(Photo by Bob Bertsch via Creative Commons)

(Photo by Bob Bertsch via Creative Commons)

How Ohio electric bills ‘bury’ multiple charges

While separate line items on electric bills will soon show how much Ohioans pay to meet the state’s energy efficiency and renewable energy standards, other fees will remain lumped into overall distribution charges.

Meanwhile, utilities hope to add yet more riders to customer bills in order to guarantee sales for affiliated power plants.

The requirement to break out charges for Ohio’s renewable energy and energy efficiency standards results from Senate Bill 310, which Gov. John Kasich signed into law last June.

SB 310 freezes target levels and weakens Ohio’s clean energy standards in several respects. It also established an Energy Mandates Study Committee to review the charges and consider whether the standards should continue.

In December, PUCO chair Thomas Johnson testified not only about the renewable energy and energy efficiency charges, but also about a wide range of additional riders lumped into customers’ bills.

‘Under a magnifying glass’

A PUCO ruling last month says utilities should state that charges to comply with renewable energy and energy efficiency are not new. However, the disclosures will only appear on the first three bills once the charges are broken out.

Even with that statement, however, environmental and consumer advocates say that a break-out on bills for just the costs for renewable energy and energy efficiency won’t give customers a complete picture.

For starters, bills will only itemize costs for the standards and not any benefits that customers can reap. Ohio utilities have previously represented to the PUCO that, as a whole, the standards save customers twice what they cost.

Beyond this, singling out just the renewable energy and energy efficiency charges puts them “under a magnifying glass,” said Dan Sawmiller of the Sierra Club’s Beyond Coal program. In other words, customers might focus only on those extra costs—without realizing that they also pay for various other charges and fees.

“It is a huge consumer issue because folks should know what they’re paying for,” said Trish Demeter at the Ohio Environmental Council.

Controversial charges  

“There are many riders, and they are different for each utility,” noted PUCO spokesperson Matt Schilling. “The easiest way for a customer to learn about which riders they pay and how much is by examining the company’s tariffs.”

The PUCO publishes tariffs on its website. Utilities’ websites publish their tariffs and identify riders as well.

However, customers may not realize that unlisted riders are lumped into their electric bills. Even then, few probably ever bother to look up and review specific company add-ons.

Last year, Sawmiller presented a chart of American Electric Power (AEP) riders as part of his testimony before the Ohio Senate Public Utilities Committee. The chart showed charges to residential customers for 15 riders in addition to renewable energy and energy efficiency.

Most of those other riders cost customers more each month than either renewable energy or energy efficiency.

“You can see how it pales in comparison to all these other riders, most of which don’t show up [itemized] on your bill,” said Sawmiller.

Some riders cover costs that both utilities and various environmental advocates support. Examples include costs for improvements to maintain and modernize the grid.

Customer charges under other riders are more controversial. For example, Ohio law currently lets utilities collect lost distribution revenue.

“It’s a mechanism for the recovery of costs from customers between rate cases that allows the utility to capture lost distribution revenues, which occurs as a result of state-mandated cuts in energy consumption,” explained FirstEnergy spokesperson Doug Colafella.

Demeter, however, characterized it as “straight-up a charge to compensate [utilities] for lost sales because people are being more efficient in their energy use.” In other words, the charge pays utilities to make up for electricity they didn’t sell because customers wasted less electricity.

“That, to me, screams ‘subsidy,’” Demeter said.

Letting utilities get lost distribution revenue may have been appropriate “in a transitional period,” Demeter noted. In that transition, she explained, utilities would have refocused their business model from selling as much electricity as possible to providing service so customers can use energy responsibly.

“But they’re still charging this,” Demeter said. “It just doesn’t seem fair to me that customers have to continue to pay that. It’s just basically a direct payment from the customers to the shareholders.”

The PUCO’s December order says bills’ breakouts for energy efficiency costs should not include lost distribution revenue. Nonetheless, utilities still will be able to collect the money, and the amount won’t be itemized on customers’ bills.

Ohio law also allows utilities to make “reasonable arrangements” for large industrial customers as part of “economic development and job retention” programs.

Basically, utilities can offer discounted rates to those customers. Utilities then make up the difference, or “delta revenue,” from the rest of the rate base.

“Keep in mind that reasonable arrangements/delta revenue recovery are economic development riders created by the state of Ohio,” FirstEnergy’s Colafella explained. “If customers are charged delta revenue, it’s not a new charge, just a shifting of costs from one customer to other customers through a rider on utility bills.”

Yet while the utilities come out “even,” residential customers and others wind up paying for the large customers’ discounts.

Basically, Demeter said, other customers are “paying to subsidize the rates of these large companies.” And advocates question whether those other customers benefit at all.

“The companies that get this economic development money make no enforceable commitment,” Sawmiller said.

At the same time, large companies in Industrial Energy Users—Ohio objected strongly to the renewable energy and energy efficiency standards.

Yet energy efficiency provides “real cash savings” for all customers, Sawmiller said. Those who waste less energy save because they don’t need to buy as much electricity. And all customers save as a result of lower capacity charges and the avoidance of new generation to meet peak demand.

Renewable energy standards benefit all ratepayers too, Demeter stressed.

“Renewable energy has societal and environmental benefits that far exceed the cost of what you’re paying for” under the rider, she said.

The job market has also grown substantially in Ohio’s clean energy industry. A report by independent researchers found that the industry had more than 31,000 jobs as of 2012.

