 3% of the unbundled generation price is more than reasonable.
I see on a daily basis how customers are affected by these energy efficiency mandates. For those who don’t live with the consequences of the mandates day-to-day, it may be difficult to follow how the legislation’s implementation is affecting customers.
An advisory stakeholder group should be established to provide the General Assembly with periodic reports on the implementation of SB 310 and any additional reforms. This will allow the General Assembly to have a good grasp of how its legislation is affecting customers, and what tweaks may be needed down the road.
SB 310 was an important first step to reforming the EEPDR mandates to ensure that Ohio’s economy can remain competitive. However, we have a short window before these mandates resume their steep upward climb.
The suggestions I have laid out are reasonable tweaks to existing law — not a repeal of the mandates. I thank you for considering their inclusion in the upcoming report, and look forward to seeing the report that comes out of the committee.
Matt Brakey, president
*Note: This article was originally published by Crain’s Cleveland Business on 9/29/15. You can view the original version on crainscleveland.com.