OHIO LEGISLATIVE SERVICE COMMISSION
Office of Research Legislative Budget
www.lsc.ohio.gov and Drafting Office
H.B. 364
Final Fiscal Note &
134th General Assembly Local Impact Statement
Click here for H.B. 364’s Bill Analysis
Primary Sponsor: Rep. Patton
Local Impact Statement Procedure Required: No
Russ Keller, Senior Economist, and other LBO staff
Highlights
The bill expands the criteria for which state-regulated waterworks and sewage disposal
companies may recover costs from their customers under an infrastructure improvement
surcharge.
The Ohio Environmental Protection Agency (OhioEPA) may evaluate more permit
applications for hazardous waste incinerators, based on two exceptions to the permit
moratorium created by the bill. Costs to review those applications would be partially
offset by any fees collected. The net effect is uncertain.
Transient noncommunity public water systems may experience administrative cost
savings from no longer implementing and maintaining asset management programs and
reporting to OhioEPA.
OhioEPA may experience some administrative cost savings as a result of no longer
overseeing these programs and reviewing the submitted asset inventories from transient
noncommunity public water systems.
The bill specifies the priority of a residential property assessed clean energy (PACE) lien
relative to mortgages and other liens. (PACE is a voluntary special assessment added to a
property’s tax bill.)
Detailed Analysis
State-regulated utilities
Continuing law permits a waterworks company or a sewage disposal company to seek
approval from the Public Utilities Commission of Ohio (PUCO) for an infrastructure improvement
surcharge; PUCO orders refer to such a surcharge as a system improvement charge (SIC). Codified
law includes several requirements that must be met before the Commission may approve a
January 4, 2023
Office of Research and Drafting LSC Legislative Budget Office
proposed SIC. The bill expands the criteria to include additional items that may be recovered
under a SIC. If not for the bill, a waterworks company or sewage disposal company could still seek
recovery of those charges from customers through a base rate case, but in general, a SIC
proceeding is smaller in scope than a base rate case proceeding. The bill requires PUCO to issue
a final order within 180 days after a SIC application is filed by a company with $250,000 or more
in annual operating revenue, else the proposed surcharge will go into effect at the waterworks
or sewage disposal company’s discretion (albeit subject to refund to the extent that collections
exceed amounts later authorized by PUCO).
Continuing law limits a waterworks company or sewage disposal company to no more
than three concurrent SICs. Similarly, caps in current law on each SIC remain unchanged. The
waterworks company SIC and sewage disposal company SIC cannot exceed 4.25% and 3%,
respectively, of the utility rates applicable to a given customer that are in effect on the date the
SIC application was filed.
The bill does not have a direct effect on political subdivisions; the regulated utilities
affected by the bill serve only a small portion of Ohio in any case. The bill likely has a minimal
impact, if any, on PUCO’s agency expenditures.
Hazardous waste incinerators
The bill creates two exceptions to the moratorium against modifications to the permit.
The first exception is for applications when all of the following apply:
1. The hazardous waste incinerator was in operation before April 15, 1993;
2. The application for the modified permit is for the installation of an improved air emission
control system designed to achieve compliance with federal air regulations; and
3. The application does not propose to increase the treatment capacity of the incinerator or
the quantity of waste to be treated by it.
The second exception is for applications when all of the following apply:
1. The hazardous waste incinerator was in operation before April 15, 1993;
2. The application for modification seeks to increase the treatment capacity of the
hazardous waste incineration operations or the quantity of waste to be treated;
3. The hazardous waste incinerator is at or near its actual maximum operating capacity;
4. The application for the modified permit is for the installation of an improved air emission
control system designed to achieve compliance with federal air regulations; and
5. The owner or operator of the hazardous waste incinerator has not been issued any other
permit allowing for the expansion of the hazardous waste incinerator or construction of
a new hazardous waste incinerator.
In general, current law prohibits the Director of Environmental Protection (OhioEPA) from
issuing any new or modified hazardous waste incinerator installation and operation permits. As
a result of the bill’s change, the number of permit applications that are received by OhioEPA may
increase. Costs to review those applications would be partially offset by any fees collected. The
net effect is uncertain.
