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OHIO GOVERNOR'S ENERGY PLAN 2007

 

 

Source: OHIO AIR QUALITY website  http://www.ohioairquality.org/energy/energy_jobs_and_progress_for_ohio.asp

 

Energy, Jobs and Progress for Ohio

Introduction

Energy is at the core of Ohio’s economic and environmental health. Energy built our past; energy sustains our present; and, energy holds the promise of an even brighter future.  That future is ours to shape. The production and use of electricity is the central element of Ohio’s energy economy.   Assuring an adequate supply of affordable energy service is a basic responsibility of government, and all Ohioans have the right to a basic level of energy service. How we decide to generate, distribute and price electricity can be the foundation on which new industries, rewarding jobs and a safer, cleaner, healthier environment can be built.  The right choices in fulfilling this responsibility can make us leaders on our nation’s journey to energy independence and economic prosperity.  The time to make the right decisions is now. In early May 2007, Governor Ted Strickland articulated principles to guide the development of an Ohio Energy Compact as we construct a plan to secure Ohio’s electricity security.  He called upon electric utilities, environmental advocates, customers of all sizes, regulators, business and political leaders to set aside narrow self interest and to partner in a joint investment in Ohio’s future. The Governor and his staff then met with representatives of all key stakeholder groups, listening and learning from those different perspectives on the electricity challenge and its possible solutions.  This Turnaround Ohio proposal outlines specific measures based upon these principles and stakeholder conversations.  Governor Strickland’s vision is to develop a comprehensive, long-term approach to the challenges and opportunities of supplying Ohio’s electricity, recognizing that reliable, affordable, and sustainable electric power is essential to Ohio’s future.  The Governor proposes a non-partisan solution that will treat all stakeholders fairly to protect jobs, stimulate economic growth and protect our environment.  As stewards of the public trust, we can afford to do no less.

 

Principle One:
We must establish a stable balance between the protections of regulation and the opportunities of competitive markets

There is broad consensus that deregulation has failed to deliver an efficient, competitive market that can meet the needs of Ohio’s economy in an affordable, reliable, and sustainable manner.  The Administration recognizes that there are considerable legal obstacles to a full return to a regulated system. At the same time, we understand the realities of the condition of the current market and conclude that we must address the potential economic impact of non-competitive market pricing on Ohio’s businesses and residents.  Our challenge - and opportunity - is to harness the power of market incentives and apply them toward not only utilities’ quarterly bottom line profits, but also toward Ohio’s future overall prosperity.

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Market Determination. Expert and casual observers alike agree that the market for electric power is presently neither fully efficient nor fair.  The Administration proposes establishing clear PUCO authority to determine the conditions under which the market for retail generation service may be declared efficient and competitive, and under what conditions it may be just and reasonable for a supplier to charge market-based retail rates.

The Administration proposes that electric distribution utilities must file a Standard Service Offer regarding electric power service with the PUCO, and may opt for either a “market rate plan” or an “electricity security plan.”

 

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Market Rate Plans.  Utilities applying for approval of a market-based plan must meet the following conditions:
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Demonstrate that markets are efficient and competitive in accordance with Section 4929.02, ORC;

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Open their service territories to competitive service providers on a reasonable and non-discriminatory basis that does not impose unnecessary costs or undue burdens on such competitors;

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Be subject to the PUCO requiring the utility to file cost and market price information to ensure that the plan will not impose undue rate increases on consumers;

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Demonstrate that the proposed plan is just and reasonable;

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Include in the plan reasonable medium and long-term components and reasonable product offers;

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Demonstrate that purchases supporting the plan must be reasonable and prudent; and

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Subject such plans to audit.

 

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Electricity Security Plans.  Utilities opting to submit energy security plans shall include reasonable cost estimations of generating assets to be included into their rate base, subject to PUCO approval. 
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The valuation of existing generation assets must take into account the degree to which Ohio ratepayers have already paid for those assets and the degree to which those assets have been depreciated.

