In August, the Ohio Public Utility Commission (PUCO) collected comments on a proposal to enact a statewide electricity discount for companies that boost the state?s economy with large amounts of hiring or capital investment. The proposal is raising eyebrows among utilities and local ratepayers.
Existing customers can receive a discount off the incumbent electric distribution utility?s tariff rate. The discount to electric rates would occur at varying levels for a 5-year period. The more hiring or investment a company makes the greater the discount. For example, ac company hiring seven workers with a payroll of at least $5 million would receive the minimum discount of two percent. The same discount could be earned by making at least $50 million in investments on buildings and equipment. At the top of the scale, electricity would be discounted by 20 percent for firms hiring 125 workers with a payroll minimum of $17 million. Companies must also receive funding or incentives from local, state or economic development agencies to be eligible for any discount.
For new customers to receive a discount they must add at least 75 permanent Ohio employees, have a minimum monthly demand of at least 5 MW and meet a variety of other requirements that determine the extent of their discount.
Of course the question on everyone?s mind is who is going to pay extra to offset these discounts. The answer is ratepayers across the state. The proposal assumes consumers would pay the difference between the discounted rates and the otherwise applicable rates (called ?Delta Revenue?) on a 20 to 80 split.
Ohio isn?t the first state to attempt this type of electricity economic development, but normally this type of corporate welfare deal is worked out on a case-by-case basis with the local utility. A statewide policy would obviously limit any flexibility within the utility to negotiate the best arrangement for the business and ratepayers.
Nearly two million customers throughout Ohio are already benefiting from lower electricity prices thanks to the competitive market. Overall, retail prices for states with electricity markets have increased at a slower rate than those in non-market states, and commercial customers have seen a two percent decrease while non-market commercial consumers have weathered a three percent increase.
Subsidies to promote economic development distort the Ohio electricity market and encourage large industrial consumers to use more power while regular small business and residential customers pay for electricity they do not use. The PUCO should continue to pursue policies that enhance competition among electricity providers and continue to draw down electricity rates.
