OHIO LEGISLATIVE SERVICE COMMISSION
Office of Research Legislative Budget
www.lsc.ohio.gov and Drafting Office
H.B. 79 Bill Analysis
135th General Assembly
Click here for H.B. 79’s Fiscal Note
Version: As Passed by the House
Primary Sponsors: Reps. Seitz and Sweeney
Effective Date:
Rocky Hernandez, Attorney
SUMMARY
State competitive retail electric service policy
 Amends the state policy for competitive retail electric service to include encouraging
electric distribution utilities (EDUs) to develop voluntary portfolios of energy savings
programs to help customers save energy.
Energy savings portfolio application requirements
 Permits EDUs to apply to the Public Utilities Commission (PUCO) for approval of a
portfolio of programs for energy savings (energy efficiency savings and peak demand
reduction savings) to help retail electric customers to save energy.
 Specifies what portfolio applications must contain about proposed energy savings
programs, including for example, descriptions of program size and scope, program costs,
and planned energy savings, and other information the EDU determines appropriate for
PUCO review.
 Also requires a portfolio application to include proposed mechanisms for (1) certain
program cost recovery and utility incentives and (2) recovery of lost distribution
revenues or decoupling mechanism revenue as authorized under existing law governing
energy efficiency and peak demand response (EE/PDR) .
 Limits the collection of portfolio mechanisms for the recovery of lost distribution
revenues or recovery through a decoupling mechanism to a period that does not exceed
the length of the approved portfolio’s term.
 Specifies that, if applicable, any lost distribution revenue mechanisms must be
normalized for weather.
 Specifies that recovery of any lost distribution revenues or recovery through a
decoupling mechanism is not subject to the bill’s provisions allowing mercantile
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customers to opt in to an EDU’s energy savings programs and residential and
nonresidential customers to opt out.
 Prohibits portfolio mechanisms that would result in double cost recovery.
Application review process
 Requires PUCO to conduct hearings on a portfolio application.
 Not later than 180 days after receiving an application, requires PUCO by order to
approve, or modify and approve, portfolio applications for a term not to exceed five
years, if PUCO finds that the application meets the requirements under the bill and to
deny the application if PUCO finds that the requirements are not met.
 Requires PUCO to specify, according to established rate classes, if it approves an energy
savings portfolio application, the use of either lost distribution revenue recovery or
recovery under a decoupling mechanism for EE or conservation programs under current
EE/PDR law.
 Allows PUCO to modify an application only as necessary for it to comply with portfolio
requirements under the bill.
 Requires PUCO, upon approving or modifying and approving a portfolio application, to
authorize accounting mechanisms under which the EDU may defer and recover only
those PUCO-approved program costs that would cause recovery in excess of the bill’s
rate caps due to the level of customer participation that exceeded the EDU’s
expectations.
 Requires an EDU to accept or withdraw its modified application not later than 90 days
after the PUCO final application order, if PUCO modifies and approves the application or
if a higher than expected number of customers opt out of the portfolio.
 Prohibits an EDU or its affiliate from doing certain activities to induce a party to a
proceeding to enter into a settlement of a proceeding before PUCO regarding a portfolio
application.
Additional portfolio requirements
 Requires portfolios to include at least one program to benefit low-income residential
customers with an annual income at or below 200% of the federal poverty level.
 Requires the total cost for a portfolio’s proposed residential low-income customer
programs to be at least 15% of the total program costs for all of the portfolio’s proposed
residential programs.
 Requires a portfolio to be designed to:
 Achieve gross annual energy savings of at least 0.5% of the gross annual energy
savings of the prior year’s retail electric sales to participating customers except as
limited by the bill’s net cost provisions and establishes options for determining gross
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energy savings either directly or with a baseline established under federal energy
standards for appliances or Ohio Building Code standards;
 Achieve not more than 30% of the planned annual gross savings through residential
programs delivering only behavioral energy savings (energy savings occurring as a
result of a change in a residential retail electric customer’s pattern of electricity use);
 Emphasize smart technology measures, including ENERGY STAR® smart thermostats
and appliance controllers;
 Only permit customer incentives on equipment that exceeds federal energy
standards for appliances or Ohio Building Standards, for gross energy savings not
determined through standard measurement, and verification protocols or, if
available, through metering that has the capability to measure demand in kilowatts;
 For gross energy savings based on federal energy standards for appliances and other
equipment or standards under the Ohio Building Code, an EDU may only claim
savings for equipment in cases in which it has paid a customer incentive;
 For demand savings when residential advanced metering is not available, determine
gross energy savings as the amount of kilowatt hours shifted to periods other than
periods of high demand, if this method of determining gross energy savings is
approved in the portfolio; and
 Exclude gross energy savings from any physical device or equipment not enrolled in
the program with the permission or at the request of a participating customer.
 Requires an EDU’s portfolio to include provisions intended to accommodate the
participation of certain small businesses as trade allies in all counties within the EDU’s
service area under its proposed EE programs.
 Requires an EDU’s energy savings portfolio to ensure that any savings on a customer’s
monthly bill or reduction in energy usage as a result of the customer’s participation in
any federal EE program or use of a federal tax rebate or credit will not be attributed to
the EDU’s programs.
 If gross annual energy savings from transmission and distribution system investments
result in measurable EE savings, (1) prohibits the investments from being considered as
a portfolio program for cost recovery and incentive purposes and (2) requires the
energy savings to be counted toward determining whether the EDU achieved its
required annual gross energy savings.
Utility cost test
 Requires an EDU’s approved portfolio to be cost-effective based on a utility cost test
that compares the total cost of measurable portfolio programs to avoided electric
generation, transmission, and distribution costs; reductions in market prices for energy
and capacity; reductions in credit and collection costs; and any other quantifiable EDU
system benefits.