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Costs associated with qualified environmental compliance activities may be passed through to customers.

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New power plants may be included into utilities’ rate bases, consistent with resource planning projections and certification of need.

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Construction-work-in-progress may be authorized by the PUCO for up to the first three commercial deployments of either next-generation clean coal and/or advanced nuclear power plants.

 

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Transferred Generation Assets.  Until the market becomes efficient and competitive as anticipated by SB 3, the Administration concludes that utility affiliates that receive generation assets must fulfill a continuing obligation to serve Ohio retail consumers.  Accordingly, the Administration proposes that a utility affiliate company that has received ownership of power plants through a corporation separation plan retains the responsibility to assure that retail consumers in the territory of its affiliate receive an amount of electricity that is:  first, at least equal to the expected output of those power plants; and second, priced under just and reasonable rates taking into account Ohio ratepayers’ investment in those power plants.  Such an affiliate may apply for a waiver of the requirement to offer retail electric generation services.  The PUCO may grant such a waiver if it finds, following notice and hearing, the applicant has demonstrated that:
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The market for electric generation services is competitive and efficient in accordance with the state policy enumerated in Section 4929.02 ORC; or

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The affiliate has entered or has made a reasonable written offer to enter into a contract with the EDU, from which it received generation assets, to provide generation services to the EDU in quantities, under terms and at rates that are at least as favorable to the purchaser as the quantities, terms and rates at which it otherwise would be required to offer retail electric generation services.

Principle Two:  
Policies to stimulate renewable and advanced energy production in Ohio are instrumental in attracting investment in related energy technology manufacturing.

Ohio already has the industrial base, technical resources, and skilled labor necessary to build the technologies and systems that will power the future. The missing ingredient is a clear policy signal that Ohio is the right place for advanced energy technology investment.  This Administration offers its leadership in expanding the role of renewable and advanced energy in Ohio.

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Advanced Energy Portfolio Standard.  Nearly half of the States are developing or have implemented some sort of portfolio standard to accelerate deployment of new energy technologies.  The Administration proposes that Ohio adopt an advanced energy portfolio standard to encourage development and deployment of next-generation energy technologies, including renewables1, clean coal2, advanced nuclear, fuel cells and cogeneration as well as emerging technologies that may reach the level of commercial deployment and are today unidentified.  The standard should include clear timelines and numerical targets to be developed with the benefit of technical analysis and due process at the PUCO, guided by the following boundaries:

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By 2025, a minimum of 25% of the electricity sold in Ohio must be generated from advanced energy technologies. 

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No less than half of this amount shall be generated from renewable energy resources.

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At least half of the total advanced energy requirement must be met through assets sited in Ohio, and aspecific “carve-out” requirement for solar power must be adopted to reflect and reinforce Ohio’s leadership in solar energy technologies.

Principle Three: 
Transparency and accountability are priorities throughout the Strickland Administration.

We can restore lost faith in both government and public utilities by designing clear, “common sense” plans and being responsible for accomplishing them. Senate Bill 3, passed in 1999, assumed that markets would become efficient and competitive, and that the State would protect consumers from market deficiencies, as well as from the ability of suppliers to exercise unreasonable market power.  The reality is that markets have not achieved efficiency, have not protected consumers, and have failed to stimulate the investments required to meet our growing energy needs. We must ensure that these goals are met before making the transition to relying entirely on markets for Ohio’s electric power supply.  Transparency and accountability provide a sound basis for public and private sharing of the investments required to achieve those goals.

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Define “Public.” There must be a clarification about the meaning of the term “public” in public utility.  The Administration proposes renewed emphasis on “public service,” “public obligation,” and “public benefit.”

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Transparency.  The development of efficient and competitive markets requires that power markets be sufficiently transparent, and that market participants can manage uncertainty, effectively hedge risk, and have confidence that the market is not subject to strategic manipulation. 
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Price Signals. An effective electricity system benefits from all classes of consumers having access to time differentiated changes in the actual cost of electric service. Accordingly, the Administration proposes the PUCO take actions to accelerate the availability and expand the implementation of real-time pricing and time-of-use tariffs.

