Where Ohio is Headed: Potential Changes in Substitute Senate Bill 58 Ohio Chamber of Commerce October 18, 2013 Webinar Sam Randazzo – General Counsel, IEU-Ohio

Legislative Process In the last months of 2012, legislation was proposed to suspend the current mandates and to allow the General Assembly to revisit the mandates. This “lame duck” effort was unsuccessful but it created interest in the subject. Early in 2013, Senator Seitz, Chairman of the Senate Public Utilities Committee, began soliciting input from interested parties, introduced a “placeholder” bill* and initiated a hearing process to gather information (facts and opinions), review the portfolio mandates and identify any needed reforms. Following several hearings which resulted in testimony and recommendations from interested stakeholders, Substitute Senate Bill 58 (Sub. SB 58) was adopted by the Committee. Sub. SB 58 contains substantive revisions to the current portfolio mandates and provides a vehicle for the Committee’s more focused review of the current mandates and possible reforms. Before anything happens in the Senate, the Committee will complete its work and a bill will be presented to the entire Senate for its consideration. We expect that the Ohio House Public Utilities Committee will take up a “companion bill” relatively soon (next week). Before any reforms can be made to current law, both the Senate and the House must vote in favor of the reforms and their decision must not be vetoed by the Governor. 2 * Background regarding the portfolio mandates and information on the placeholder bill is available via the Internet at

Categories of Reform in Sub. SB 58 Maintains supply side (“renewables” and advanced energy) and demand side (energy efficiency and peak demand reduction) compliance requirements –Sub. SB 58 does NOT repeal the mandates’ compliance targets Filling in the blanks –Defines “energy efficiency” and “peak demand reduction” in objective terms –Confirms that actions, behaviors or practices that have attributes that can be counted towards compliance for both supply side and demand side mandates must be counted and not ignored –Confirms that reductions in “energy intensity” count Clarifies/Confirms what counts towards compliance with the mandates (supply side and demand side mandates) –“as found” (actual) v. hypothetical measurement of compliance Defines compliance cost limit for the supply side mandates and establishes a total compliance cost limit for the demand side mandates –Limit is on consumer-funded expenditures – utilities free to invest shareholder dollars above consumer funding limits –Limit is 3% in incremental total cost for supply side (consistent with PUCO decision) –Limit is 2013 expenditure level for demand side ($ million statewide) 3

Categories of Reform in Sub. SB 58 Does not expand mandates to electric cooperatives or municipal electric utilities Streamlines opt out process for largest electricity users –Opt out process for “mercantile customers” (700,000 kWh per year or “national accounts”) is retained –Streamlines opt out process for customers served at “above primary” voltage and customers/accounts that are self-assessors for purposes of the kWh tax (45,000,000 kwh per year) There are about 145 self-assessors in Ohio Election effectuated through verified written statement Streamlined opt out requires adoption of “energy management system” with measurement and verification protocols –Adjusts compliance baseline to remove load/usage of opt out customers so as to avoid shifting compliance burden to other customers –Streamlined opt out customers may opt back in with proper notice but must stay in for three years Explicitly establishes a “shared savings” benefit for utilities as “incentive” for compliance with the mandates 4

Categories of Reform in Sub. SB 58 Confirms that utilities recover their cost of compliance “Feathers” the escalation rate in the year-to-year compliance targets to avoid abrupt year-to-year changes Confirms the PUCO’s authority to require utilities to bid the capacity resource value of energy efficiency into the PJM market if the utility owns the right to do so Confirms that customers retain the right to capture value from their customer-sited capabilities by bidding them into the PJM market or by using them to reduce their electric bills and that the PUCO cannot confiscate such value Provides transition from currently approved compliance plans so utilities and customers can adapt to the reforms Terminates the Ohio mandates if federal mandates are adopted Eliminates the in-state purchase requirement associated with the current renewable mandate to address conflict with U.S. Constitution’s Commerce Clause 5

Timing The primary sponsor of Sub. SB 58, Senator William Seitz, has stated that he wants reform legislation enacted before the end of In addition to Sub. SB 58, legislation (SB 34) has also been introduced to repeal Ohio’s portfolio mandates. 6

Questions? 7