New bill proposed to cut energy costs through voluntary demand response programs

COLUMBUS, Ohio (WSYX) — A new bill is being proposed at the Ohio Statehouse to lower energy costs, tackling rising electricity prices and preparing for increased demand from new data centers.

Ohio Rep. Roy Klopfenstein, R-82nd, has introduced House Bill 427, which aims to establish voluntary demand response programs for residential and small commercial customers, allowing utilities to temporarily reduce electricity use during peak times.

Klopfenstein said the sticker shock people are experiencing hasn’t gone unnoticed.

“I have not talked to anyone that their power bill has not went up and in some cases went up considerably,” he said.

Fluctuations between people cranking their air conditioning units when it is hot outside, and leaving their heaters running when it’s cold, he said puts immense strain on power grids, setting the stage for outages and sharp spikes in energy bills.

“In the past 10 years, we’ve been shutting down base load generation coal plants so we don’t have the base load that we used to and we’re experiencing growth,” Klopfenstein said. “We need more power.”

Demand response programs offer financial incentives to customers who permit utility providers to remotely adjust their smart thermostats, water heaters or other devices during high-demand periods. Participation is voluntary, but the initiative could potentially enroll hundreds of thousands of customers across Ohio, effectively acting as a virtual power plant.

“In most cases, most people aren’t even going to realize it’s off,” Klopfenstein said. “It’s just a way of managing the power with enough houses, enough homes, enough small businesses that they can make a difference during peak demand. And at the same time, get power to where it’s needed and quite possibly save consumers a little bit of money.”

The programs are expected to generate net savings of between $34.5 million and $104 million for the utility system, excluding infrastructure savings. Implementation could occur within one to two years, significantly faster than constructing new natural gas or nuclear plants.

Ohio electric bills already have risen by about $30 per month due to the PJM capacity auction, with further increases anticipated.

PJM Interconnection is an independent regional transmission organization (RTO) that manages the electric grid and operates competitive wholesale electricity markets for 13 states and the District of Columbia.

A PJM capacity auction is a process where PJM Interconnection, the regional grid operator, secures future electricity generation capacity by paying power suppliers to commit to having their power sources available to meet anticipated peak demand, three years in advance of the delivery year. The auction ensures there’s enough power to prevent shortages during high-demand periods, and the resulting price, or auction clearing price, is a key indicator of future electricity costs for consumers.

Rob Kelter, managing attorney for the Environmental Law & Policy Center, praised the bipartisan effort, stating, “Good energy policy manages both supply and demand.”

Nolan Rutschilling, managing director of Energy Policy for the Ohio Environmental Council, emphasized the importance of demand response programs, saying they “save customers money, reduce strain on our electric grid, and create more capacity in the PJM market.”

Shayna Fritz, executive director of the Ohio Conservative Energy Forum, highlighted the need for reliable and affordable energy, noting, “Providing demand response solutions will ensure we are helping our energy remain reliable during peak times.”

Large commercial users like data centers and factories already have demand response programs in place to assist with the strain.

Ohio AEP’s electric security plan already includes a demand response program offering incentives for smart thermostat purchases and participation in demand response events. The plan also features energy efficiency programs aimed at reducing overall energy use, particularly benefiting low-income customers.

AEP Ohio will contribute $400,000 annually to the Neighbor to Neighbor program, providing utility assistance grants to eligible customers.

Opponents caution that voluntary programs may not achieve the scale needed to prevent grid emergencies. If passed, the program will require final approval from the Ohio Public Utilities Commission.