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Side Deals and Special Contracts. The practice of side deals being struck in the course of rate cases is longstanding.  However, the secretive nature of such arrangements severely limits the information available to the PUCO in the course of the regulation of electric utilities.  The Administration proposes requiring that all side deals, as well as special contracts, be filed with the PUCO in a manner that protects proprietary information, with the penalty of rate cases being removed from consideration upon discovery of any related side deal that has not been appropriately filed with the Commission.

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Accountability. Service interruptions and power quality problems represent a significant cost to Ohio businesses and other consumers, as well as limiting competitiveness in the modern, increasingly digital economy. In exchange for revenue streams provided by Ohio ratepayers, the Administration calls upon electric utilities to work through the PUCO to clearly define, measure and report on the critical public service they provide.
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Performance Metrics.  Customers deserve to understand the performance they receive for the money they pay to Ohio’s electric utilities.  The Administration proposes that the PUCO staff produce and make publicly accessible an annual report, written in plain language, providing timely information on indicators of quality of service, including reliability and other related metrics for electric utilities serving Ohio customers.

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Performance Targets. In order to harness market forces to improve the quality of service provided to customers by Ohio’s electric utilities, the Administration proposes that all electric rates include corresponding performance targets for quality of service metrics.  Through due process, the PUCO shall establish formulas for financial incentives and penalties for utilities’ over- and under-performance with these metrics, progress on which shall be reported in plain language, and made readily available by the PUCO to the public.

Principle Four:
Customers deserve equal footing with utilities
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The complexity of these issues creates an imbalance of knowledge and expertise that can create a disproportionate influence of utilities in electric power decision-making. In an era of expensive energy, there is increased tension between the historical social responsibility of what we call public utilities and the driver of private sector return on investment. We must exercise vigilance in determining whether electric power markets are efficient and competitive, and we must restore public confidence by protecting consumers from market deficiencies and suppliers’ market power. We must work together constantly to make sure the public understands the issues and the consequences of our actions.

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Inclusion. Organizations representing customer groups will enjoy equal footing with all other stakeholders in consultations and negotiations with the Administration on electric regulation and, as currently allowable under law, with the PUCO.

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Balance. All electric rates must recognize the degree to which Ohio ratepayer investment has built the capital assets of the state’s public utilities.  While utilities are entitled to fair returns, suppliers do not have a fundamental right to take advantage of the failure of markets to develop as anticipated to charge undue prices for power from generators built with ratepayer funds.  The benefits of, and responsibility for, both ongoing and future investment must be clearly shared by ratepayers and shareholders.

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Demand Response. Among the most effective tools consumers can use to exercise choice as utility customers is the ability to adjust usage in response to actual, as opposed to average, electricity prices.   Accordingly, the Administration proposes the PUCO be directed to accelerate implementation of measures promoting demand response, including, but not limited to, availability of time-sensitive pricing and deployment of advanced metering infrastructure.

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Aggregation.  To address the imbalance that the size of the customer creates, some consumers find better prices by pooling their purchases. The Administration supports continuation of municipal opt-out aggregation and proposes that PUCO establish frameworks to facilitate demand response aggregation and to establish rules for aggregation by political subdivisions other than municipalities.

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Federal Energy Advocate.  Many issues with significant economic impact are no longer under the jurisdiction of the state but rather under the authority of the Federal Energy Regulatory Commission (FERC).  It is essential that the PUCO be empowered through a clear mandate to aggressively pursue the interests of Ohio ratepayers before the FERC.  Accordingly, the Administration proposes creation of a Federal Energy Advocate function at the PUCO and specific authority for the Commission to examine the value of Ohio’s current participation in Regional Transmission Organizations and to publish an analysis of whether continued participation is in the interests of Ohio electric customers.

Principle Five:
Modernizing Ohio’s electric infrastructure must be a high priority.