More proposed riders

Customers will pay for still more riders if AEP, Duke and FirstEnergy succeed in getting the PUCO to approve proposed power purchase agreements.

Utilities say the plans will provide rate stability and pay off for customers in the long run. Opponents argue that the plans are “bailouts” that favor utilities’ corporate affiliates in violation of Ohio law and at the expense of consumers.

By law utilities need to show a benefit to consumers for any “electric security plan,” noted Nathan Rutz at the Ohio Organizing Collaborative. However, testimony on behalf of FirstEnergy admits consumers will pay approximately $400 million in three years under its plan to guarantee sales for all electricity from certain coal plants and the Davis-Besse nuclear plant.

Conceding the absence of any savings in the plan’s first three years is “already admitting that it’s essentially illegal,” Rutz said. And the company’s figures are probably optimistic, he added.

Indeed, opponents say the actual costs are likely to be much more.

Last month, in testimony by the Office of the Ohio Consumers’ Counsel and Northeast Ohio Public Energy Council, economist James Wilson estimated that FirstEnergy’s plan will more likely cost customers between $3 billion and $4 billion over the course of the 15-year power purchase agreement.

Local hearings on FirstEnergy’s plan continue this week and next in Toledo and Cleveland. Cases for plans for Duke Energy and AEP remain pending too.

If approved, electric charges would include yet another rider. And the amount would not be broken out separately on customer bills. For FirstEnergy customers, for example, the rider would be lumped into an already existing “cost recovery charge.”

“Why would we ever think about bailing out coal plants?” Sawmiller said. “What are you getting for it?”

“Ohioans are already paying enough for energy,” Rutz said. The idea of giving FirstEnergy and other utilities “more money for free is pretty bad,” he added.

The Sierra Club and Ohio Environmental Council are members of RE-AMP, which publishes Midwest Energy News.

4 thoughts on “How Ohio electric bills ‘bury’ multiple charges

  1. It’s really unfortunate that electricity has gotten so expensive, and while I’m all for promoting renewable energy, these charges and taxes aren’t doing much to lower costs for us 😛 I guess we have to cancel out these charges by reducing energy consumption and producing our own electricity, such as with solar panels or biogas. Does anyone know whether these charges apply to electricity you generate yourself?

  2. I am glad a utility (First Energy in this case) is now on the record defending cost shifting. Apparently cost shifts create a “death spiral” when it comes to energy efficiency and distributed generation, but not when costs are shifted from large commercial and industrial customers to residential customers.

    “Keep in mind that reasonable arrangements/delta revenue recovery are economic development riders created by the state of Ohio,” FirstEnergy’s Colafella explained. “If customers are charged delta revenue, it’s not a new charge, just a shifting of costs from one customer to other customers through a rider on utility bills.”

  3. This story doesn’t get to half of the problem. Literally. In Ohio a provision of law permits “economic development” rates. Another provision permits “special arrangements”. There are lots of similar terms in use, but the law only permits these two. Needless to say, a lot of money is recovered under conditions that defy the legal process allowed under the law.

    For every year since 2009, when Ohio’s EE and RE standards went into effect, the cost of these provisions have been higher for FirstEnergy and AEP customers than the entire cost of efficiency programs plus shared savings plus the entire cost of the renewables programs.

    A Wall Street Journal story a year and a half ago quoted an unnamed PUCO official saying that the Ormet Aluminum company got “$346 million” from Ohio in the four years prior to going bankrupt. A Resource Insight report identifies a half billion dollars over five years.

    Most of these costs are in separate riders, but some of them are actually included in the riders which are allegedly for efficiency or renewables.

    2012 was the highest year for efficiency spending so far, because FirstEnergy overspent to catch up with two years of underperformance. The cost that year for Ohio’s efficiency programs was less than $200 million statewide. Renewables cost less than $54 million in each year that has been reported so far, and renewable prices have fallen so much that future years are unlikely to cost more, even though the standard has risen.

    The five or so industrial companies which get most of these subsidies are represented by the same attorneys who did most of the testifying in favor of the changes which wound up in Ohio’s 2013 law weakening the standards. For them, the law results in letting them benefit from the efficiency spending by other customers without having to pay their share.

    This isn’t a game. We shouldn’t let our public officials treat it like one without paying the price for subverting our economy.

  4. Check out this study by NC State University, which shows how installing photovoltaics on your home outperforms the stock market as an investment:

    http://nccleantech.ncsu.edu/wp-content/uploads/Going-Solar-in-America-Ranking-Solars-Value-to-Customers_FINAL.pdf

    The PUCO Bozos (and I apologize to Bozo for the comparison) are right-wing extremists with incestuous ties to the fossil fuel industry. The energy companies are not only burying their profiteering by obscuring their fees while shining a light on renewable & energy efficiency costs, but they’re actively lobbying politicians and marketing their brand of scare-tactic to ill-informed, regular citizens. They’re spending our money – the money we pay for electricity to a PUBLIC utility – to then create marketing campaigns to scare people away from doing what is best for the economy, the environment, and energy security, so that they can continue to get rich. And the kicker? Ohioans continue to vote for the crooks who put these clowns (again, no offense to the clowns) in power.

    Take control: deep energy efficiency at home, paired with cheap, unsubsidized solar, brought my energy costs down by 85%. Check it out at http://www.thegreenedhouseeffect.com.