Office of the Ohio Consumers' Counsel

Government Relations

For more than 30 years the Office of the Ohio Consumers’ Counsel (OCC) has had a keen interest in legislation that impacts Ohio’s residential consumers who are served by public utilities. OCC’s practice of participating in the legislative process was especially active in the first year of the 127th General Assembly.

While one bill, Substitute Senate Bill 221, introduced by request from Governor Ted Strickland in August, dominated both the House and Senate Public Utility Committees during 2007, more than 20 other bills related to utility matters were also introduced. The largest number of bills dealt with some form of tax exemption while others introduced either promoted or established alternative and advanced energy standards in Ohio for the first time – a position long-advocated by the OCC.

In addition to S.B. 221, of particular interest to the OCC have been H.B. 72 introduced by Rep. Clyde Evans, (R-Rio Grande), H. B. 357 introduced by Rep. Jim McGregor (R-Gahanna) and H.B. 250 introduced by Rep. Shannon Jones (R-Springboro).

H.B. 72

Rep. Evans’ bill, H.B. 72, would create a task force to study broadband and wireless communication development in all areas of the state, but particularly in the rural areas that lack such crucial coverage. The OCC believes this is an important task to provide more options to customers. The OCC is also concerned with the practice of telephone companies filing for alternative regulation for pricing flexibility for basic service without clear competitive choices for comparable service.

Governor Ted Strickland also launched his Ohio Broadband Council which shares many of the same objectives as HB 72. The OCC was appointed to the Council and will ensure that the residential consumer perspective is represented.

H.B. 357

H.B. 357, introduced by Rep. McGregor, was assigned to the newly created Alternative Energy Committee in the Ohio House. Involved at the outset, many of OCC’s suggestions became part of the introduced version of the bill. Rep. McGregor sought recommendations in areas that involved advanced energy components, energy efficiency and renewable energy standards. At year end, the bill had not moved out of committee.

H.B. 250

H. B. 250, introduced by Rep. Jones, would create revenue decoupling mechanisms for natural gas companies. OCC insisted in its testimony and during meetings with legislators that any revenue guarantees for the utilities should include specific consumer protections and be tied to energy efficiency measures. The bill, as of year end, was still in the Ohio House Public Utility Committee.

S.B. 221

With electric rate stabilization plans set to expire at the end of 2008, state regulators, lawmakers and other parties were particularly interested in the plan to restructure Ohio’s electric industry. Without such a plan, dramatic rate increases could be expected in parts of the state.

The issue gained prominence when Governor Ted Strickland presented his energy proposal to the state legislature on August 29. The resulting legislation, Senate Bill 221, passed the Ohio Senate unanimously on October 31. The amendments included in the Senate-passed version heightened the OCC’s concerns that the bill, in that form, could lead to higher electricity rates. At year end, the bill was in the Ohio House Public Utilities Committee as representatives heard testimony from the OCC, regulators and other utility experts about the statewide energy legislation.

Consumers’ Counsel Janine Migden-Ostrander testified four times before the Senate and the House regarding Senate Bill 221 in 2007. In her legislative testimony, Migden-Ostrander cited the need for a 10- point approach to ensure a sound energy future that gives residential consumers a fair regulatory process and the lowest rates. The OCC’s full list of recommended protections for residential consumers is as follows:

• Utilities should be required to develop a side-by-side comparison of all pricing options, including a regulated rate and a market rate so the lowest cost option can be determined and provided to customers;

• A fair process should be created in cases at the Public Utilities Commission of Ohio (PUCO) that includes ample time for participants to prepare;

• Customers should not continue to pay for charges that are scheduled to expire;

• No automatic increases outside a rate case process should be permitted;

• Discounts to large users should not be grandfathered into the law. Any discount should be based on criteria tied to economic development and jobs, and should be for limited periods of time and subject to renewal if the circumstances warrant;

• A prudency standard should be reintroduced so it requires accountability to the customers who are paying for the utilities’ decisions regarding purchases;

• The baseline rates allowed by Senate Bill 221 are too high and result in customers repaying for costs already recovered by utilities;

• Customers who switch electric providers should be able to avoid their original utility’s entire generation rate;

• Any infrastructure improvement costs should be sought only as part of a full rate case;

• Criteria should be established that the PUCO must consider when deciding whether to increase rates.

The OCC also testified at the Ohio legislature in favor of more energy efficiency and renewable energy which can ensure reliability and stabilize prices. In addition, the OCC testified on the importance of increased disclosure from utilities when they seek rate increases.

Renewable energy and energy efficiency should be part of a portfolio of options to meet the growing demand for electricity in the years to come. These largely untapped resources give Ohio a tremendous opportunity to reduce or moderate the demand for electricity and the expensive centralized power plants needed to produce it, and reduce reliance on limited resources such as fossil fuels. Another benefit of utilizing renewable energy is there is no fuel cost for producing electricity.

For these reasons, the OCC recommended amending Senate Bill 221 to increase the percentage of renewable energy a utility must purchase for sale to its customers. Benchmarks and penalties should also be added to ensure that utilities achieve incremental progress toward using renewable energy instead of delaying or deferring use of these resources. In addition to the increased use of renewable energy, the OCC believes that 22 percent of new electricity can be saved through energy efficiency measures by 2025.

The concept of transparency is an extremely important element to fair rates for consumers. Full disclosure of all parts of a rate case – including side deals and special contracts – is essential to verify the millions and sometimes billions of dollars at stake in complex cases. Transparency should also provide parties with adequate time to review and analyze the complex filings in order to verify the costs and protect consumers.

Side deals and special contracts that utilities sign with other companies need scrutiny to protect residential consumers. Side deals are generally not presented in a PUCO process for comment by others or for possible approval by the PUCO. Those involved in side deals, including the utilities and their affiliates, should be required to disclose the side deal.

Special contracts were established years ago to promote economic development, among other objectives. To fully protect customers, special contracts should be allowed to expire and a more defined public process is needed to address any remaining concerns.

Transparency needs to be a part of all aspects of utility regulation. With an open and inclusive process that includes ample time to review complex utility requests, the OCC can effectively work toward obtaining the best outcomes for residential utility consumers, just as others can work in an open, fair process toward meeting their needs.

As the House finishes its analysis and finalizes the energy bill in 2008, important issues remained for Ohio consumers. Residential consumers must be protected and provided with the lowest cost energy options, with a fair and open rate setting process and with more opportunities for the use of renewable and energy efficiency resources. It was important that the OCC and others were able to participate in the process of Senate Bill 221 and that OCC represented the perspective of residential consumers, as the decisions made by the Ohio legislature will have a profound effect on the future of consumers’ utility bills and service quality.

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