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Customer and EDU incentives
 Specifies that (1) customer incentives must provide a “meaningful inducement” for
customers to participate in the cost-effective delivery of energy savings and (2) EDU
incentives through a portfolio must not exceed 10% of actual program costs on an after-
tax basis and excluding any advertising or marketing dollars, and must not count toward
the portfolio’s net cost calculation or the rate caps under the bill.
 Permits PUCO to adopt rules to implement the customer and EDU incentive provisions
of the bill.
EDU promotion of energy savings programs
 Requires an EDU that promotes its energy savings programs to include in its
advertisements and marketing materials a description of the specific energy savings
programs that the EDU is promoting and offering to its customers.
Portfolio net cost limit
 Establishes a method for calculating the net cost of an EDU’s portfolio and prohibits the
net cost from exceeding 2.25% of the difference between the EDU’s annual total
operating revenues for the previous year as reported in its FERC financial report, FERC
Form 1, Account 400, less the purchased power expense, account 555, for the same
year.
 Requires an EDU to retain 20% of revenues received from EDU program energy savings
bid into the wholesale market and specifies that these revenues are separate from
utility incentives described in the bill.
 Prohibits recovery of any lost distribution revenues or recovery using a decoupling
mechanism under an EDU’s approved portfolio from counting toward the portfolio’s net
cost or the rate caps under the bill.
Rate caps
 Effectively caps charges for an EDU’s portfolio costs by prohibiting an EDU’s portfolio costs
from resulting in a rate that produces a monthly charge greater than $1.50 per residential
customer per month or greater than $7.50 per nonresidential retail customer per month.
 If a higher than expected number of residential customers opt out of the portfolio,
automatically authorizes an EDU with an approved portfolio to reduce portfolio
spending to ensure that the EDU complies with the rate caps.
Customer opt-out
 Establishes a process under which, at the start of a new portfolio, (effectively at least
every five years due to portfolio’s maximum five-year term) residential customers and
nonresidential retail customers (customers that are not residential customers or
mercantile customers) may opt out of portfolio participation and cost recovery for the
portfolio.
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 Includes in this process, an opportunity for a customer that has opted out of portfolio
participation to opt back in at the beginning of a portfolio’s term.
 Allows a customer’s election to opt out to continue after an EDU’s portfolio’s term
expires or after PUCO approves a new portfolio and specifies that a customer’s election
to opt out of participation in a previous portfolio remains in effect until the customer
elects to opt back in according the bill’s opt-in process.
Mercantile customer opt-in
 Automatically excludes mercantile customers (commercial or industrial customers that
consume more than 700,000 kilowatt hours of electricity per year or are part of a
national account involving multiple facilities in one or more states) from participating in
an EDU portfolio, but establishes a process under which such customers may
affirmatively opt in to any opportunities to participate in an EDU’s portfolio and any
portfolio cost recovery.
 Requires EDUs to provide a notice to mercantile customers describing the opt-in that
includes a mercantile customer’s cost of participating in the portfolio.
Conveyance of energy savings incentives
 Permits a customer to convey to an eligible electric services company (ESC) an energy
savings incentive associated with participation in an EDU’s energy savings program if the
ESC has:
 Obtained the customer’s written consent;
 Verified the customer’s identity by providing the customer’s EDU account number or
the customer’s service delivery identifier number;
 Explained how the incentive being conveyed meets the energy savings program
eligibility requirements.
 Requires the ESC to produce evidence that the customer has completed the energy
savings program, and provides that examples of such evidence could be a product
identification code, product serial number, or similar evidence that proves installation or
delivery of an eligible product under the energy savings program.
EDU report
 Requires an EDU with an approved portfolio to review the cost-effectiveness of its
portfolio annually over its term, update its portfolio based on the review, ensure that
reductions in monthly bills or energy usage due to federal EE programs, tax credits, or
rebates are not attributed to the EDU’s programs, and file a report of its annual review
to PUCO by April 15 each year.
 Requires an EDU to continue to offer customers a portfolio of energy savings programs
during its cost-effectiveness and compliance review and subject to the General
Assembly’s findings regarding the EDU’s performance and compliance as described in
the PUCO report required by the bill.
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PUCO report
 Requires PUCO, by July 1, 2026, and every three years thereafter, to review EDU reports
and submit a report to the General Assembly that includes an overview of EDU
compliance and energy savings and a compilation of the EDU reports received.
 Requires PUCO to recover reasonable costs for evaluation, measurement, and
verification for each EDU’s program through the affected EDU’s portfolio cost recovery
mechanism and specifies that the costs must not be considered portfolio costs or
included in net cost calculations or the rate caps under the bill.
TABLE OF CONTENTS
State competitive retail electric service policy ............................................................................... 7
Energy savings portfolios ................................................................................................................ 7
Portfolio application requirements ............................................................................................. 7
Application review process ............................................................................................................. 8
Modification restrictions and process......................................................................................... 9
Inducement of settlement prohibited ........................................................................................ 9
Additional portfolio requirements ................................................................................................ 10
Programs for low-income customers ........................................................................................ 10
Accommodations for trade allies .............................................................................................. 10
Portfolio energy savings requirements ..................................................................................... 10
Gross energy savings determination .................................................................................... 11
Energy savings from transmission and distribution system investments ................................. 12
Federal EE measures, tax rebates, or credits ............................................................................ 12
Utility cost test .............................................................................................................................. 12
Customer and EDU incentives ...................................................................................................... 13
EDU promotion of energy savings programs ................................................................................ 13
Portfolio net cost limit ...........................................................................