[Editor's Note: Utility Dive writer Bill Opalka contributed significant portions of writing and research to this article.]
The trends have been clear for some time.
Fossil fuels are gradually being phased down and renewables are rapidly taking their place, while utility business (and regulatory) models based on retail electricity sales are changing as progressive policymakers look to advance the cleanest fuel of them all—energy efficiency.
But as the U.S. seeks to transition towards a cleaner, more sustainable energy future, a big question remains—how do we get there?
That’s the question being asked in Ohio, where the state’s renewable electricity standard and energy efficiency mandate are under the microscope.
Ohio, however, is just the latest battleground in the ongoing fight over the future of energy in America.
The Ohio fight
In 2008, Ohio passed a bill setting a renewable electricity standard (RES) of 12.5% renewables by 2025 for the state's investor-owned utilities. The law also mandated utility energy efficiency and demand response programs with a goal of reducing electricity demand by 22.2% by 2025 and a 7% peak demand reduction by 2017 for utilities.
Since then, Cincinnati Republican Senator William Seitz has sought to effectively strangle both the RES and energy efficiency mandate.
Seitz introduced Senate Bill 58, which would cap spending on efficiency programs at current rates and weaken the state's RES by broadening its definitions and lessening in-state sourcing requirements.
The bill would also allow Ohio's largest industrial customers to not take part in utilities' energy efficiency programs, which the 2008 law mandated.
Consumers divided
The battle over the future of energy efficiency and renewable energy mandates in Ohio has divided the state’s biggest energy users.
Some large industrials like Dow Chemical, Honda, Whirlpool, BASF and Owens-Corning are in favor of keeping the current law in place, arguing that incentives to use less power would be removed.
But the vast majority of the opposition consists of environmental, clean energy and consumer advocacy groups. They argue the bill would effectively gut the state’s renewable standards and cripple energy efficiency programs.
On the other side of the fence is the Ohio Energy Group, which represents the state's 21 largest energy-intensive manufacturers. They support the proposed changes, particularly those allowing large power users to opt out of mandatory efficiency programs.
The group notes 10 of the 25 states with mandatory efficiency programs have provisions that allow large industrials to opt out. They argue the costs of the efficiency program are imposed on large industrial customers, who cannot afford the added charges and remain competitive in a brutal global economic environment.
David Boehm, counsel to the Ohio Energy Group, recently wrote in the Cincinnati Enquirer that “Senate Bill 58 attempts to protect ratepayers from the oppressive burden of meeting the unrealistic requirements of existing law by establishing a cap on the amount utilities must spend to meet their [energy efficiency] goals.”
The proposal would essentially cap energy efficiency spending at $237 million, which is what will be spent in 2013. Projections quoted by Boehm say that the current mandate will top $5 billion by 2025.
Utilities caught in transition
Of course, all this spending on energy efficiency does sound excessive—until you think about the avoided cost.
If passed, Senate Bill 58 will eliminate $2.5 billion of energy efficiency savings from 2014 to 2020, according to a study performed by the American Council for an Energy-Efficient Economy and sponsored by the Ohio Manufacturer's Association.
In fact, instead of saving money, the bill will actually cost ratepayers $3.94 billion over 12 years, according to a study by The Ohio State University's Center of Resilience.
The state’s biggest utilities—FirstEnergy, American Electric Power (AEP) Ohio and Duke Energy—disagree. (Dayton Power & Light has not commented on the bill.)
"FirstEnergy remains concerned that meeting the state's energy efficiency goals will continue to place burdensome costs on our customers, particularly Ohio businesses," the company said in a statement.
And after sitting on the fence for months, AEP Ohio just came out in support of the proposed bill. It could be a significant shift in emphasis for the company, which has largely supported energy efficiency across its 11-state territory.
This is all to say that utilities are struggling with America's transition to a clean and efficient energy economy. Their business models largely do not incentivize a continuous reduction of energy consumption. They are, after all, in the business of selling electricity.
So for them—the slower the transition, the easier it will be to adapt.
The fate of Senate Bill 58
This is not the first time that Senator Seitz has tried to crush the state's renewable and efficiency mandates.
Seitz sits on the American Legislative Exchange Council's (ALEC) board of directors. ALEC, a conservative, corporate-funded stealth group that drafts model legislation for lawmakers to pass, has been trying to repeal renewable portfolio standards and efficiency mandates across the country. Senate Bill 58 is part of that gameplan.
Seitz actually originally voted for the clean energy bill in 2008, but has since argued he did so under the belief that demand for electricity was poised for growth in the years to come. That, however, has not been the case, due largely to the recession and energy efficiency.
Seitz's bill was set for a vote before the Senate Utilities Committee this week but, after some noisy opposition to the bill, Seitz said he plans to rewrite some of the bill's more controversial portions, which includes mostly leaving the state's RES as is and compromising on some (but not all) efficiency requirements.
The bill could see a vote shortly after the Thanksgiving holiday.
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