The Ohio Energy Bill Subsidy Virginia Would Copy

Three of the six electric utilities charging customers to provide others with Ohio PIPP subsidies. Per 1,000 kWh the surcharge to customers is $3.19 for Toledo Edison, $3.34 for Ohio Edison and $2.37 for The Illuminating Company.

by Steve Haner

Both the Virginia House of Delegates and Senate have voted to increase the price of electricity to most Virginians in order to subsidize the bills of low-income utility customers. How much? They have no idea. But the program in Ohio being copied adds from $1 to $3.66 to the price of 1,000 kilowatt hours for those not subsidized.

The Virginia version is even borrowing the name and acronym from Ohio, the Percentage of Income Payment Program (PIPP). The charge in both is called a “universal service fee.” In 2020, the Ohio program will cost ratepayers $301 million to subsidize the power bills of about 275,000 low-income households. The Public Utility Commission of Ohio (PUCO) sets the amount charged in each utility’s service territory and the Ohio Development Services Area transfers the necessary funds to the various electricity providers.

The largest electricity provider in that state of 11.7 million people, Ohio Power, has the highest “adder” on its rates, $3.66 per 1,000 kilowatt hours used. That works out to $44 per year for a residential customer using exactly that amount monthly. A large industrial or commercial user would pay the same rate until monthly consumption hit 833,000 kilowatt hours, when a reduced rate kicks in on additional consumption. The first 833,000 kilowatt hours of usage in Ohio Power’s territory is hit with a $3,050 monthly surcharge. 

The five other electricity providers have lower rates, from $3.34 and $3.19 down to under $1 per 1,000 kWh. All offer a discount to large customers once they exceed 833,000 kWh per month, or 10 megawatts per year. The rates jumped about 50% from 2019 to 2020, according to the case file at the Ohio regulatory body.

The original 2020 “rider” amounts requested for Ohio PIPP, slightly higher than the amounts finally approved by the Public Utilities Commission of Ohio. Ohio Power, serving 42 percent of state, is charging $3.66 per 1000 kWh.

 

UPDATE:  One of the people who regularly comments on energy discussions found and posted this history of Ohio’s program, which dates back to 1983.  For more find Acbar’s comment in the string. 

Virginia’s Percentage of Income Payment Program is created in the pending Virginia Clean Energy Act, which has passed on both sides of the legislature but with differences to be ironed out next week. The creation of PIPP is not one of the issues for the conference committee to resolve. As noted in an earlier post, there has been no mention of PIPP’s possible cost in the ongoing discussions, so Bacon’s Rebellion contacted the Ohio utilities commission to see what happens there.  PUCO shared the most recent case file.

Virginia’s State Corporation Commission has produced some estimate of cost impact for residential customers of other parts of the clean energy transition proposal, but it left the potential cost of PIPP a question mark. Details still remain to be worked out, but an additional $2-4 per month for residential customers is likely. PIPP would apply in both Dominion’s territory and that for Appalachian Power Company.

PIPP has been offered in Ohio for decades, and Dominion Energy is familiar with it because it runs a natural gas distribution company in that state. APCo’s parent company has a presence in Ohio, too. The Ohio PIPP covers natural gas and electricity, although as with the Virginia proposal the state’s rural electric cooperatives are exempt. It is safe to assume that once Virginia PIPP is established for electric customers, a natural gas program will follow.

In Ohio, if you heat your home with natural gas, that bill is capped at 6% of your household income, with another 6% going to the electric company. If you have electric heat, the cap is 10%. Once enrolled, a monthly budget payment amount is set on that basis and if you stay current, any excess is paid out of PIPP funds. As with the Virginia program description, if you stay current on the monthly bill amount any old bills in arrears are also paid out of the PIPP funds contributed by other ratepayers.

Those subsidies and payments for unpaid past bills will use up most of the $301 million in PIPP revenue for 2020. About $11.5 million of the total will be spend on energy efficiency programs and $5.4 million on administration.

Virginia’s proposal, according to the bill, adds a sweetener: If the participant lowers their usage below the previous baseline, half the value of that reduction will also be taken off that month’s bill.

According to case testimony from the Ohio Development Services Agency, PIPP participation peaked in 2015 at almost 400,000 households but has dropped since with the improved economy. It sought the 50% increase in revenue to $301 million for the electricity program in part because underlying electric rates are up. Electricity prices in Ohio and Virginia are very similar.

Doing the math, the average annual cost per participating Ohio household is $1,100. Who is being subsidized is a nice economics argument, but clearly the utilities also benefit by reducing the amount of unpaid bills and collection cost. Lowering risk at somebody else’s expense is always attractive.

In Ohio, to qualify for PIPP your income must be at or below 150% of the federal poverty level, about $39,000 for a family of four. The Virginia legislation is less specific, proposing PIPP eligibility for those in various other public assistance programs, including Medicaid, housing or food programs. No estimate has been provided how many households served by Dominion or APCo that might be.