Our power plants, transmission lines, and distribution networks are showing their age. We must broaden the restructuring debate to include our energy delivery system, not just our generation capacity. It is our responsibility to marshal the resources to meet the needs of the 21st Century economy in Ohio.

bulletModernization Plans. For those utilities that opt for Electricity Security Plans, the Administration proposes requiring development and submittal of long-term energy delivery infrastructure modernization plans, in addition to restoring the practice of regular integrated resource planning.  In this context, single-issue rate cases for high-priority investments and system upgrades would be allowable under the framework of energy infrastructure modernization.
bulletOhio Air Quality Development Authority.  To underscore the importance of reliable, affordable, and sustainable energy for Ohio, the Administration directs the Ohio Air Quality Development Authority to take on additional responsibilities to:
bulletGet the best rate for electricity for State facilities, State-supported colleges and universities, interested local governments, and willing school districts through pooled purchases;
bulletProvide better cost financing for new generation projects;
bulletAct as a statewide entity to encourage and provide incentives for investments in energy efficiency;
bulletLead Ohio deployment of renewable energy installations;
bulletDevelop tools to provide incentives for early deployments of next-generation baseload generation systems, including clean coal generation facilities with carbon capture and sequestration and advanced nuclear power plants, and reduce the cost of associated risks;
bulletInvest in and coordinate State-supported energy R&D; and
bulletDevelop and implement tools to make better cost power available to key industrial and other sectors.

Principle Six: 
Energy efficiency must be a central element in addressing electric regulation.

Emerging “smart energy” technologies intersect with looming electric generation capacity shortages to create a unique opportunity to deploy our most affordable, available, and sustainable energy resource: energy efficiency. 

bulletEnergy Efficiency Standard.  The Administration proposes establishing an energy efficiency standard that requires Ohio utilities to acquire no less than 25% of projected growth in electricity use and 10% of total peak demand by 2025 through energy efficiency measures.  To encourage compliance, PUCO may treat efficiency as a production cost based upon achievement of predetermined energy savings.  Financial and other penalties also shall be developed and enforced by the PUCO for failure to demonstrate adequate energy efficiency improvement.
bulletConsumption Data.  Energy efficiency projects require data to establish a baseline against which to measure progress, but access to such information often proves unnecessarily difficult, particularly for smaller customers.  To facilitate energy efficiency initiatives across Ohio, the Administration proposes that the PUCO require historical electricity usage data be made available by electric utilities for the past three years, in an accessible electronic format, upon customer request.
bulletDecoupling.  The Administration recognizes the importance of energy efficiency and notes that the proposed approaches may need to be supplemented by more effective measures.  Accordingly, the Administration proposes authorizing the PUCO to design and implement a system to decouple electric utility revenues from energy sales, if other measures fail to adequately promote energy efficiency.

Principle Seven: 
Ohio’s electric power sector must be prepared for the ever-growing influence that will be exerted by environmental issues, especially global climate change
.

Understanding that new power plants are built with expected operating lives of 30-50 years, Ohio’s vulnerability to future climate change policy is heightened by our coal-intensive economy. We must develop coherent, transparent means of giving appropriate incentives to technologies that can adapt successfully to eventual carbon controls.  In addition to the environmentally-relevant measures discussed in other parts of this document, such as renewable energy and clean coal deployment, the Administration seeks progress in the following areas:

