Carol Knapp, Executive Director
180 Milan Avenue
Norwalk, OH 44857
Ohio Energy Efficiency Laws Update-New Online Tool to Help Customers Calculate Hidden Costs
The True Cost of Ohio’s Energy Efficiency Mandates
New Online Tool Available to Help Customers Calculate Hidden Costs
By Jonathan Lesser, Ph.D.
President, Continental Economics
A recent independent study conducted by my firm concluded that Ohio’s energy efficiency mandate is causing direct harm to Ohio consumers and businesses, while passing any potential benefits to neighboring states. A coalition of businesses and organizations, is working to reform that law, and they need your help.
When the energy efficiency law was passed nearly six years ago, Ohio’s economy was booming, energy demand and prices were high, and energy supply options appeared to be limited. Fast forward to today’s conditions, and the law’s high costs are having unintended consequences on Ohio residents and the very businesses we need to drive economic recovery.
In fact, Continental Economics found that the costs of the law far exceed the benefits – by five to 10 times. Residential electric customers are paying between $1.74 and $3.92 per month in energy efficiency “fees” in order to achieve maximum potential savings of 37 cents per month. Thanks to the energy efficiency mandate, customers are paying more to use less electricity.
The law’s supporters claim that Ohio electric customers are receiving a “free lunch” – gaining energy efficiency benefits without having to pay for them. They argue the law has lowered wholesale energy prices, and therefore retail prices, thus offsetting monthly fees used to fund the mandate. Our report concludes the opposite. Ohio customers’ electric rates and bills have in fact risen since the law’s inception. Utilities incur very high fixed costs to maintain the reliability and safety of their transmission and distribution systems – costs that remain the same no matter how much (or how little) electricity flows through the lines.
Furthermore, to the extent that any “free lunch” might exist, it would be enjoyed by customers outside of Ohio. Wholesale energy prices are set throughout a 13-state region controlled by PJM Interconnection, the regional grid operator. Assuming any wholesale price reductions do in fact benefit customers, the vast majority of those benefits, about 80%, would flow to customers who do not pay the Ohio energy efficiency fee. Therefore, Ohio businesses are being placed at a disadvantage to their out-of state competitors, harming the Ohio economy through slower growth and lost jobs.
Statewide, Ohio electric customers have paid nearly $1 billion for energy efficiency programs at a time when supply is plentiful. If the law is not changed, these costs will continue to rise in the years to come as customers are required to use increasingly less electricity and the necessary upgrades become more complex and expensive. By 2020, Ohio customers could pay over $500 million per year to fund the mandate.
To see how much Ohio’s energy efficiency mandates are hurting your bottom line, visit the new Mandate Tax Calculator, available online at http://ieu-ohio.org/mandate-cost-calculator.aspx. If the answer surprises you, call or write Ohio’s elected leaders (contact info below) and urge them to pass reform to Ohio’s energy efficiency law.
The Honorable John Kasich
Governor of Ohio
77 S High St, #30
Columbus, Ohio 43215
The Honorable Keith Faber
President, Ohio Senate
1 Capitol Square, 2nd Floor
Columbus, OH 43215 (614) 466-7584
The Honorable William G. Batchelder
Speaker, Ohio House of Representatives
77 S. High St
Columbus, OH 43215
Phone (614) 466-8140
About the Author:
Jonathan Lesser, PhD., a noted economist and author, is President of Continental Economics, Inc., an economic consulting firm that provides litigation, valuation, and strategic services to law firms, industry, and government agencies.