Why Ohio’s retail electric deregulation has been bad for households and why re-regulation would be even worse

Ohio has a deregulated retail electricity market in which households and businesses can “shop” from among competing marketers for their electric service. But, have households actually experienced the benefits of this “competition”? A study by Dr. Noah Dormady, assistant professor at the John Glenn College of Public Affairs, Glenn College doctoral student Zhongnan Jiang and Matthew Hoyt finds that Ohio households have lost at least $1 billion under the current system.

Prior to deregulation, Ohio’s predominant electric utility model relied on vertically-integrated monopolies. These utilities were overseen by the Public Utilities Commission of Ohio (PUCO) and subject to price and cost regulation. Ohio initiated its effort to deregulate electric utilities by passing SB 3 in June 1999, in response to low natural gas prices, recently deregulated wholesale markets and pressure from the state’s large industrial sector. SB 3 established a five-year market development period during which time incumbent utilities could collect transition revenues. At the conclusion of this period, however, competitive electric markets did not develop as envisioned by the proponents of SB 3. PUCO, concerned that a clean change to market-based rates would lead to “rate ‘sticker shock’,” opted instead to delay the end of the market development period with the backing of the Ohio Legislature. PUCO approved individually negotiated Rate Stabilization Plans with all four major Ohio utilities. During this period utilities received higher than average returns as a means to recover stranded costs prior to open wholesale market competition.

Those years also coincided with a natural gas boom and expansions in hydraulic fracturing utilization in Ohio. The resultant low natural gas prices have reduced the profitability of utility-owned generation, predominantly coal-fired plants. These changes have driven down generation costs. PUCO, however, has permitted through its Electric Security Plan approval process atypical increases in riders and surcharges on household electric bills that allow utilities to recover lost profits from their corporately-separated generation businesses. In essence, households in Ohio never saw the benefits of competition, but have instead been forced to subsidize the losses of an aging coal fleet through a system of inflated riders and surcharges on their home electricity bills.

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A Call for Supporting a Next Generation Airspace System for the State of Ohio

Similar to the United States’ interstate highway system that facilitates the transport of people and goods across the nation, the United States’ National Airspace System (NAS) is a critical element of the nation’s transportation infrastructure, serving as a backbone to economic vitality and growth. Despite increased demand for air travel and improved technologies in computing, satellite navigation, and digital communications in other industries, modernization to a 21st century NAS infrastructure has been slow to evolve. This slow progress is reducing the effectiveness of the Ohio economy.

Through public-private-partnerships with the Federal Aviation Administration (FAA) and leading aviation technology companies, the state of Ohio has an opportunity to be among the leading states in the nation to substantially increase the efficiency and safety of air transportation for all of its 88 counties, while reducing the cost and environmental impacts of aviation operations. Being a leader in adopting the FAA’s Next Generation Airspace System, known as NextGen, is the key to capitalizing on such an opportunity.

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Product Innovations Linked to Trans Fat Produces Healthier U.S./Canadian Cookies

For years, the food industry favored the use of trans fat in processed food because it extends the shelf life of a product and its stability permits frequent heating at high temperatures. But unlike any other food component, trans fat has no nutritional benefit and its consumption has been associated with an increased risk of cardiovascular disease.

These concerns prompted health agencies to recommend removal of trans fats from the global food supply. The World Health Organization (WHO) has recommended replacing it with unsaturated fats.

In response to public policy mandates requiring trans fat labeling, food manufacturers in the U.S. and Canada created more uniform food labels, including the amount of trans fat in a product, and criteria for making a front of package claim.

Dr. Neal Hooker, Professor of Food Policy in the John Glenn School of Public Affairs, and his colleague Shauna Downs, University of Sydney, examined more than 2,000 new cookie products from 2006 through 2012 to see how the industry adapted to new policies governing the use of trans fat. In the U.S., saturated fat was higher in these products in 2012 when compared to 2006 and 2007, but trans fat levels decreased over that time period. In Canada, there were no difference in the cookies’ composition, with the exception of reductions in trans fat over time. In both countries, cookie products without trans fat were more expensive.