bulletLife-Cycle Analysis. Recognizing that not all technologies and not all sites are equal, the Administration proposes requiring site-specific, life-cycle analysis of greenhouse gas emissions in the course of environmental impact and siting analyses for all new electric power generation projects.  In addition, utilities should be required to provide similar information for all existing generation assets serving Ohio customers.
bulletCarbon Planning.  Greenhouse gas emission constraints are nearly certain to come into force at the federal level during the lifetime of any new power generation facility, and are very likely to become relevant for many existing power plants as well.  In this context, the Administration proposes requiring carbon control planning (note: planning, not controls) for all existing and new GHG-emitting power generation facilities.
bulletGreenhouse Gas Reporting.  Recognizing that power plant emissions represent the largest single sector share of Ohio’s greenhouse gas emissions, and in order to prepare Ohio’s utilities for the eventual passage of federal climate change legislation, the Administration proposes requiring greenhouse gas emissions reporting for all electric power generation facilities through The Climate Registry, a voluntary greenhouse gas registry of which Ohio was one of over 30 founding state participants.
bulletCarbon Sequestration.  In no uncertain terms, coal-based electric power generation represents Ohio’s primary vulnerability to future global climate change policies.  Until federal regulations are developed to govern the geologic sequestration of carbon dioxide, the Administration proposes legislative authority to develop an interim regulatory framework to facilitate pilot and demonstration carbon sequestration projects, including enhanced oil recovery activities that also result in permanent carbon disposal.

1 “Renewables” refers to biomass, geothermal, solar, new low-impact hydro, anaerobic digestors, wind and municipal waste or garbage if converted to a clean burning fuel prior to use for electric power generation.

2 “Clean coal” refers to coal-based electric power generation facilities that control or prevent emissions of carbon dioxide at a level at least 80% less than  the emissions of the generating facility without the technologies; the definition also includes facilities using waste coal as a the primary fuel source.

 

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Wednesday, August 29, 2007

Gov. Ted Strickland unveiled his energy plan Wednesday in a speech called

"Energy, Jobs and Progress"

 

 

Every generation learns an old lesson and thinks it's new. Back in the 1880s, a vast supply of natural gas was found in northwest Ohio. In fact, in Findlay it was said that the region had the largest reserve of natural gas in the world. There was so much that it was given away free. Locals bragged that natural gas was as "free as the air." There was so much that lesser wells went uncapped – or were simply burned off. The local chamber of commerce took out newspaper ads across the country touting "Free Fuel! Free Sites!" for any manufacturer willing to relocate. Every home and every company in town used natural gas for heat, for lighting, and to run machinery. With abundant energy fueling prosperity and ease, the population of Findlay quadrupled in less than a decade. It was, in the words of a historian, "a wild, mad, exciting, exhilarating, spectacular" time. Given their resources and how quickly the area had grown, town leaders saw no reason to doubt that they lived in what was destined to become the manufacturing center of the world. There were naysayers. Geologists regularly warned that the gas supply was limited. But their warnings were ignored by some and dismissed by others. By the turn of the century, however, area residents and companies had only memories of free fuel. In fact, my friends, they had only memories of the endless supply of natural gas. Today in Ohio, we could assume that the energy we rely upon now will always be sufficient — and quietly wait for the day of crisis when that is no longer the case. Or we can admit to an undeniable truth — that our energy sources must be broadened and modernized, that we must adopt more efficient practices, that our regulation policies must be made sensible and fair — and achieve a secure energy future for Ohio.

I know that energy isn't the first thought for most people when they wake up in the morning. But energy shapes economies, energy shapes communities, energy shapes lives. And that's particularly true in Ohio. We are blessed to be among the nation's leading manufacturing states and to be home to one of America's largest concentrations of Fortune 500 companies. But the consequence of all that is done here and all that is made here is the vast quantity of energy that is consumed here. In fact, Ohio is 5th among the states in overall energy consumption. Our economy spends more than 30 billion dollars on energy every year, and electricity is the single biggest component of our energy use.

In 1999, Ohio moved toward deregulating electricity under the belief that competitive market forces would develop and hold prices down. But it is widely acknowledged that a competitive electricity market has not emerged in Ohio. When you offer consumers a product with no choice of who they buy from, you don't have a market, you have a monopoly. And prices don't go down, they rise ever higher. Indeed, ever since 1999 there has been recognition of this fact, as well as the need to keep electric rates predictable and stable, because to this day the PUCO has retained the cushion of rate stabilization. And it is that cushion that has kept rates paid by consumers and companies from rapidly escalating. But rate stabilization is set to expire at the end of next year. Many of Ohio's largest employers have expressed the concern that deregulation without rate stabilization will mean skyrocketing electricity prices and an unprecedented drain on Ohio's economy.

