Pending legislation in the Ohio Legislature seeks to remove barriers to new electricity generation, but electric utilities warn that the proposed policy could have a negative impact on their operations.
Ohio House Bill (HB) 15 and Senate Bill (SB) 2, which are currently being considered by their respective energy committees, propose significant changes to how the state’s electric market operates, including provisions for third-party customer billing, removing billing responsibilities from utility companies, and shifting tax burdens from generation to transmission and distribution.
“HB 15 currently falls short of the goal of meeting the pressing need of modernizing Ohio’s ratemaking process and making the state a more attractive place for investment in each component of the grid,” said Marc Reitter, president and COO of AEP Ohio, which serves 1.5 million customers across 61 counties and employs over 1,300 Ohians.
In testimony before the Ohio House Energy Committee on February 26, Reitter stated that Ohio is at the start of a once-in-a-generation opportunity for tremendous economic growth across a wide range of industries.
“Essential to the state’s ability to capture all of that potential growth during this unique opportunity is the health of Ohio’s electric utilities,” he said, pointing out that the proposed bills endanger their health.
State Rep. Roy Klopfenstein (R-82), the primary sponsor of HB 15, stated that the state’s current energy framework, which dates back to 1999, is the result of the generation sector’s deregulation and separation from the regulated monopoly transmission system.
“It is now time to modernize this structure,” he said, noting that energy demand has increased dramatically over the last five years, with data centers alone consuming 600 megawatts (MW) of electricity.
AEP predicts that this will rise to 5,000 MW by 2030, a trend that is unlikely to reverse as data center projects and mega-energy consumers such as Intel and Anduril Industries move to Ohio. According to PJM Interconnection, there may be shortages if new generation is not added.
Klopfenstein stated that the legislation aims to address this by prohibiting electric distribution companies (EDCs) from owning generation, prohibiting EDCs from bidding in the wholesale market with ratepayer-funded assets, and transferring the Tangible Property Tax from electric generation facilities to transmission and distribution systems.
According to Klopfenstein, these changes will help Ohio become more competitive with neighboring states.
In addition, he stated that the bill seeks to improve affordability for all Ohioans by protecting ratepayers from unnecessary costs.
“This will be achieved by repealing the electric security plan (ESP) statute, requiring all Standard Service Offers to be market-based, increasing bonding requirements for Competitive Retail Electric Suppliers (CRES) and Competitive Retail Natural Gas Suppliers (CRNGS), mandating customer notifications for contract changes, and enabling features like supplier consolidated billing, on-bill financing, purchase of receivables, and seamless enrollments,” according to Klopfenstein.
The bill also aims to promote competition in the energy sector by allowing competitive intrastate transmission, eliminating Ohio Valley Electric Corporation (OVEC) subsidies that have already cost Ohioans $670 million since 2017, and repealing the Ohio Solar Generation Fund, which he claims has collected $60 million but spent only $10 million on five statewide projects.
“It is not the role of the state to favor one form of generation over another,” Klopfenstein observed. “Instead, we should open the market to dispatchable energy generation to address future energy shortages.”
While the bills have yet to be voted on, they have already sparked strong opposition from major industry stakeholders, with numerous hearings and testimonies held in recent weeks.
AEP Ohio’s Reitter cautioned that HB 15 could limit the company’s ability to support Ohio’s economic development. While acknowledging some advantages of SB 2, Reitter emphasized that the elimination of ESPs would stymie investment in grid modernization and reliability.
While Reitter acknowledged the significant resource adequacy challenge facing Ohio, he stated, “AEP Ohio is concerned that the bill, as drafted, will impair our ability to continue to enable Ohio’s recent economic development wins.”
His colleague, Christopher Hollon, senior counsel for AES Ohio, testified last month that the company supports modernizing the ratemaking process.
“Specifically, we support swifter resolution of rate cases at the Public Utilities Commission of Ohio (PUCO),” according to Hollon. “Rate cases can and should be settled within 275 days. A’shot clock’ on PUCO decisions could help to ensure that utilities and customers receive predictable and reasonable rates on time.
AES Ohio also believes that utilities should be able to propose three-year, forward-looking test periods that include all costs, including capital investments, with a true-up mechanism. This framework would better align a utility’s investments with its rates at the time they are charged, Hollon explained.
“Customers would pay only for what utilities actually invest, and they would benefit from the efficiencies gained by those investments in close to real time,” he told me. “Moreover, this framework would provide the PUCO, customers, and interested parties with an annual, transparent review of a utility’s books.”
Philip Moeller, executive vice president, Business Operations Group and Regulatory Affairs at the Edison Electric Institute (EEI), also testified against HB 15 and SB 2, claiming that the proposed changes to ESPs could cause regulatory delays, limiting utilities’ ability to recover costs for necessary infrastructure investments.
He also warned that a prolonged regulatory lag could result in financial burdens, credit downgrades, and increased consumer costs.
At the same time, Moeller expressed concerns about the Consumer Choice Billing (CCB) Program, claiming that it could cause customer confusion and introduce hidden charges, and that requiring Ohio Power Siting Board certification for replacing major utility facilities could slow down power restoration efforts after storms and postpone grid modernization.
“As written, HB 15 would make Ohio’s electricity system less reliable, less resilient, and more expensive in meeting Ohio’s growing power demands,” Moeller said in testimony to the Ohio House Energy Committee on February 26. “We therefore urge this body to work with our member electric companies in the state to resolve the issues mentioned … and improve the bill prior to the consideration of passage.”
Torrence Hinton, president of FirstEnergy Ohio, which serves over 2.1 million customers through its three Ohio EDCs: Ohio Edison, The Illuminating Company, and Toledo Edison, as well as an Ohio-based transmission subsidiary called American Transmission Systems Inc.
