April 24, 2019

Ohio House of Representatives, Subcommittee on Energy

Stein and O’Brien and members of the subcommittee:

R Street Institute appreciates the opportunity to testify before you today. R
Street is a policy institute devoted to free-market solutions to public policy
issues, and today we would like to voice our concern that HB 6 would be a step
backward for the competitiveness of the Ohio energy economy and thus a burden
on the state’s energy consumers. I am Alan Smith, Midwest Director of R Street,
and a life-long Ohioan. This testimony was prepared with the assistance of our
Energy and Environmental Policy Director Travis Kavulla. Mr. Kavulla is a
former utility commissioner, twice elected to that office in the State of
Montana, and a past president of the National Association of Regulatory Utility

have claimed that prices will rise if HB 6 is not adopted.[1]
In our experience, requiring customers to subsidize producers does not
typically result in lower costs for customers. While HB 6 would relieve
customers of the obligation to pay subsidies for certain renewable
technologies, the cost of these obligations is typically lower than the price
customers would have to pay for nuclear units under HB 6. For example,
residential customers of First Energy’s distribution company, Ohio Edison
Company, pay an average of $0.47 per month for renewable subsidies.[2]
Under HB 6, this number would rise to $2.50 per month, a five-fold increase. In
effect, the law would swap one, smaller subsidy obligation for a much larger one.

related claim often made by those who support nuclear subsidies is that, were
nuclear units to retire, the tighter supply-and-demand balance of the region
would cause wholesale prices to rise. They contend this price effect would
eventually show up in the prices that customers pay to retailers or default
suppliers who serve them energy. There is little evidence to support this
argument. If true, it should be backed up by rigorous analysis. The Independent
Market Monitor of PJM, the official appointed to conduct analysis independent
of any financial participant, has not made any such claim. Indeed, the Market
Monitor suggests the opposite. The 2018
State of the Market of PJM
report indicates that the construction and
operation of new natural-gas-powered combined-cycle generators is economical at
the market’s current prices.[3]

HB 6 would establish a substantial subsidy program. The law is expected to cost approximately $300 million annually and establish subsidies for 30 million megawatt-hours (MWh) of electricity generation.[4] In comparison, the total electricity consumed in Ohio in January 2019 equaled 11.3 million MWhs.[5] While renewables do enjoy subsidies in today’s marketplace, it is noteworthy that Ohio’s utility-scale wind and solar production totaled a mere 244,000 MWhs in 2019.[6]

HB 6 enacted, the quantity of subsidies given out would be so large, on a MWh
basis, as to make up a significant portion of the total MWhs that the state
uses. Such a result would contradict Ohio’s policy decision to promote
competition in electricity, which we hope the legislature will protect.

you for your consideration,

Alan Smith

Midwest Director, Senior Fellow

R Street Institute


[email protected]

The Hon. Travis Kavulla

Energy and Environmental Policy Director

R Street Institute


[email protected]

Jim Siegel, “FirstEnergy Solutions Warns of Higher Prices if Nuke Plants
Close,” The Columbus Dispatch, Apr.
17, 2019. https://www.dispatch.com/news/20190417/firstenergy-solutions-warns-of-higher-prices-if-nuke-plants-close

Public Utilities Commission of Ohio, Renewable
Portfolio Standard/Rate Impacts 2nd Quarter 2019
. https://www.puco.ohio.gov/industry-information/industry-topics/ohioe28099s-renewable-and-advanced-energy-portfolio-standard/renewable-portfolio-standard-rate-impacts-2nd-quarter-2019/ 

Monitoring Analytics, State of the Market
Report for PJM, Volume 2: Detailed Analysis
, March 14, 2019, p. 336. http://www.monitoringanalytics.com/reports/PJM_State_of_the_Market/2018.shtml

Siegel, Apr. 17, 2019.

Energy Information Administration (EIA), Ohio
Net Electricity Generation by Source
, January 2019. https://www.eia.gov/state/rankings/?sid=OH#series/51.

EIA, Ohio State Energy Profile. https://www.eia.gov/state/print.php?sid=OH

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