Quite frankly, their fears are not without foundation. According to the U.S. Department of Energy, customers in states with deregulated electricity paid 30 percent more last year than customers in regulated states. When their version of rate stabilization ended this year in Illinois, electricity bills immediately jumped as much as 55 percent. When rate stabilization ended last summer in Maryland, electric bills soared by 72 percent. Headlines across the country tell the story of small businesses literally shutting their doors because their electric bills more than doubled. And that job loss is coupled with personal hardship. USA Today recently detailed what happened to an East St. Louis, Illinois family whose electric bill quadrupled when the state's rate caps expired. The wife had to take her engagement ring off her finger and return it. Her husband had to take extra shifts at his warehouse job. And still they may not be able to pay their electricbills. Equally troubling, the Federal Energy Regulatory Commission has documented the potential for manipulation in a totally deregulated market. All of you recall the shameful example of Enron's efforts to exploit the deregulated electricity market in California. By intentionally limiting available power, then watching prices soar as demand spiked, companies including Enron are believed to have bilked 9 billion dollars from California consumers over the course of just a few months. Infamously, two Enron energy traders were caught on tape bragging about how they were bankrupting the grandmothers of California with outrageous electricity bills. We must heed these lessons.

Let me say I do not see us going back to a fully regulated system, but I do see us moving forward with a carefully crafted system that ensures price stability, and an adequate and reliable supply of electricity. Our energy policy is not simply a matter of what we stand to lose. It is a matter of what we stand to gain – jobs. Energy can be a catalyst for new jobs, bringing forth a new day, a new economy, a new Ohio. An economic analysis by the Apollo Alliance found that an expanded use of renewable energy would provide Ohio more than 20,000 new manufacturing jobs building the products necessary to harvest the energy of the wind, sun, water and other renewable resources. And that represents only a fraction of the potential jobs to be gained in the research and operation of not only renewable but other advanced energy options. Advanced energy offers the promise of high paying jobs – jobs that would take advantage of Ohio's strengths in manufacturing, our location, and our workforce. And all the while we will help power our economy with cleaner fuels and take control of our energy destiny.

We now face a choice. We can embrace unchecked monopolies presented under the guise of a deregulated marketplace, a false marketplace that would stifle our economy, and leave to chance the development of innovation. Or we can embrace a carefully crafted hybrid approach that recognizes how we generate, distribute, and price electricity affects every one of us every day, and acknowledges that maintaining an adequate supply of electricity is a fundamental responsibility of our state government. Today, I am offering my vision of an electricity market that will provide reliable, affordable, and sustainable power essential to Ohio's future.

First, we must protect Ohio jobs. And in order to do that, there must be a sensible balance between regulation and competition. We must develop a market that serves the needs of Ohio, not a system that offers utilities both the benefits of deregulation and the protections of regulation. We should give utilities the option of pursuing either a competitive market pricing plan or an electricity security plan. If an efficient and competitive market emerges, with service territories open to competitors on a reasonable basis, then utilities should be allowed to charge market rates. However, until such an efficient, open, and competitive market exists, rates should be set under an electricity security plan.

Rates will be determined in part by the cost of generating and delivering electricity. Rate decisions will also be determined by considering the long term sustainability of energy by allowing utilities to recoup costs of environmental innovations and new power plants. And while utilities are certainly entitled to fair returns, electricity rates will also factor in the significant investment Ohio ratepayers have already made in the capital assets of those utilities.

Second, we must implement an advanced energy portfolio standard in order to create thousands of new Ohio jobs. Next generation energy technologies, including renewable energy, fuel cells, clean coal, advanced nuclear, and cogeneration offer the promise of a secure energy future and a prosperous economic future. Under my plan, by 2025, a minimum of 25 percent of the electricity sold in Ohio must be generated from advanced energy technology. No less than half of that energy will come from renewable sources, including biomass, wind, solar, anaerobic digesters, geothermal, and hydro power. And no less than half of that advanced energy must be created in Ohio.

