The following article was originally published in the Ohio Capital Journal and published on News5Cleveland.com under a content-sharing agreement.
An Ohio House committee began hearings last week on a bill cracking down on utility resellers. In some developments, like apartment complexes, the building owner contracts with a utility to purchase power wholesale and then resells it to their tenants. There’s nothing wrong with that arrangement in the abstract, the sponsors of the proposed bill argue, but they say there’s little to stop a landlord from taking advantage of residents.
House bill 265
State Reps. Sean Brennan, D-Parma, and Tex Fischer, R-Boardman, are co-sponsoring House bill 265 which would treat utility resellers like utilities.
“These companies purchase bulk utility services from traditional utilities, then resell them to end users at rates of their own choosing,” Brennan argued. “They charge for service, send bills, impose late fees and even disconnect customers, but unlike utilities regulated by the PUCO, they’re subject to virtually no oversight.”
Subjecting resellers to the same regulatory expectations as utilities would require them to justify rates and follow existing rules for billing, complaint resolution, and disconnection. The changes could also give customers access to conservation or assistance programs.
Fischer made a free-market case for the bill. He said a competitive market will produce the lowest prices, but competition relies on a level playing field.
Ohio’s existing energy market where customers can easily switch to different suppliers has saved customers “nearly $37 billion since 2011,” Fischer said. But utility resellers can hive off a set of customers and lock them into rates they didn’t chose.
“This is a problem,” Fischer said. “It cannot be the case that a competitive energy market has a third-party entity creating a monopoly on certain consumers by removing the choice we are seeking to empower them with.”
Committee questions
Brennan and Fischer’s isn’t the only proposal attempting to address the utility resellers.
State Rep. David Thomas, R-Jefferson, introduced House bill 173 which he described as “equal parts clarity and consumer protection.”
Unlike Brennan and Fischer’s proposal, Thomas would not subject resellers to the same scrutiny as utilities, but the bill explicitly prohibits resellers from charging more than the standard consumer rate.
In committee, Rep. Tristan Rader, D-Lakewood, asked Brennan and Fischer to elaborate on the differences between the two bills’ approach.
“I think that would create a separate regulatory framework for submetering,” Fischer said. “Whereas our approach is simply to more or less plug those existing submetering companies into the existing public utility regulatory climate.”
State Rep. Beth Lear, R-Galena, sounded skeptical. If more regulations lead to higher prices, she said, how will subjecting resellers to new regulations lower prices?
“Because I would think that in general, it would be good for a lot of folks to be able to have their own individual bill, which I think is kind of the purpose of submetering,” she said.
And Lear seemed concerned about landlords deciding to stick with bulk utility purchasing and burying the cost in tenants’ rent.
“I’m just trying to understand how this is more fair than that,” she said, “and (how it) is going to save money and not cost people more.”
Fischer agreed with Lear’s baseline assumption that regulations can inflate costs. But in a monopoly market, he said, those assumptions break down. It’s not a good idea to have several companies competing to put up power lines to your home, he said, but without that competition, regulations are one of the few guardrails available to rein in prices.
Fischer insisted their legislation isn’t meant to eliminate submetering. “I think there’s a lot of value in the concept,” he insisted, but resellers shouldn’t be operating in a kind of “no man’s land.”
“Although under current law, it’s not considered utility it functions in a very similar way, if not the exact same way,” Fischer said. “So, what we’re looking to do is to kind of add transparency and add a little bit of accountability to that process to make sure that there are not folks getting overcharged.”