The Ohio General Assembly has passed what members are dubbing a “21st Century Energy Policy” in the form of Amended Substitute House Bill 15 (House Bill 15). After years of debate, members of the Ohio House and Senate considered concurrent bills during the current legislative session and settled on House Bill 15 as the vehicle to enact sweeping changes to how public utilities are regulated and how energy resources will be developed in Ohio in the future.
House Bill 15 was extensively debated during the House committee process – there were seven separate hearings and three substitute versions – before receiving a nearly unanimous floor vote of 94-3. Things moved quickly in the Senate – the Senate committee had been debating its energy policy bill, Senate Bill 2, while the House worked on House Bill 15 – and House Bill 15 was voted out of committee after two hearings and one additional substitute bill. The Senate voted 33-0 to approve the bill on April 30, with the House concurring later that day, with a vote of 94-2.
House sponsor, Representative Roy Klopfenstein (R-Haviland), stated at the outset that the goal of House Bill 15 was to (1) repeal the Electric Security Plan (ESP) process, enacted in Senate Bill 221 of the 127th General Assembly in 2008, as an alternative to utilities using a full market-based rate during a time when many feared that a market-based rate would result in massive increases to consumers' electric bills; and (2) to repeal the ratepayer subsidies to two 1950s-era coal plants, estimated to have cost ratepayers more than $500 million to date, that was part of a prior, controversial energy reform bill, House Bill 6 of the 133rd General Assembly in 2019.
While the House added substantially more issues to the bill it passed, the Senate's substitute bill pared down the number of issues covered. Highlights of the bill as passed include:
- Electric Security Plans (ESPs): The bill repeals the requirement for utilities to file ESPs and instead requires them to offer a standard service offer (SSO) only as a market-rate offer (MRO). Existing ESPs will be phased out. For example, FirstEnergy's ESP will end on May 31, 2029.
- Coal Plant Subsidies: House Bill 15 repeals the subsidies to the Ohio Valley Electric Corporation (OVEC) coal plants in Ohio and Indiana. The OVEC plants were originally built by a coalition of investor-owned utilities in Ohio, Indiana and Kentucky during the Cold War to fulfill the United States' atomic enrichment needs. Though atomic enrichment operations ceased more than two decades ago, the subsidies were part of a decades-old agreement to support the plants' operations. The subsidies will end immediately upon the bill's effective date.
- Electric Distribution Utility Rate Cases: Starting no later than December 31, 2029, and every three years thereafter, each electric distribution utility is required to file a rate case application with the Public Utilities Commission of Ohio (PUCO). Starting with the effective date of House Bill 15, these utilities have the option of filing a forward-looking, three-year rate case that should be more streamlined than existing rate cases. House Bill 15 adds new deadlines for the PUCO to act on applications for an increase in rates.
- Utility Ratepayer Protections: The bill aims to protect ratepayers by removing barriers to new electricity generation development and ensuring utilities are accountable. Public utility rates found by the Ohio Supreme Court to be unreasonable, unlawful or otherwise improper are refundable from the date of the Court's decision. Electric distribution utilities are prohibited from taking certain actions to induce settlements in PUCO proceedings.
- Incentives for Electric Generating Plant Construction: Starting with the 2027 tax year, House Bill 15 significantly reduces public utility property taxes levied on generating facilities and energy storage facilities that are new, converted or repowered in 2027 or thereafter. It also reduces public utility property tax assessments on pipelines first subject to taxation in 2027 and thereafter. The Power Siting Board (PSB) is directed to adopt an accelerated process for approval of electric generating plants, electric transmission lines, and gas pipeline infrastructure located in a priority investment area. The PSB also is directed to adopt an accelerated approval process for major utility facilities – i.e., electric generating plants of 50 megawatts or more, high-voltage electric transmission lines, and gas pipelines longer than 500 feet, more than nine inches in diameter, and more than 125 psi – located on land owned or leased by the applicant or on an easement or right-of-way.
- Consumer Protections for Competitive Retail Electric Service: House Bill 15 extends current consumer protections to “small commercial customers,” which are customers that receive electric service pursuant to a nonresidential tariff if the customer's demand for electricity generally does not exceed 25 kilowatts within the last 12 months. It requires a competitive retail electric supplier or competitive retail natural gas service supplier to provide two notices before converting a fixed rate to a variable rate. Competitive providers also are authorized to offer alternative billing and payment structures to their larger commercial customers, such as daily, weekly or milestone-based payment plans.
- Mercantile Customer Self-Power Systems: House Bill 15 authorizes one or more mercantile customers to obtain electricity from a “mercantile customer self-power system” that produces electricity primarily for their consumption without risk that the system be regulated by the PUCO as a public utility. The system must connect directly to the mercantile customer without using the distribution or transmission system of an electric distribution utility or electric cooperative. A “mercantile customer” is a commercial or industrial customer that consumes more than 700,000 kilowatt hours per year. One example of a mercantile customer self-power system could be a natural gas power plant that serves an industrial park or a cluster of data centers.
Majority and minority caucus leaders in both chambers praised the bill, saying it included many good points, but left a number of issues for future legislation. Speaker Matt Huffman (R- Lima) noted that he has broader concerns with Ohio's membership in PJM, a 13-state regional transmission organization. “Is PJM the right fit for the state of Ohio? There's another choice, MISO [Midcontinent Independent System Operator], to the west, which includes Indiana and much of the Big 10, or the old Big 10.”
With the legislature's work done on House Bill 15, it now heads to Governor Mike DeWine (R) for signature. Once the Governor receives the bill from the General Assembly, which can take several days if not weeks, he will have 10 days to either sign, veto or let the bill become law without his signature. The majority of the provisions of the bill, with the exception of a handful of provisions that were given a specific effective date, will become effective 90 days after the Governor signs the bill.
House Bill 15 is a significant overhaul of Ohio energy policy and law. If you have any questions about the bill or would like further information, please reach out to your Calfee attorney or one of the Calfee contacts listed below.
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