Ohio

Summary Ohio’s investor-owned utilities will soon begin administering energy efficiency programs under a regulated structure with oversight by the Public Utilities Commission of Ohio (PUCO). A recently passed senate bill established energy savings goals for electric utilities and allows for cost recovery and decoupling. Rules for implementing the senate bill were published by the PUCO in July 2009.  The rules require utilities to propose energy efficiency plans and file annual status reports with the commission. Ohio is a state on the cusp of greatly increased energy efficiency spending and savings. According to the Energy Information Administration, Ohio utilities spent $2.5 million on energy efficiency in 2007, saving 29,789 MWh.

Passed in 2008, SB 221 called on utilities and the Ohio Department of Development to develop programs to meet newly proposed energy and peak demand savings targets. Utility programs have been submitted to the Public Utility Commission of Ohio (PUCO), which has approved plans for three out of Ohio's four major investor-owned utilities (Duke Energy, American Electric Power and First Energy).  Eligible efficiency measures and programs for each utility were determined at the proceedings. This legislation also explicitly includes demand-response programs and transmission and distribution system improvements.  

The distribution utilities administer their own energy efficiency programs with oversight from the PUCO. The PUCO may also modify the utilities' proposed programs. Additionally, under the new bill, a mercantile customer, which is a commercial or industrial customer that consumes more than 700,000 kWh per year, may enter into a special arrangement with an electric utility to integrate the customer’s demand reduction, demand response, or energy efficiency programs with those of the electric utility.

According to the Energy Information Administration, Ohio electric utilities reported efficiency program savings of 29,789 MWh in 2007 - 0.2% of their total retail sales.

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The Ohio Department of Development’s Ohio Energy Office operates an energy efficiency program with funding from an advanced energy fund. These mostly commercial and industrial projects are funded by a utility rider of $0.09 per billing period for every customer (residential and non-residential) of the four investor-owned utilities in Ohio.

Ohio's public benefit fund, instituted in 1999, supports an Energy Efficiency Revolving Loan Fund that is administered by the state.  A universal service rider, a type of surcharge, supports the Ohio Energy Loan Fund, providing low income bill assistance and efficiency incentives. The charge is $0.0001758 per kWh and adds up to $15 million per year to the fund.

Under the new rules, the electric utilities will file their long-term forecast and benchmark report. Once the reports and forecasts are approved, the utilities may then apply to recover the costs of their energy efficiency programs. In the past, energy efficiency programs have been funded through a cost rider. According to the Energy Information Administration, Ohio electric utilities spent $2.5 million on energy efficiency in 2007 - 0.2% of their total spending.

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Recent legislation (2008 Senate Bill 221 or Ohio Revised Code 4928.66) requires a gradual ramp-up to a 22% reduction in electricity use by 2025. Starting in 2009, electric distribution utilities must achieve 0.3% savings, ramping up to 1% per year by 2014 and then jumping to 2%  per year in 2019 through 2025. The legislation also requires electric distribution utilities to reduce peak demand by 1% in 2009 and to continue to achieve an additional 0.75% reduction per year until 2018.

The baseline for energy savings is the average of the total kilowatt hours the electric distribution utility sold in the preceding three years. The baseline for peak demand reduction is the average peak demand on the utility in the preceding three calendar years. The commission may reduce either baseline to adjust for new economic growth in the utility’s territory.

Failure to comply with energy efficiency or peak demand reduction requirements will result in forfeiture of funds by the utility.  The amount of the forfeiture is either that prescribed by the legislature or the amount of the existing market value of one renewable energy credit per MWh of undercompliance or noncompliance. Any revenue from a forfeiture is credited to the advanced energy fund.  

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In the Public Utilities Commission of Ohio’s (PUCO) rules, the commission may provide for decoupling and an electric distribution utility may submit an application for approval of a revenue decoupling mechanism to the PUCO.  Rather than true decoupling, the gas utilities have all been allowed to implement straight-fixed-variable rate designs.  Lost revenue recovery mechanisms for electric and gas utilities are determined on a case-by-case basis. Duke Energy Ohio recovers lost revenues resulting from its portfolio of energy efficiency programs through the DSM rider. Dayton Power & Light currently has a case pending. AEP Ohio chose not to seek lost revenue recovery in their prior rate case. ORC §4928.143(B)(2)(h); Docket Nos. 06-0091-EL-UNC, 06-0092-EL-UNC, and 06-0093-GA-UNC.

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Incentives may be approved on a case-by-case basis. Duke Energy was recently approved for more than a dozen residential and commercial DSM programs and related cost recovery.  The recovery mechanism is an annually reconciled rider which includes conditioned adjustments for shared savings with a maximum 10% shareholder incentive if at least 65% of targeted savings are achieved.

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Ohio’s investor-owned utilities are required to prepare and implement energy efficiency plans. On April 15 of each year, each electric utility must file its long-term forecast and benchmark report regarding compliance with baselines and benchmarks for energy efficiency and peak reduction programs with the Public Utilities Commission of Ohio.

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• Public Utility Commission of Ohio
• Senate Bill 221 (May 2008)
• Rules for implementing SB 221
• Ohio Department of Development’s (ODOD) Ohio Energy Office
• Ohio State Incentives for Renewables and Efficiency

Last Updated 08/19/2009

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