On October 10, 2013, the Ohio Manufacturers’ Association (OMA) sent a letter to Senator Bill Seitz, the Chairman of the Senate Public Utilities Commission. Senator Seitz has been holding hearings to evaluate Ohio’s energy portfolio mandates that were adopted in 2008. The OMA letter repeated its opposition to Substitute Senate Bill 58 (SB 58), which Senator Seitz introduced to reform – not repeal – the mandates.
SB 58 imposes reasonable limitations on the amount ratepayer electric bills can increase as the compliance requirements significantly escalate. Customers are paying for this compliance through a sizable surcharge on their electric bills. Some large manufacturers are paying upwards of $1 million per year, with the total statewide tab running at about $250 million.
These surcharges create a slush fund that pays other customers for the completion of energy efficiency projects. Organizations like the OMA also have the ability to extract a sizable bounty from the slush fund by turning in member efficiency projects to the Public Utilities Commission of Ohio (PUCO).
On October 9, 2013, the OMA issued what it calls an Executive Overview of SB 58, in which it characterizes the legislation in a fashion that attempts to justify its opposition. This opposition is in the face of overwhelming industrial and commercial customer support of SB 58. Steelmakers to fast food restaurants have made their voices heard that SB 58 is good for Ohio businesses.
The OMA opens its Executive Overview by stating, “A fundamental objective of the OMA is to… lower[ ] energy costs for Ohio manufacturers….” The OMA then offers a series of misrepresentations of SB 58, before arriving at conclusions diametrically opposed to its members’ interests. The OMA’s peculiar position on SB 58 gives rise to four questions that its members and the Ohio General Assembly should ask.
Question 1: What is “Vastly Broader” Than “All”?
The OMA misleadingly asserts that SB 58 “would vastly broaden how energy efficiency is defined with respect to what utilities can count toward compliance….” However, under current law, the PUCO is obligated to measure portfolio mandate compliance “by including the effects of all [mercantile-sited] demand response programs… and energy efficiency” (RC Section 4928.66, emphasis added).
SB 58 contains provisions that are designed to make it clearer that when the General Assembly says “all,” it means “all.” But this clarification is hardly a broadening – vast or otherwise – of “all.” By definition, there is nothing broader than all.
The OMA is not only advocating against the clarifying language of SB 58. It is advocating for an unlawfully narrow interpretation of current law that is inconsistent with the law’s plain language. To the OMA, the definition of “all” seems to be “some.” By ignoring actual energy efficiency gains, mandate compliance becomes increasingly arduous, driving up costs to manufacturers and other ratepayers.
It is peculiar that the OMA would take a position that makes mandate compliance for its members significantly more difficult than is statutorily required.
Question 2: How Does Limiting Costs Increase Costs?
SB 58 clarifies the cost limit for renewable energy resource mandates in current law (RC Section 4928.64). It also introduces a cost limit for the energy efficiency and peak demand reduction mandates. Under SB 58, electric utilities are free to spend more on renewables and energy efficiency, but if they do so, their shareholders – not ratepayers – shoulder the costs.
The OMA’s Executive Overview states that these limitations on electric bill increases may “limit[ ] program innovation and growth in future years.” But if renewable and energy efficiency resources prove to be the lowest cost solution as proponents suggest, ratepayers’ bills will stay well below the proposed cap. Since program innovation and growth will continue unless costs significantly exceed current levels, the type of program growth the OMA favors can only mean significantly higher bills for its members.
The OMA then goes on to say that these sections of SB 58 “could result in significant extra costs to ratepayers….” Apparently, the OMA believes that by limiting ratepayer exposure to significant costs, the program’s growth will be limited, which will result in ratepayer exposure to significant costs. Either the OMA seriously believes this invalid reasoning, or it advances these arguments because of an ulterior motive.
It is peculiar that the OMA would fight efforts to limit its members’ cost exposure.
Question 3: Why Does the OMA Want to Limit the Discretion of Its Own Members?
Through the electric bill surcharge scheme, a small subsection of customers may be able to extract more money out of the slush fund than they will ultimately pay into it. However, this scheme is a zero-sum game. The money one customer receives is coming out of the pocket of another, with the rent-seekers taking their cut along the way.
If the OMA wants its members that are benefiting from the mandate compliance money to continue program participation, which will thereby allow the OMA to extract its bounty, that’s fine. SB 58 does not foreclose the OMA or its members from making this choice.
However, for the majority of large manufactures that are losing out in this scheme, SB 58 provides a streamlined way to exit the program. An exit mechanism for mercantile customers already exists under current law. However, the current exit mechanism suffers from two serious problems: (1) it is overly cumbersome, and (2) organizations like the OMA can get paid a bounty out of the slush fund when a customer exits. These two flaws needlessly squander resources, which ratchets up compliance costs.
The OMA correctly identifies that SB 58 “[c]reates an opt-out option for [some high] voltage customers allowing them to opt out of paying the energy efficiency [bill surcharge]….” In exchange for opting out, these customers relinquish any and all rights to program benefits.
In case you were wondering, the high voltage customers that qualify are largely manufacturers – the very constituency the OMA professes to represent. However, the organization bemoans that the proposed legislation “[c]ontains no requirement for these opt-out customers to implement any energy efficiency measures or achieve any energy efficiency savings.”
The OMA’s position is that its members should not be free to choose whether they participate in the program. The OMA seems to believe that its members cannot be trusted to make responsible energy efficiency decisions without regulatory intervention.
It is peculiar that the OMA would object to empowering its members with a streamlined way to leave the program.
Question 4: Why is the OMA Lobbying Against SB 58, and Thereby Its Own Members’ Interests?
In 2007, the OMA argued that
[w]hile renewable sources of power are an important part of Ohio’s electricity generation portfolio, their use should be governed by the market place, not by government mandate. Subsidizing the use of expensive renewable energy sources by forcing all customers to bear the burden will drive up electricity costs for residential, commercial and industrial energy users alike.
It is very peculiar indeed that the OMA now (1) takes a position that makes mandate compliance for its members significantly more difficult than is statutorily required; (2) fights efforts to limit its members’ cost exposure; and (3) objects to empowering its members with a streamlined way to leave the program.
In a mere six-years, and on the very same issue, the OMA went from an advocate for market solutions to an advocate for government mandates.
Being able to dip into a $250 million slush fund has perverted the OMA’s advocacy position. They are not advocates for the manufacturing community. They are advocates for rent-seeking and regulatory capture.