Hinton testified that the bills assume competitive market forces apply to all aspects of electric service, which he claims is not the case for transmission and distribution.
Ohio’s distribution and transmission utilities operate under a regulatory compact that requires the utility to serve all customers within an exclusive service territory at just and reasonable rates that allow the utility to earn a fair return on shareholders’ investment, while also subjecting its costs and operations to full regulatory scrutiny.
There is no similar regulatory compact in place for generation services, and their pricing is determined by competitive markets.
“FirstEnergy supports the General Assembly’s intent to focus on competitive market solutions to address generation resource adequacy across Ohio and the surrounding region, and to provide choice for the citizens in Ohio and to power growth and development within our communities.”
Mr. Hinton stated. “However, some of the changes proposed in HB 15 do not promote competitive generation markets and would hinder regulated utilities’ ability to deliver safe, reliable transmission and distribution service.”
The changes in HB 15 would also eliminate important tools and flexibility that PUCO currently has to respond to changing circumstances, which could jeopardize the safety and reliability of electric operations and harm FirstEnergy’s customers and communities, he said.
Amy Spiller, president of Duke Energy Ohio, agreed, saying HB 15 would raise regulatory risk and complicate infrastructure investments. She also noted that Ohio already ranks last among US states in terms of regulatory lag, and eliminating ESPs without a clear alternative could further stifle investment in the state’s electric infrastructure.
Duke Energy Ohio, which serves 700,000 electric and 490,000 natural gas customers in southwest Ohio, opposes HB 15, as introduced, according to Spiller, because several of its policy provisions undermine the utility’s ability to meet its customers’ needs and expectations.
Spiller specifically stated that the bill would set Ohio on a backwards path of regulating electric utility services; inject risk into critical infrastructure projects; add to an already confusing situation for customers regarding their relationships with utilities and competitive suppliers; risk inadvertently violating the cost causation principle; provide tax relief for new and existing generation resources, but exacerbate the state’s already uncompetitive infrastructure.
“Ohio’s 20th-century regulations governing the setting of base electric distribution rates are antiquated and do not provide the means for utilities to respond at the speed of business to the evolving needs of our customers and communities,” Mr. Spiller said. “Instead of improving existing regulations, HB 15 merely eliminates a construct known as ESPs, thereby increasing the risk to utilities of regulatory lag,” which is the time between when investments are made and recovered through rates.
Eliminating ESPs without implementing a new strategy would exacerbate an already stifling investment climate, according to Spiller.
“Base rate cases are expensive and take years to plan, negotiate, settle or litigate, and appeal,” according to her. “In fact, H.B. 15 allows a utility to have two cases on appeal at the Ohio Supreme Court while a third case is already being considered by the commission.
If this approach appears inefficient, costly, and unsustainable to customers, utilities, and regulators, it is.
Aside from utility companies, a labor organization opposes the measure.
Robert “Jake” Mitchell, president of the Utility Workers Union of America Local Union No. 430, stated that HB 15 could harm local economies, particularly those in southeastern Ohio, by jeopardizing jobs and reducing tax revenues that fund essential public services.
OVEC owns the Kyger Creek Generating Station, and UWUA Local Union No. 430 represents the hourly employees there. Mitchell testified that Kyger Creek is critical to the economic stability of southeast Ohio, the state’s grid sustainability, and the reliability of Ohio residents’ services.
“HB 15 stands to cause instability and uncertainty for the health of our community and the longevity of our good-paying jobs at OVEC,” said Mitchell, who also works for OVEC as a senior electrical technician at the Kyger Creek Station.
“Those jobs include not only my colleagues at the Kyger Creek plant in Cheshire and the Piketon corporate office, but also the numerous Ohio contractors who support us.
“As a private citizen, I am also concerned about what this legislation could do to the tax base that supports our local communities — the schools, the local amenities, and area charities,” he said. “It has the potential to devastate Southeastern Ohio.” The tax revenue generated by this plant funds a variety of essential services in our rural community.”
On the flip side
Bill proponent Melville Nickerson, NRG Energy Inc.’s director of government affairs in the central region, testified on February 12 that House Bill 15 promotes and advances the competitive power market.
NRG is a publicly traded Fortune 500 company that generates electricity for sale on the wholesale market through PJM and other regional transmission operators, as well as selling natural gas and electricity to industrial, commercial, and residential customers.
Nickerson stated that Ohio is the company’s largest Midwest market, serving nearly a half-million Ohio customers.
He explained that the bill improves the conditions that encourage market investment. Focusing on the retail aspects/benefits of HB 15, he stated that it is a pro-consumer bill that seeks to keep electricity costs low while driving customer benefits through competition.
First, requiring electric utilities to competitively bid the Standard Service Offer for residential customers who do not shop for electricity will ensure that they pay the lowest possible price for their electricity.
This provision also allows consumers to shop for electricity based on a transparent Standard Service Offer price and their own preferences, according to Nickerson.
According to Nickerson, NRG’s Choose to Give Program, a partnership that pairs a customer’s electricity with philanthropic donations, has raised more than $1 million for Nationwide Children’s Hospital since 2021. NRG delivered nearly 45 million airline miles to Ohioans through airline partnerships in 2023 and 2024.
Second, the provisions that establish a direct relationship between the electric supplier and the customer will improve customer service as suppliers compete for customer retention, he said.
Specifically, HB 15 allows suppliers to bill customers directly, provide on-bill financing for energy-saving products, and make enrollment simple, all of which are pro-consumer provisions. According to Nickerson, these provisions allow NRG to engage with customers directly and offer products and services that save them money.
The Senate Energy Committee’s next hearing on SB 2 is scheduled for March 11. The House Energy Committee will hold its next HB 15 hearing on March 12.
