SENATOR SHANNON JONES

7th Ohio Senate District

Senate Public Utilities Committee

Senator Shannon Jones

June 3, 2015

Senate Bill 156

Good afternoon Chair Seitz, Vice-Chair Balderson, Ranking Member Williams, and members of the committee. Thank you for the opportunity to come before you today to present sponsor testimony on Senate Bill 156, which is designed to provide residential electric customers receiving bill payment assistance though the Universal Service Fund (“USF”) the benefit of lower electric bills and, at the same time, reduce the funding for this program which is collected from all electric customers served by electric distribution utilities. To date the annual funding for the USF is now $443 million with the most recent controlling board action (5-18-15) to increase the appropriation authority another $93 million over what was budgeted. As you know, I have been trying to address this issue in several general assemblies – most recently in the 130th GA with SB 380.

As part of the electric restructuring reforms adopted through Amended Senate Bill 3 (“SB 3”) in the 123rd General Assembly, the General Assembly established the Universal Service Fund (USF)as the means to provide bill payment assistance to income-eligible residential customers. With SB 3, all customers with the exception of those receiving USF assistance, were permitted to select their supplier of competitive retail electric services. For customers receiving USF assistance, the Director of the Department of Development (now DSA) was given the authority to aggregate USF customers and competitively source their competitive retail electric service in the market much like municipalities throughout Ohio can aggregate. Absent such competitive sourcing for USF-assisted customers, such customers are captive to the default generation supply price available from the applicable electric distribution utility. Thus, these customers are unable to shop for their generation supply.

To date the Director has not used this aggregation authority even though the results of competitive bidding processes supervised by the PUCO as well as results of community aggregation programs indicate that aggregation could reduce the electric bills of USF-assisted customers and, at the same time, reduce the bill payment assistance funding that is collected from all customers. USF-assisted customers will remain responsible to pay the same percentage of their income to their electric bill. However their overall arrearage may decrease as a result of competitive bidding, making their remaining balance much more manageable after leaving the PIPP program.

Due to the design of the PIPP program, this legislation will not only assist PIPP customers but all utility consumers. Through reducing USF-assisted customers’ monthly payment we are not only cutting costs for low-income consumers – but reducing the shared burden that remains on all utility consumers who pay the USF rider. To put this burden on other ratepayers in perspective, when the program began in 2001, the total cost socialized among all other rate payers was $48 million. Today this has ballooned to $443 million with DSA needing to increase its appropriation authority regularly because it’s growing faster than they can properly predict.

This legislation will require the Director of the Development Services Agency to use the already given authority to aggregate and competitively source the load of USF-assisted customers when it will benefit these customers and those paying the rider. Only if the aggregated and competitively sourced option produces a better outcome for affected customers will the Director be obligated to move forward with this option.

Again, thank you for the opportunity to testify on Senate Bill 156. I am happy to answer any questions that you might have.

History of PIPP

Universal Service Fund
FY / Appropriation / Actual spend / Notes
1999 / $0 / $0
2000 / $0 / $0
2001 / $0 / $48,012,386 / Beginning of DSA's PIPP program.
2002 / $160,000,000 / $221,704,133
2003 / $160,000,000 / $192,738,056
2004 / $170,000,000 / $195,141,707
2005 / $170,000,000 / $198,153,583
2006 / $210,000,000 / $230,179,458
2007 / $210,000,000 / $266,139,655
2008 / $245,000,000 / $310,821,757
2009 / $245,000,000 / $336,179,719
2010 / $245,000,000 / $405,537,791
2011 / $245,000,000 / $399,669,437
2012 / $245,000,000 / $292,456,844
2013 / $245,000,000 / $337,853,336
2014 / $350,000,000 / $379,476,271
2015 / $350,000,000 / ≈ $443,000,000
2016 / $390,000,000 / Budgeted by DSA
2017 / $390,000,000 / Budgeted by DSA