Ohio lawmakers send energy overhaul to the governor

by Nick Evans, Ohio Capital Journal
May 1, 2025

Ohio state lawmakers approved an energy deal Wednesday in a pair of back-to-back floor votes. The sweeping legislation aims to encourage investment in new power generation by building a moat around the market and offering tax incentives to new entrants.

Meanwhile the distribution utilities on the outside looking in will get similar tax breaks for new transmission infrastructure, as well as a ratemaking overhaul. For those so-called pole-and-wire companies, some changes are welcome. Others a bit less so.

The legislation equips the ratemaking process with a statutory ‘shot clock’ to keep deliberations to about a year at most. Utilities will also get to set rates for three years at a time, so long as there’s an annual “true up” of charges and expenses. But a system they’ve relied on for years to avoid full rate cases is going away. So is the controversial coal plant subsidy approved as part of 2019’s House Bill 6.

The legislation amounts to a substantial reworking of the state’s energy marketplace, but at least in the near term, it’s unlikely to address the concerns that drove a bipartisan coalition of backers to approve it.

The 13-state energy grid operator PJM predicts energy demand will surpass its supply in the next few years. At the same time, it’s struggling to get new power plants plugged into its system. Some leaders point to so-called behind-the-meter generation — small, purpose-built power plants for individual customers — as a potential short-term answer to the problem. Others suggest if the line with PJM is too long, maybe it’s time to look for a different line.

In the Senate, state Sen. Brian Chavez, R-Marietta, spoke in support of House Bill 15. Earlier this week, lawmakers tacked on several tweaks hammered out in negotiations with the House.

“In essence,” Chavez argued, “it reduces the barriers to entry for power generation, it increases the flow of investments into the state, and it makes Ohio more competitive for industries, while stimulating job creation and economic development.”

He also highlighted one important compromise. Instead of eliminating a tax on machinery and equipment, the final version reduced the tax from 25% to 7%.

State Sen. Kent Smith, D-Euclid, urged lawmakers to revisit provisions left out of the final bill. He argued Ohio should launch a pilot program for community solar, saying lessons can be learned “in a small scale first, so we can help develop this across the state of Ohio.”

But most important, Smith applauded the measure for finally turning the page on H.B. 6.

“House Bill 15 contains huge wins for consumers that have been scarred by the House Bill 6 scandal,” he said. “But most importantly, it will keep money in the pockets of hardworking Ohioans as we end the legacy generation rider, which is costing Ohio ratepayers over $450,000 a day.”

The Senate put the proposal to a vote quickly and approved it unanimously.

Speaking after the vote, Senate President Rob McColley emphasized the importance of behind-the-meter generation. He argued the policy could be “one of the most transformational” changes state lawmakers make in the energy sector. McColley said he’s already hearing from companies that believe it will dramatically reduce the time it takes to get up and running. He added the policy could also offer a way for some power producers to sidestep the PJM backlog.

“Eventually some of these projects, once they’re built behind-the-meter, will file an application at PJM to interconnect,” McColley said. “They will not need permission to interconnect before they can build because they won’t be interconnected yet, but the ultimate goal could be that they generate enough power to send it out onto the grid.”

Across the rotunda, House sponsor state Rep. Roy Klopfenstein, R-Haviland, praised the legislation as a “great step” toward making Ohio “energy independent.”

“We know that PJM has issued significant warnings throughout the last few years,” he said, “that we are heading towards an energy shortage crisis across the entire market — as soon as next year.”

The House overwhelmingly approved the measure, by a vote of 94-2.

Speaking afterward, House Speaker Matt Huffman echoed McColley’s praise for behind-the-meter generation. He argued giving large power users an alternative will reduce their impact on the grid and give the system greater flexibility overall.

“What that does is make sure there’s more reliable energy, and with fewer users on the grid, the cost goes down,” he said. “So that’s hopefully the immediate effect.”

But far from suggesting the approach could help generators sidestep a long interconnection queue with PJM, Huffman floated the idea of sidestepping PJM altogether.

“Is PJM the right fit for the state of Ohio?” Huffman wondered. “There’s another choice, MISO, to the West, which includes Indiana and much of the Big 10 — or the old Big 10 when there was only 10 schools in it.”

Huffman said he’s already begun talking with people at MISO. The 15-state grid operator covers much of the Midwest, and stretches as far south as Mississippi and Louisiana and as far west as the Dakotas and part of Montana.

The speaker complained about PJM agreeing to changes sought by Pennsylvania Gov. Josh Shapiro that “restrict the free market.”

Shapiro sued PJM arguing the price cap at an upcoming auction was too high, and customers in his state could see bills increase $21 billion over the next two years. PJM settled, and federal regulators signed off on the agreement earlier this month.

“That gives me, personally, great pause,” Huffman said. “Is that PJM board acting in the best interest of all of the members, including the state of Ohio? So, we need to ask that question that may help us some on the future issues.”

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