Ohio Energy Group Prepares for Uncertainties in Electricity Price
The Ohio Energy Group (OEG), a consortium of Ohio’s largest industrial energy users formed to manage energy costs, is promoting new legislation, increasing its membership, and forming strategic partnerships as it attempts to offset potentially damaging effects to the state’s economic development from the looming threat of rising electricity rates.
OEG member companies employ more than 67,000 workers in 78 facilities throughout Ohio, and account for annual energy purchases of more than $600 million in energy-intensive industries. The group is represented by Boehm Kurtz & Lowry, a Cincinnati-based law firm that specializes in regulatory and utility matters, and by the Government Practice Group of McDonald Hopkins, a Cleveland-based, full-service business law firm.
The three-year-old OEG is preparing for statewide electricity rate stabilization plans scheduled to expire at the end of 2008. In what is expected to be an unpredictable market to follow, large industrial users of electricity, which typically spend about 20 percent of revenues on energy, are especially vulnerable to the threat of increased rates. Similar cases have become evident through recent events in states where rate stabilization plans have already ended.
In Maryland, higher rates caused an Alcoa smelter to close operations and lay off 600 workers. In Pennsylvania, Allegheny Technologies, Inc., recently announced plans to end a $400 million investment because of that state’s rising electricity costs.
In an effort to help offset the threat of increased power costs, the OEG is actively supporting proposed state legislation that would provide a kilowatt-hour tax credit to heavy industrial users of electricity that make substantial capital investments in Ohio.
Ohio House Bill 632 (Rep. Matthew Dolan, District 98) and its companion legislation, Ohio Senate Bill 335 (Sen. J. Kirk Schuring, District 29), are intended to provide incentives to maintain and increase industrial capital investments in Ohio, while protecting manufacturing jobs.
Under the bill, for every $10 of capital investment, a qualifying company would be eligible for a $1 kilowatt tax credit. No company could receive more than a 75 percent tax credit.
Under Ohio Revised Code, the kilowatt-hour tax credit is currently extended to just four of the state’s largest users. The proposed legislation would extend the same benefit to all companies that qualify as heavy industrial users–those that consume more than 45 million kilowatts at one location.
As the end of rate stabilization plans near, Ohio is expected to face similar market instability as occurred in Maryland and Pennsylvania. Nationwide, deregulation has not only failed to lower electricity rates, but in many cases has caused them to rise substantially. Capital investments, economic development, and the preservation and creation of jobs could be in jeopardy, says the OEG.