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Freeze on Ohio’s green energy law imminent

The Ohio Senate this week approved Senate Bill 310 to freeze the state’s energy efficiency and renewable energy standards at current levels while a newly created Energy Mandates Study Committee (EMSC) reviews the standards and provides recommendations for modifications to the standards. Session ran late into the night on May 7 with the vote occurring around 1:00 a.m. the next morning. The bill passed the full chamber by a vote of 21-11 with three Republicans voting in opposition, one Democrat voting in the affirmative and another Democrat absent from the vote.

Under current law, electric distribution utilities (EDUs) and electric services companies (ESCs) must provide 25 percent of their electricity supply by 2025 from alternative energy resources. Additionally, EDUs and ESCs must meet energy efficiency benchmarks that total 22 percent energy savings by 2025.

The Senate committee made a number of changes to S.B. 310 prior to passing the measure. As introduced, the bill would have frozen the standards at 2014 levels for the energy efficiency (currently 4.2 percent) and renewable energy benchmarks (currently 2.5 percent) indefinitely. Following speculation that Governor Kasich was likely to veto the bill in its original form, Senate President Keith Faber met with the governor to discuss changes to the bill. Amendments were added following the discussion, and language was inserted to resume the standards in 2017 barring legislative action resulting from the EMSC’s recommendations.

The following are additional changes included in S.B. 310:

  • Eliminates the ability for EDUs or ESCs to utilize advanced energy resources, such as clean coal or fuel cell technology to satisfy the alternative energy requirements, and reduces the alternative energy requirement to 12.5 percent of a utility’s baseload, reduced from 25 percent in current law
  • Changes the composition of the EMSC to include 12 legislators—six appointed by the House Speaker and six appointed by the Senate President—and the PUCO Chairman, who will serve as an ex officio member. Previous versions of the bill included legislators as well as industry experts.

  • Permits a streamlined opt-out procedure for industrial customers beginning in 2017—language permitting residential customers to opt-out of energy efficiency and renewable energy programs was included in previous versions of the bill and ultimately removed

  • Allows gas and energy produced from anaerobic digesters to qualify for renewable energy credits

  • Eliminates the mandate that half of the renewable energy resources must be generated from in-state sources, instead requiring that renewable energy must be deliverable to Ohio for compliance of the standards

  • Allows energy efficiency gains achieved through the universal service fund for low-income customers to qualify toward the requirements.

On May 9, Kasich and Faber issued the following joint statement on the bill:

“The well-intentioned strategy developed in 2008 to encourage alternative energy generation mandated levels which are now emerging is a challenge to job creation and Ohio's economic recovery. They are simply unrealistic and will drive up energy costs for job creators and consumers. However, alternative energy sources are an important component of Ohio’s diverse energy portfolio, which is why we've rejected the notion of scrapping Ohio's renewable standards. Instead, by temporarily holding at our current level while problems are ironed out, we keep the progress we've made, ensure we steadily grow new energy sources and preserve affordable energy prices for both businesses and consumers.”

The bill now moves to the House, where Speaker Bill Batchelder has stated the caucus’ intention is to move the bill quickly. The House Public Utilities Committee has scheduled two hearings on the bill next week and is expected to report the bill out by the end of the month.

Severance tax proposal gets another overhaul

The House Ways and Means Committee accepted a second rewrite of legislation to increase Ohio’s severance tax, which is currently 20 cents per barrel of oil and three cents per Mcf of natural gas and natural gas liquids. As originally introduced, House Bill 375 would have phased-in a rate of two percent for horizontal wells, which the committee later increased to 2.25 percent. The substitute bill introduced this week increases the rate to 2.5 percent, and does not allow a phase-in of the higher rate.

The increase is the result of discussions with Governor Kasich, who proposed a rate of 2.75 percent in his Mid-Biennium Review legislation and continues to push for the higher rate.

The substitute measure also included an increase for local areas impacted by drilling, who now receive 15 percent of the revenue generated under the proposal—up from 10 percent in the previous version. The funds would be distributed to counties in proportion to the statewide share of oil and gas revenue they produce.

Local dollars would be distributed as follows:

  • 20 percent to counties for capital purposes
  • 5 percent to townships for road maintenance

  • 75 percent to be distributed by the newly created Ohio Shale Gas Regional Commission, an 11-member commission comprised of local officials, a representative from an economic development organization, and a representative from the oil and gas industry

    • Of this amount, 85 percent is to be used for infrastructure projects and 15 percent would go to a legacy fund

The bill is scheduled for two hearings next week in the House committee, with a vote anticipated on May 13.

Legislation to watch

Toll bridge: Sponsored by Representatives Ross McGregor (R-Springfield) and Dale Mallory (D-Cincinnati), House Bill 533 would allow for future tolling of the Brent Spence Bridge connecting Cincinnati with Kentucky and amend the law governing public-private agreements relative to transportation facilities. The bill was introduced on May 6, and is scheduled for its second hearing in the House Finance Committee on May 13. Senate Bill 355, sponsored by Senators Bill Seitz (R-Cincinnati) and Senator Eric Kearney (D-Cincinnati) is companion legislation introduced on May 7.

Children services: Sponsored by Representative Anne Gonzales (R-Westerville), House Bill 452 would require children's residential facilities to provide specified information to local law enforcement agencies, emergency management agencies, and fire departments. It would also require the Department of Job and Family Services to implement a Child Placement Level of Care Tool Pilot Program. The bill was approved by the House on May 7.

Vehicle repairs: Sponsored by Representatives Matt Lynch (R-Chagrin Falls) and Bob Hagan (D-Youngstown), House Bill 526 would prohibit auto insurers from requiring, recommending, or suggesting that a claimant on a policy have the claimant’s vehicle repaired at a particular repair shop or by a particular person unless the claimant requests a recommendation or suggestion. The bill is scheduled to receive its first hearing in the House Insurance Committee on May 13.

Sewage systems: Sponsored by Representatives Sean O’Brien (D-Brookfield) and Mike Duffey (R-Worthington), House Bill 522 would require notification to a property owner whose property is served by a household sewage treatment system of the construction of a private sewage system to which the property will be required to connect. The bill would then authorize such a property owner to elect not to connect to the sewerage system under specified conditions. The bill was introduced on April 16 and has been referred to the House Public Utilities Committee.

For more information, please contact:

Michael Caputo
(non-attorney professional)
216.348.5770
mcaputo@mcdonaldhopkins.com

Rebecca M. Kuhns
(non-attorney professional)
614.458.0043
rkuhns@mcdonaldhopkins.com

Aaron M. Ockerman
(non-attorney professional)
614.458.0026
aockerman@mcdonaldhopkins.com

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