Part of the cost in Ohio, obviously, is the annual case at the utilities commission to review the accounting for the previous year and set the rates for the coming year. It reads exactly the same as the annual reviews and true ups for the various rate adjustment clauses that are now part of our electric bills in Virginia. It will be only one of the several new “RACs” being created by this pending legislation.

And if the SCC’s cost predictions are correct, and Virginia’s electricity rates begin to soar because of this sudden infusion of wind and solar generation, battery storage and related spending, then the amount needed by Virginia PIPP to protect low-income customers from that impact will also have to increase.

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30 responses to “The Ohio Energy Bill Subsidy Virginia Would Copy

  1. Excellent article! Thanks! I was under the impression that Ohio was typically less liberal than Virgina!

    Not sure how I feel about the basic concept. Is it better to give low income money that comes from taxpayers to help with electricity or to have the electric company lower the bill and have others with higher incomes chip in to pay?

  2. Good reporting, Steve.

    My prediction: Outside of your blog posts, PIPP will never get reported here in Virginia, or at least not explained in a way that people understand is happening to them. Just one more example of how this General Assembly is screwing the middle class — and they’re doing it so subtly that people won’t even know what hit them This is truly the most anti-middle class legislature in the 40 years that I have been practicing journalism in Virginia.

  3. I think, to be fair – other things have been done to ratepayers prior to this session – also, not the least of which was gutting the SCC and essentially giving Dominion free rein on excess profits, tax rebates and the coal ash cleanup.

    And the thing is, actually there are two things:

    1. – Dominion will probably get the blame for increased bills even if they claim the GA did it.

    2. – When electric bills go up – just like when gasoline prices go up, people take steps to lower their usage.

    Nowhere is this more apparent than California – which has some of the highest electricity rates in the country – as well as the lowest usage.

    ?itok=uLaARkiR

  4. Jumble of numbers. It would help to add the simple example of how much extra this would add to a typical middle class house with three or four bedrooms or some comparison for a business or industry. This posting tries to report but doesn’t really explain. And frankly, even ae a former Ohio resident who was too busy eith other things at the time to spend hours pondering my energy bill, i still have too many other things going on the do the tedious math. Want to break this down for dullards like me? Steve you need to do a better job of explaining.
    i am not, and don’t want to be, a richmond lobbyist it “stakeholder.”

    • Really…. another subsidy for people who make bad personal decisions,, smoking, drugs, liquor, new cars, fast food, coffee and donuts at 711 every morning they can’t afford, and other stupid stuff that leaves them poor… for some reason liberals and a lot of others think we should subsidize this bunch of losers…
      What they need is a dose of tough love and a few cold nights….
      Their will be a bunch whining about the poor old folk… most of them are Poor old folk for the same reason, bad personal decisions when they were younger, healthier and working.. No reason to subsidize them either, they shouldn’t be rewarded for lIvins it up while the rest of us scrimped and saved…

    • That helps thanks

  5. There you have it. The difference between a Conservative and a Liberal! 😉

  6. Peter, on this issue I’m writing for a policy blog audience, not the general public. Here’s the “news” lede: “Based on what happens now in Ohio, Dominion and APCo customers will be paying $30 to $40 or more per year to provide subsidized electricity for low-income Virginians, a new hidden tax on their electric bills. Business users will pay even more. This is on top of the other price increases driven by the new renewable generation.” But will take your advice under advisement….I get numbers and forget how they flummox so many others (it’s how the world gets ripped off….). No, most people never actually read their power bills…..

    When Virginia Mercury does its re-write it can make it clear to all the VPAP readers (like it did when it re-wrote my story about how the Senate was arresting the House’s ambitions, and the VM story made VPAP, not mine.)

  7. If the cost to produce electricity drops – there may not even be an increase in the bills – unless of course Dominion gets to keep all the overcharges again!

    • Right, the fairies are going to build $8 billion of wind turbines and $5 billion of new solar farms and the leprechauns will pay the profits and interest over 25 years. April Fools is still a month away.

      • So here’s a question.

        If other states non-utility private sector build a lot of solar and it is then sold via PJM – and it ends up being cheaper than what Dominion is producing with it’s own in-house uber expensive solar… will (can?) Dominion CHOOSE to provide the more expensive solar to ratepayers so it can make more profit off it’s own rather than buy cheaper solar from PJM? Up early this morning? most mornings? 😉

  8. Alls I would say is, my perception is, if you look at income taxes, car taxes, etc etc, Virginia is quite tax friendly to lower incomes compared to other states. This means mid incomes have to be hit a bit harder here. Whether or not my perception is valid, or whether or not that is a good system, not sure.

  9. Still thinking about it but I think there may be a way to sue Dominion for wire and mail fraud and maybe a RICO action. It all depends on what they tell their customers about the extra payments. Not sure how it would end but it sure would be fun to see the Company sweat it for a couple of years.

    • A court would merely recognize this for what is is: A legislatively-imposed excise tax to fund a new public assistance program. An interesting question is, is this a revenue bill and should it fail because the deadline for revenue measures had passed?

      • yep. Is there any other similar law in Virginia? Is this a first?

