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Direct Energy: Ohio House Bill 6 (Nuclear Bill) Is, "A Direct Attack On Retail Energy Competition"

June 19, 2019

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Copyright 2010-19
Reporting by Paul Ring •

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In written testimony submitted to an Ohio Senate committee on HB 6, the nuclear subsidy bill, Teresa Ringenbach, Sr. Manager of Midwest Government & Regulatory Affairs for Direct Energy, said that, "As written House Bill 6 is a direct attack on retail energy competition in Ohio."

Ringenbach noted, as had been first reported by (details here), that the bill allows utilities to enter contracts with customers for renewable energy supply and generation development

Ringenbach wrote, "House Bill 6 will allow the monopoly utility to directly compete against retail suppliers by offering green products. Let me start off by saying that every utility in the state has the option to form an affiliate and compete in the open market should they choose. Therefore Section 4928.647 [of the bill] is completely unnecessary. In May 2019, there were 236 green products available from retail suppliers in Ohio. That said, if this legislature decides that over 200 green products available to customers is not enough and the utility should be also offer these, then certain protections must be put in place. If the utility wants to compete they should be required to lose their safety net. The utility must be forced to take on all the costs and risks of the products they sell by only recovering those costs from the customers that take the product. They cannot rely on all rate payers to subsidize a green product which may only be taken by a few customers. For this reason, the bill should be amended to either remove Section 4928.647 entirely or guarantee no recovery of costs from any utility customer other than those customers who choose to take these products from the utility."

Joseph Oliker, Associate General Counsel for IGS Energy, in testimony opposing the bill, noted in particular that, under the bill's language, the utility renewable energy development would not be subject to the typical statutory provisions under Chapter 4928 (concerning competitive retail electric service and related utility policy)

Oliker, "There have been some claims that utility ownership of renewable generation will not cost any non-participating customers a dime. That, however, is not what the language of the bill says. The proposed language in R.C. 4928.647 is a standalone provision that permits utilities to provide renewable energy services 'regardless of any limitations set forth in any other section of Chapter 4928 . . .' This means that in the implementation of this provision, the PUCO is explicitly able to disregard all other laws in the chapter, such as the state’s energy policy and important customer protections."

"Further, the two alleged safeguards in this proposed section are meaningless," Oliker wrote. Oliker said that the bill gives broad discretion for approval of a utility green program if it does not create an "undue burden or unreasonable preference" to non-participating customers, with Oliker faulting the language as vague.

Oliker also noted that the section states that the utility, for a renewable program, must comply with any conditions the PUCO "may" impose to ensure that the utility and participating customers are solely responsible for the risks, costs, and benefits. "This section is not a safeguard because the word may is optional -- whereas the word shall would have created a mandatory requirement," Oliker said

Ringenbach also faulted the provisions in the bill relating to the termination of the RPS requirement, effective January 1, 2020

As first reported by (details here), utilities would be permitted to recover any RPS compliance costs from contracts extending beyond such date, net of liquidation and any funding from a state air quality authority (Clean Air Fund) to offset such costs, through distribution rates (nonbypassable charge).

Ringenbach wrote, "Unfortunately, while compliance with the RPS is terminated on January 1st 2020, the legacy cost of RPS contracts are simply shifted to the utility and assessed on customer’s bills. Sections 3706.485 and 4928.641 provide that a utility may still recover their long term RPS costs. The utility may do this by taking from the Clean Air Fund or by requesting a non-bypassable charge be applied to all customers. A retail supplier who will also have RPS legacy costs has no similar ability in this bill to recover costs associated with existing contracts. In addition, our customers will now be subject to a potentially higher charge from the utility for that utility’s legacy RPS costs. Our customers today negotiate their RPS costs in their retail supply contracts. In the end, the bill may remove RPS compliance, but it keeps the utility charges, interferes with existing contracts, and potentially increases RPS costs for customers of a retail supplier by forcing them to pay the utility rather than their current negotiated price."

"The bill should be amended to ensure fair recovery of RPS contract costs for all companies and customers," Ringenbach wrote

Oliker similarly noted, "the elimination of the RPS contains a phase out that favors the utilities, permitting them to recover the cost associated with their long-term purchases from all customers, whereas there is no provision to make retail electric providers whole for similar investments. Thus, should the General Assembly choose to repeal the RPS, the mechanism to recover a utility’s RPS compliance costs must remain bypassable."

Ringenbach also alleged that an exemption in the bill for mercantile customers from paying for the Clean Air Fund favors certain retail suppliers, due to the specific qualifications to qualify for the exemption

House Bill 6 creates an exemption from paying into the Clean Air Fund for mercantile customers who enter into a power purchase agreement.

"However, as written the restriction of what type of generation those customers may take includes resources already subsidized by the Fund. This creates another market advantage for First Energy Solutions and the limited solar facilities which are eligible for the fund. The provision would offer First Energy Solutions and the owner of those solar facilities a statutory advantage to poach customers by offering the customer an opportunity no other supplier in the market can offer," Ringenbach wrote (namely, an avoidance of the clean air fund fee and legacy RPS costs)

"If the state decides to offer certain generation resources a subsidy from the Clean Air Fund it should not give those same resources a second advantage by allowing them to under cut other competitive companies in the market. Direct Energy recommends Section 4928.47 be amended to remove this second subsidy to any generator taking funds from the Clean Air Fund. The exemption for a mercantile customer should focus on resources not already receiving a subsidy such as a renewable resource or combined heat and power system," Ringenbach wrote

Oliker similarly noted, "R.C. 4928.47 [under the bill] permits mercantile customers (any customers that uses more than 700 megawatt hours in a year) to avoid paying into the Ohio Clean Air Program if they enter into a purchase power agreement of three years or longer with certain generation resources, including nuclear. What does this mean? If a retail provider offers a contract to a customer at the same or lower price as FES, the customer would be more likely to choose FES because purchasing power from nuclear generation makes the customer eligible for an exemption from the Ohio Clean Air Program charge. For example, a large mercantile customer could avoid paying $90,000 over a three-year period if they pick FES as their retail electric supplier. This retail subsidy effectively permits FES to double dip and earn additional profits on top of the $9 per megawatt hour wholesale subsidy."

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