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Medicaid Outcomes: Better than being uninsured and comparable to private coverage?

The Medicaid program is not perfect. It can be better. But, the argument that Medicaid is such a broken system that it is better to be uninsured than to be on Medicaid is not supported by the evidence.

In a new study by William D. Hayes, director of Healthcare Reform for the Ohio State University Wexner Medical Center, and Professor Anand Desai of the John Glenn School of Public Affairs at The Ohio State University, looks at the debate regarding Medicaid expansion. They have found that critics of Medicaid expansion have selectively taken the work of credible scholars with seemingly sound analyses to make the counter intuitive claim that the Medicaid system is so broken that it is better to be uninsured than to have Medicaid coverage.

In their paper, “Medicaid Outcomes: better than being uninsured and comparable to private coverage?” Hayes and Desai conclude that when properly comparing people on Medicaid to people with other sources of health coverage, the general and inevitable conclusion is that having Medicaid coverage is better than being uninsured, including: better access to care, lower rates of unmet health needs; reduced financial burden, less stress; improved mental health status and even reduced rates of death. Medicaid coverage can also be comparable to private coverage on many, though not all, measures. They further find Ohio’s Medicaid program performs better than that in most states and has results on some measures that are similar to or better than private pay in Ohio and better than the national private pay and the national state Medicaid average.

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The Costs of Inefficiency: Ignoring Ohio’s Energy Efficiency Potential

In Ohio, substantial energy efficiency resources, although available, are not being used. Based on the current technological capacity, there is significant potential to increase energy efficiency to a degree that would substantially and cost effectively reduce the state’s energy use.

The state’s current retail electricity market design is worsening this energy efficiency use weakness, causing consumers to spend more for energy while receiving fewer economic benefits. In 1999, Ohio established electric deregulation (in SB 3), changing from a regulatory price setting system into one where prices were established through wholesale market auctions.

In 2008 (in SB 221) and in recent decisions by the Public Utilities Commission of Ohio (PUCO), the marketing process was expanded to include retail competitors along with wholesale marketers. Now, third party retailers can compete with regional utilities to deliver energy to residential, commercial and industrial customers. That means that retail default energy prices provided by monopoly electric utilities are set by utility-managed auctions that include energy but do not include energy efficiency.

Retail energy-only auctions do not permit energy-saving services to compete, forcing ratepayers to pay for an excess supply of electricity. That, in turn, creates a drag on Ohio’s economy. The nation has made huge strides in developing energy efficient technology in the past 40 years. Nonetheless, efficiency gains are falling short of their full potential in the U.S. and in Ohio.

After adoption of SB 221, PUCO directed Ohio’s utilities to adopt procedures to capture a portion of this economically available energy efficiency. The utilities select measures through a process called “Assessment of Potential,” which first surveys all the achievable efficiency available today and then screens for cost-effectiveness and market availability.

This policy paper directly addresses retail energy markets and energy efficiency standards.

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Ohio Colleges Must Upgrade Remedial Education To Help Students Earn Degrees

To increase the number of college graduates, higher education institutions and policy makers must ensure that students required to take remedial courses do not drop out as a result of negative experiences.

The low college graduation rate in Ohio is of special concern because it frustrates the state’s desires and efforts to create a pool of talented workers for today and tomorrow. These gaps in college achievement are particularly significant for ethnic and racial minorities at a time when the nation is poised to dramatically diversify.

Remediation coursework slows down college completion. About half of all students starting college finish within six years, but this number drops substantially for those taking remediation. Only 19 percent of those who started school as traditional age students finished a degree if they took remediation courses, as opposed to 15 percent of those who begin school when they are older than 24.

This policy paper recommends specific actions that can help improve student graduation rates and enable the Remediation Free Standards to work.

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