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February 12, 2010

Ohio S.B. 221 Sets 22 Percent Cumulative Energy Efficiency Standards by 2025

A Green Strategies Bulletin

Ohio Senate Bill 221 (SB 221) enacted in 2008 and aimed at encouraging Ohio businesses and utilities to adopt renewable and advanced energy technologies -- also includes new energy efficiency and peak demand standards that utilities must meet through energy efficiency programs. Significant penalties can follow if utilities fail to meet the new benchmarks.

The Public Utilities Commission of Ohio (PUCO) has proposed new energy efficiency rules that have yet to take effect. The intent of the new rules is to establish clear and distinguishable requirements relating to the reporting, verification and design of cost-effective energy efficiency and peak demand programs.

Key energy efficiency provisions include:

  1. The Energy Efficiency Standard
  2. Peak Demand Standard
  3. Baseline for Energy Savings
  4. Potential Adjustments to Efficiency Benchmarks
  5. Efficiency Programs
  6. Verification
  7. Penalty for Under-Compliance

I.   Energy Efficiency Standard

SB 221 requires utilities to implement energy efficiency programs to achieve efficiency in energy usage from 2009 to 2025 on the following schedule as set forth in O.R.C. § 4928.66(A)(1)(a):

Year(s)

Efficiency-based Energy Reduction

2009

.3 percent

2010

.5 percent

2011

.7 percent

2012

.8 percent

2013

.9 percent

2014 – 2018

1 percent each year

2019 – 2024

2 percent each year

2025

Cumulatively 22 percent

II.   Peak Demand Standard

Similarly, beginning in 2009, electric-distribution utilities must implement peak demand efficiency programs designed to achieve efficiencies in peak demand on the following schedule as set forth in O.R.C. § 4928.66(A)(1)(b):

Year(s)

Peak Demand Energy Reduction

2009

1 percent

2010 – 2018

Additional .75 percent each year

2018

Legislate Future Reductions

In 2018, standing committees in the House and Senate must make recommendations to the General Assembly regarding future peak demand efficiency targets. O.R.C. § 4928.66(A)(1)(b).

III.   Baseline for Energy Savings

The baseline for energy savings is the average of total kilowatt hours utilities sold during the preceding three years. The baseline for peak demand efficiency is the average peak demand on the utility in the preceding three years. However, the PUCO may reduce either baseline to adjust for new economic growth. O.R.C. § 4928.66(A)(2)(a).

IV.   Potential Adjustments to Efficiency Benchmarks

The PUCO may amend the efficiency benchmarks if it determines the utility cannot comply due to regulatory, economic or technological reasons beyond its control. O.R.C. § 4928.66(A)(2)(b).

Compliance measurements include the effects of mercantile customer-sited efficiency and peak demand programs, i.e., measures adopted by utility customers at the sites of their facilities. Any mechanism designed to recover the cost of energy efficiency programs may exempt mercantile customers that commit their demand-response or other customer-sited capabilities (whether existing or new) for integration into the utilities’ demand response, energy efficiency or peak demand efficiency programs. If a mercantile customer implements such measures, the utility’s baseline is adjusted to exclude the effects of such programs that may have existed during the period used to establish the baseline. O.R.C. § 4928.66(A)(2)(c).

Baselines also must be "normalized" for changes in numbers of customers, sales, weather, peak demand and other appropriate factors so that factors outside the utilities' control do not unduly influence compliance. O.R.C. § 4928.66(A)(2)(c).

V.   Efficiency Programs

Programs implemented by a utility to comply with this standard may include demand-response programs and transmission and distribution infrastructure improvements that reduce line loss. O.R.C. § 4928.66(A)(2)(d).

Under the PUCO’s proposed rules, the programs must be part of a comprehensive energy efficiency and peak-demand efficiency program portfolio, including a range of programs that encourage innovation and market access for cost-effective energy efficiency and peak-demand efficiency for all customer classes. A utility’s program portfolio plan must include:

  • A description of stakeholder participation in program planning efforts and program portfolio development;

  • A description of attempts to align and coordinate programs with other public utilities’ programs;

  • A description of existing programs; and

  • A description of proposed programs.

Under the PUCO’s proposed rules, prior to submitting its comprehensive energy efficiency and peak-demand efficiency plan for consideration, an electric utility must conduct an assessment of potential energy savings and peak-demand efficiency from adoption of energy efficiency and demand-response measures within its territory. The assessment must include:

  • Analysis of energy efficiency and peak-demand efficiency measures that are technically feasible;

  • Analysis of the cost-effectiveness of such measures; and

  • Analysis of the achievable potential of each measure deemed cost-effective.

VI.   Verification

The PUCO must draft and docket an annual report verifying the energy usage and peak demand efficiency achieved by each utility. O.R.C. § 4928.66(B).

VII.   Penalty for Under-Compliance

If the PUCO determines, after notice and an opportunity for hearing, that a utility has failed to comply with the mandated energy usage or peak demand efficiencies, it must assess a forfeiture upon the utility equal to either:

  • An amount per day of under-compliance for the period of the annual report not greater than $10,000 per day under O.R.C. § 4905.54; or

  • An amount equal to the then existing market value of one renewable energy credit per megawatt hour of under-compliance or noncompliance.

Revenue from forfeiture is deposited into the state’s Advanced Energy Fund. O.R.C. § 4928.66(C).

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