P a g e |2 H.B. 364, Final Fiscal Note
Office of Research and Drafting LSC Legislative Budget Office
Transient noncommunity public water systems
The bill changes current law provisions that require public water systems (PWSs) to
implement asset management programs. Specifically, the bill removes transient noncommunity
public water systems from these requirements.1 The bill defines a transient noncommunity public
water system as a system that does not regularly serve at least 25 of the same persons over six
months per year and is not a community water system or a nontransient noncommunity water
system. Examples include gas stations, restaurants, and campgrounds.2
PWSs are regulated by the Ohio Environmental Protection Agency. PWS water sources
are derived either from a ground water source, a surface water source, or a ground water under
the direct influence of surface water source. In Ohio, around 4,800 regulated public water
systems serve approximately 11 million people daily.
Locally managed public water systems
PWSs that meet the definition of a transient noncommunity public water system may
experience administrative cost savings from no longer implementing and maintaining asset
management programs and reporting to OhioEPA. Some systems may continue to implement
their own asset management programs based on best practices, but this would be a voluntary
measure once the bill is enacted.
Enforcement savings – fines and penalties
Because of the bill, OhioEPA will no longer be able to enforce certain administrative, civil,
or criminal remedies as permitted under current law and specific to asset management program
reporting, including license revocation for a PWS that meets the definition of a transient
noncommunity public water system.3 This change would result in administrative cost savings for
the agency. Generally speaking, fines and penalties may be as follows:
Administrative – PWSs serving populations of more than 10,000, not less than $1,000 for
each day of each violation, total amount cannot exceed $10,000 per violation; PWSs
serving populations of 10,000 or fewer, $1,000 multiplied by a number, expressed as a
decimal, in order to determine the penalty amount for each day of violation, total amount
cannot exceed $2,500 per violation;
Civil – up to $25,000 for each violation;
Criminal – penalties vary depending on the culpable mental state of the offender and the
severity of the offense. For a reckless violation, a misdemeanor, punishable by a fine of
up to $10,000 or imprisonment for up to four years, or both. For a reckless or knowing
1 The requirements for public water system asset management programs were first enacted by S.B. 2 of
the 132nd General Assembly.
2 The other types of PWSs are: (1) community (serve at least 15 service connections used by year-round
residents or regularly serve at least 25 year-round residents; examples include cities, mobile home parks
and nursing homes), and (2) nontransient noncommunity (serve at least 25 of the same persons over six
months per year; examples include schools, hospitals, and factories).
3 For a complete listing of the fines and penalties that may be sought currently, see R.C. 6109.23, 6109.33,
and 6109.99, and Ohio Administrative Code (O.A.C.) 3745-81-04.
P a g e |3 H.B. 364, Final Fiscal Note
Office of Research and Drafting LSC Legislative Budget Office
violation that poses a significant threat to or causes significant harm to public health, a
felony, punishable by a fine of up to $25,000 or imprisonment for up to four years, or
both.
As a result of this change and to the extent that a PWS may have been found in violation
of any of the current asset management program requirements, these systems may experience
certain cost savings in terms of fines and penalties once the bill is enacted.
Property assessed clean energy (PACE)
The bill specifies that the priority for a residential PACE lien is:
1. Always subordinate to a first mortgage, regardless of when that mortgage is recorded
with the county recorder;
2. Subordinate to all other liens recorded prior to the recordation of the residential PACE
lien;
3. Superior to all other liens recorded after the recordation of the residential PACE lien.
Background
A residential PACE lien is a lien for a residential PACE (property assessed clean energy)
loan, which is a loan to pay for the installation of cost-effective energy improvements on a
homeowner’s qualifying residential real property and is repayable by the homeowner through a
voluntary special assessment added to the property’s tax bill. PACE provides financing for 100%
of an energy project’s cost (i.e., energy efficiency and renewable energy improvements) and is
repaid for up to 25 years. PACE assessments stay with property upon sale and transfers to new
owner.
HB0364EN/th
P a g e |4 H.B. 364, Final Fiscal Note
Statutes affected: As Introduced: 3302.151, 3319.111, 3319.229, 3319.26, 3319.61, 3333.048, 3333.39, H.B
As Reported By House Committee: 3314.03, 3319.26, 3326.11
As Passed By House: 3314.03, 3319.26, 3326.11