Ohio Democrats propose utility rate freeze, consumer dividend

Ohio House Democrats are pitching a plan to temporarily freeze utility rates and provide a $150 credit on Ohioans’ electric bills, as affordability takes center stage in a hotly contested midterm election.

But the proposal could fall flat because the Democratic plan calls for a dramatic increase in state taxes on oil and gas drilling. Even if that increase puts Ohio in line with other Republican-led states, it seems unlikely Ohio Republicans will embrace it.

House Minority Leader Dani Isaacsohn seemed to acknowledge that possibility at a press conference recently.

“Ultimately, the people who lead Ohio get to be voted on by the people of Ohio,” he said. “I believe Ohioans are tired of seeing their costs go up and seeing how policy after policy and law after law has chosen to prioritize people and companies that are already doing very well.”

“If we want different results in Ohio,” he added, “we’re going to start needing to make different choices.”

Capping rates

Ohio state Rep. Desiree Tims, D-Dayton, explained many Ohioans are getting a shock when they open their monthly electric bills.

“So, what we plan to do is offer a utility freeze,” Tims said. “What this will do is allow people to breathe.”

The proposal would freeze utility cost recovery rates for twelve months. Those rates cover the cost of building, running, and maintaining Ohio’s electric system. That’s a significant share of your monthly utility bill but it’s not all of it.

Other charges related to transmission and capacity (a market for ensuring reliability) get set at the regional or federal level. For instance, a recently approved update to transmission costs will push AEP customers’ rates up by about $8 a month. State lawmakers can’t cap those increases.

But lawmakers have to do something, Tims said, when Ohioans are struggling to make ends meet and AEP’s parent company is reporting record profits. Families on fixed incomes or budgeting for childcare “cannot afford to receive a surprise bill in the mail that is triple the cost of what they are usually paying,” she said.

Isaacsohn noted New Jersey, which saw the biggest utility price spike in the nation last year, has instituted a similar utility rate freeze.

Defraying costs

The other half of the plan has to do with what are known as severance taxes. Many states impose a tax on natural resources as they’re extracted — or severed — from the ground. In Ohio the biggest sources of revenue are natural gas and oil, but taxes get levied on products like coal, limestone, gravel and salt.

Ohio state Rep. Tristan Rader, D-Lakewood, explained the problem is Ohio isn’t charging enough. The current rates amount to roughly 1% of current market value for natural gas and about .2% for oil.

“What we’re suggesting here, what we’re demanding here, is that they pay their fair share, and that fair share we’re proposing is 7%” Rader said.

As recently as 2015, he added, Republican Gov. John Kasich proposed raising Ohio’s severance tax to 6.5%.

“The rate that we are proposing is no different than Oklahoma,” Rader said. “It’s actually less than Texas, and it’s less than Kansas.”

The tax increase Democrats want would generate more than $650 million based on last year’s production. A portion of that would still go toward state efforts to plug orphan wells, but the remainder could fund a $150 annual credit for Ohio utility customers.

“That could actually help tangibly make a difference reducing their rates and leading to more affordable outcomes for all Ohioans,” he said.

“The principle is clear,” Isaacsohn argued. “Ohio’s natural resources are owned by Ohioans, and so Ohioans should benefit when there are profits being made from those resources. And for generations, they have been left out of the equation, and it is time for generational change on who benefits from Ohio’s rich natural resources.”

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