Senate Bill 2 Creates Affordable, Abundant, and Reliable energy

Why is it imperative for us to devise a modern energy policy for Ohio?

Fortune 500 companies are pouring concrete and raising walls at new manufacturing and data centers around the state. Companies including Intel, Amazon Web Services, Anduril, and Honda have planted stakes in Ohio because of the business-friendly environment we took great pains to create. Business is booming in the Buckeye State, but an underlying concern remains: using what power?

The state’s energy demand will skyrocket nearly 50% by 2034, with new projects accounting for nearly all the increased demand. But Ohio’s current energy market can provide less than one gigawatt of the estimated 18 gigawatts we need to add  by 2034. Manufacturing plants, data centers, and technological advancements like artificial intelligence will bring a windfall of jobs and tax revenues to the state, but they also stress an already strained energy supply.

Ohio’s energy market requires structural change. Homes must power appliances, businesses need must run machinery, and schools must light classrooms for the next generation of Ohioans.  To ensure Ohio has the energy it needs, the Ohio Senate has passed legislation to meet a huge increase in demand while attempting to keep prices stable. Senate Bill 2 will spur energy by a return to a market-based system while fostering a hospitable business environment for energy generators and transmitters and streamlining regulatory operations.

First, SB2 makes key changes in the current market structure for affordable energy rates. Currently, electric distribution utilities — energy transmission companies such as AEP, AES, and Duke Energy — can charge their customers based on the utility’s Electric Security Plan (ESP). As outlined by Ohio Code, ESPs can be used by utilities to charge their ratepayers to recover costs of specific programs. 

ESPs, referred to as riders, enable utilities to charge their ratepayers above the competitive market rate for energy, typically for an outlined purpose. For example, a utility can use money collected from riders to build new infrastructure or repair damages following a significant storm.

But this easily inflated pricing mechanism is not good for consumers. What happens when utilities abuse riders and overcharge consumer beyond what they need? Language in SB2 repeals riders and requires utilities to charge a market rate. In practice, the market rate, specifically the free-market rate, reflects basic principles of supply and demand and ensures affordable, competitive prices.

Senate Bill 2 also saves consumers money by repealing and prohibiting power plant subsidization. The legislation repeals Ohio Valley Electric Cooperative coal plant subsidies enacted in House Bill 6 of 2019, which will create an estimated $397.5 million in savings for consumers through 2030.

Additionally, $80 million will be saved by repealing renewable solar funds also created in HB6, and $53 million will be diverted to a new school energy efficiency loan administered by the Ohio Air Quality Development Authority. This initiative will assist schools in updating facilities toward energy efficiency and reduce stress on the energy grid.

To stimulate energy generation, SB2 reduces and removes market barriers, creating a pro-business environment for prospective projects. Ohio tax code requires taxes on tangible personal property (TPP), meaning personal property that can be seen, weighed, measured, or felt. This includes a business’s machinery, equipment, and inventory. SB2 aims to attract new investment by eliminating TPP tax on new generation projects and reduces the TPP tax from 88% to 25% on new transmission, distribution, and pipeline infrastructure.

SB2 also attracts businesses to develop Ohio’s currently unused infrastructure. Designated as Priority Investment Areas (PIAs), sites of brownfield and former coal plants for will be targeted for development. Properties receiving PIA classification will forgo TPP tax on any generation, transmission, or pipeline infrastructure for five years. To ensure the program is administered timely, the Ohio Power Siting Board must decide within 45 days on PIA certification. Taking these steps allows businesses to confidently invest in Ohio and meet the growing energy demand.

Behind-the-meter (BTM) generation is another mechanism to increase generation and relieve the grid. BTM or “self-generation” allows entities that produce generation for their own consumption to provide excess energy to another entity. Allowing self-generators to sell leftover energy incentivizes production while alleviating consumers’ reliance on the grid.

Senate Bill 2 implements additional measures to increase efficiency within state energy regulatory bodies, the Ohio Power Siting Board (OPSB) and the Public Utilities Commission of Ohio (PUCO). Currently, red tape and slow bureaucracy impede energy industry growth. To ease this burden, SB2 creates deadlines for the PUCO and OPSB when determining cases. The PUCO oversees rate cases within the state, but the current process takes up to 540 days, leaving utilities without guidance and largely out of check. This bill requires cases to be determine in 365 days or less. The OPSB, which must certify major utility facilities for construction, does not have a determination deadline in statute, so SB2 will require cases to be complete in 120 days compared to the approximately 275-day timeline in place now. Again, SB2 creates framework for a reliable, ambitious energy market for prospective and existing businesses.

SB2 provides further framework in protecting ratepayers. In this legislation, electric distribution utilities can still have annual rate adjustments, as needed. But, for utilities to apply for an increased rate charged to consumers, they must disclose their finances to the PUCO. This disclosure acts as a check on utilities to ensure companies are charging customers a reasonable, competitive rate. The clear language in this bill  will hold utilities accountable and ensure fair rates for their customers.

Senate Bill 2 creates affordable, abundant, and reliable energy. Implementing the changes outlined in SB2 will provide the necessary framework for our dramatically growing energy market by removing obstacles and simplifying procedures, and customers will see the results in their monthly utility statements. 

This visionary legislation will move Ohio forward to become a leader in energy production, securing the industry and a bright economic  future for generations to come.

State Senator Bill Reineke represents District 26 and serves on the Energy, General Government, Higher Education, and Transportation Committees.