Ohio House of Representatives Minority Leader Dani Isaacsohn speaks at a press conference on energy affordability. (Photo: Nick Evans, Ohio Capital Journal.)
Democrats in the Ohio House of Representatives are advancing a plan to temporarily freeze utility rates and give Ohioans a $150 credit on their electric bills as affordability plays a central role in the hotly contested midterm elections.
However, the proposal could be rejected because the Democrats’ plan calls for a dramatic escalate in state taxes on oil and gas drilling. Even if this escalate brings Ohio into line with other Republican-led states, it seems unlikely that Ohio Republicans will adopt it.
House Minority Leader Dani Isaacsohn appears to have confirmed that possibility at Tuesday’s news conference.
“At the end of the day, the people who lead Ohio will be voted on by the people of Ohio,” he said. “I believe Ohioans are tired of seeing rising costs and how policy after policy and law after law have chosen to prioritize people and companies that are already doing very well.”
“If we want different outcomes in Ohio,” he added, “we will start making different choices.”
Rate capping
Ohio State Rep. Desiree Tims, D-Dayton, explained that many Ohioans experience shock when they open their monthly electric bills.
“So we are planning to freeze public utilities,” Tims said. “This will allow people to breathe.”
The proposal would freeze utility reimbursement rates for twelve months. These rates cover the costs of building, operating and maintaining Ohio’s electric system. This is a significant part of your monthly utility bill, but it’s not everything.
Other transmission and capacity charges (reliability market) are set at the regional or federal level. For example, a recently approved transmission cost update will escalate AEP customer rates an escalate of about $8 per month. State lawmakers cannot limit these increases.
But lawmakers must do something, Tims said, when Ohioans are struggling to make ends meet and AEP’s parent company reports that record profits. Families on fixed incomes or with a child care budget “cannot afford to receive a surprise bill in the mail that is three times what they normally pay,” she said.
Isaacsohn noticed the New Jersey he had seen the largest escalate in media prices in the country, introduced a similar freeze on utility rates.
Covering costs
The second half of the plan deals with so-called severance taxes. Many states impose a tax on natural resources extracted from – or separated from – the land. In Ohio, natural gas and oil are the largest sources of revenue, but taxes are levied on products such as coal, limestone, gravel and salt.
Ohio State Rep. Tristan Rader, D-Lakewood, explained that the problem is that Ohio isn’t charging enough. Current rates are about 1% of the current market value for natural gas and about 0.2% for oil.
“What we are suggesting here and what we are demanding here is that they pay their fair share, and the fair share we are proposing is 7%,” Rader said.
He added that back in 2015, Republican Gov. John Kasich proposed raising Ohio’s severance tax to 6.5%.
“The rate we are proposing is no different than the rate in Oklahoma,” Rader said. “It’s actually less than Texas and less than Kansas.”
The tax escalate sought by Democrats would raise more than $650 million based on last year’s production. Part of that amount would still go toward the state’s efforts to plug orphaned wells, but the remainder could fund an annual $150 credit for Ohio utility customers.
“This could measurably help lower rates and provide more affordable outcomes for all Ohioans,” he said.
“The principle is clear,” argued Isaacsohn. “Ohio’s natural resources are owned by Ohioans, so Ohioans should benefit when they profit from these resources. They have been left out of the equation for generations and it’s time for a generational change in who benefits from Ohio’s rich natural resources.”
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