        • I’ve tried to think of a parallel. It would be like a sales tax on food to pay for SNAP, or a housing tax to pay for vouchers. In the health care arena, paying customers have long subsidized unpaid care, but is it this direct?

      • The problem, I think, is that the state doesn’t administer the revenue. If it doesn’t, is the tax lawful? If Dominion administers the money and it’s lawful, isn’t at least part of the state’s revenue stream. Does that contaminate all of Dominion’s revenues? Lots of knotty regulatory accounting questions that no one in Richmond understands. But when in doubt, signal your virtue!

  10. internet is done that way – https://www.internetessentials.com/Apply

    After completing your application, you may qualify if:

    A
    You are eligible for public assistance programs such as the National School Lunch Program, Housing Assistance, Medicaid, SNAP, SSI and others.

    • Larry, that is a private program that is run by Comcast. I worked on a task force to help Cox develop a similar plan for Fairfax County.

      • yep it is, but aren’t they essentially putting those costs on other customers? Sorta like hospitals cross-subsidizing?

        At this point, I’m not a fan of this bill… but I suspect it’s legal like other govt-imposed fees like battery and tire disposal.

        • Internet service is not price regulated. Subject to the antitrust laws re below-cost pricing for competitive gain (not likely present here), Comcast can price its services as it so desires. Verizon wouldn’t care if Comcast served all the discounted, low-income customers.

          Hospital pricing raises antitrust issues in my mind.

  11. So, some people can keep the AC at 60F in the summer and the heat at 80F in the winter and others will pay?

    Good deal for them!

  12. Nobody should be in a hurry to copy this Ohio program. It’s the result of a long-term cozy relationship between the state legislature and the big power companies in OH (primarily AEP, FirstEnergy, AES, Duke, plus a bunch of cooperatives), reminiscent of Virginia. My impression is, this massive transfer of ratepayer funds initially was mandated by the OH legislature as Ohio’s way to implement federal grants of low income energy assistance funding under the “LIHEAP” program beginning in the 1980s — but, decades later, PIPP was expanded as a “Universal Service Fund” program, a way to avoid stepping up to the tax increases that would have been required if the legislature had authorized the plainly-needed increases in direct social-safety-net assistance to low income ratepayers above and beyond what LIHEAP pays for. The utilities were assured their shareholders would be protected by a total pass-through of all PIPP costs and perhaps other regulatory benevolence. It’s complicated and inefficient; but without any alternative it’s also desperately needed aid to many recipients. Here’s a brief history of it: https://liheapch.acf.hhs.gov/dereg/states/ohio.htm . In short: it was the path of least resistance for OH legislators anxious to help some constituents without violating their pledge to “never raise taxes.”

  13. yep – thanks for the link .. started in 1983 .. and as Ohio became more conservative, they did not kill it…so far: ” According to the third impact evaluation of the EPP, completed in June 2006, the EPP produces substantial electricity savings in thousands of PIPP households each year. As to whether EPP has reduced PIPP costs, the evaluation noted that the $12.7 million in lifetime bill savings shown in the evaluation would reduce the cost of PIPP by an estimated $11.3 million and provide about $1.4 million in out-of-pocket savings to the participants.”

    In terms of the concept itself, ObamaCare, the Affordable Care Act – works off of designated poverty levels – to determine qualifications to participate as well as how much subsidy they receive.

    For instance, they have to have at least 138% of income to be able to participate and all subsidies go away at 400% – though folks can still buy it – and actually do if they do not have access to employer-sponsored insurance.

    Below 138%, people are eligible for Medicaid.

    Electricity, like health care, perhaps more so than health care, is fundamental to living – though we do have homeless who do without it.

    As long as the Ohio program shows money savings and those who get the benefit don’t abuse it and use more, then perhaps it’s worth trying but it should be fully instrumented to collect data so that we know it works and we know if it does not and pull the plug on it.

    • Name one program where that plug was ever pulled….Any program wherein A pays the bills for B, or pays to upgrade B’s house to Energy Star level, will show savings for B. The thing that causes me to scratch and wonder is that this weatherization and energy efficiency push dates back to the oil embargo, Jerry Ford and Jimmy Peanuts and we never seem to make any progress overall….Just keep spending.

  14. Well, I cannot name a given program where the whole program was discontinued but I think there are a few if I looked a little harder.

    But the benefit programs themselves hone their rules over time – like the recent overhaul of the SNAP program. People with Obamacare, if they get a better paying job than they had when they got insurance initially, they have to pay back money at tax time. Social Security Disability is another program that has tightened standards – so dramatically that those who are currently on it – could not qualify now.

    The Ohio program which is what 40 years old, it seems to have reached a stable point and apparently saves money – though I suspect your idea of “save” is different. 😉

  15. Here’s another little thing about this that everyone will love. Both Dominion and Apco ALREADY have a line item in their cost of service for BAD DEBT and chargeoffs. And, it is in their base rates so they will continue to collect a small percentage from everyone through base rates for bad debt and then on top of that collect this PIPP payment.

    The Double Dip returns!

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