Third, the electricity market must feature accountability and transparency. Quite simply, customers should be able to understand what they pay for and what they get. The true cost of generating electricity rises at times of peak demand and falls when demand declines. It may cost a utility 10, or 20, or even more times as much to provide electricity for the same load of laundry washed at 4 p.m. on a weekday instead of a few hours later. Yet that reality is all but absent from a consumer's experience because they have no way of measuring how their energy use relates to demand or cost. Our approach will result in the PUCO speeding up consumers' access to advanced meters that will show them not just how much, but when they are using electricity, and when they could use less expensive power. It is also time to give the PUCO a fair accounting of the deals utilities offer to certain customers in the course of the commission's proceedings. If a side deal offering a special rate for electricity is in effect which influences outcomes, I will propose requiring those transactions be disclosed to the PUCO. While this proprietary information will remain only in the PUCO's hands, it will provide the commission comprehensive information on all the rates charged to ensure that its deliberations result in a fair and just decision. My plan requires utilities to work with the PUCO to establish meaningful, plain language performance targets for meeting consumers' needs, and it establishes financial consequences if those targets are unmet.

Fourth, consumers deserve equal footing with utilities. Electricity is vital in the lives of every Ohioan and every Ohio company. Therefore, the needs and preferences of our utilities cannot be the PUCO's sole concern. Indeed, organizations representing consumer groups should enjoy equal standing in consideration of regulations and rate negotiations.

Fifth, we must update and modernize Ohio's electric infrastructure. Our responsibility for a secure energy future requires not only the generation of power but its reliable delivery. Quite frankly, our power plants, transmission lines, and distribution networks are showing their age. Under my proposal, utilities in the electricity security option must submit a long-term, infrastructure modernization plan. Utilities must also integrate all their infrastructure resources, not just the most profitable segments of the business, into their planning. To make it easier for utilities to maintain their infrastructure in the short term, under certain conditions single issue rate cases will be permitted. That is, rather than having to make a case based on the entirety of their service delivery system, a utility can propose a rate change for a limited geographic area or to achieve a limited purpose that is central to maintaining their system.

Sixth, energy efficiency must be a central element of our electricity system. Efficiency is simply our cheapest, cleanest, and most readily available energy resource. Under my plan, by 2025, utilities must meet at least 25 percent of the growth in electricity demand by achieving power saving efficiencies. And, efficiency steps should provide no less than 10 percent of the total peak demand of electricity. Further, in recognition of the fact that a megawatt saved is as valuable as a megawatt generated, the PUCO may treat efficiency as a production cost. Right now our utilities have an unhealthy incentive to simply sell more power to generate more revenue, rather than fully meeting the needs of the Ohio market with as little electricity as possible. Therefore, if other measures fail to provide efficiency, the PUCO should be authorized to allow utilities to profit from increasing efficiency to the point where electricity sales actually fall.

Seventh, our electricity plan must address the threat of global warming. While acknowledging that standards must be flexible enough to account for differences in the type of energy used and the technology available when a power plant was built, we should begin carbon control planning for each site. As a first step, under my plan each power plant in Ohio will make a full annual report of its greenhouse gas emissions. Coal has been, is, and will be an integral part of Ohio's economy. By using clean coal technology, we can take steps to reduce the carbon impact of coal. Carbon sequestration offers us that opportunity. By injecting carbon dioxide deep into the Earth instead of sending it into the atmosphere, we can significantly reduce the effect of coal on our climate. Under my plan, we will pursue pilot and demonstration projects to fully measure the potential benefits of carbon sequestration. Finally, to help advance these worthy goals, my plan calls on the Ohio Air Quality Development Authority to accomplish several critical functions. The Authority will procure electricity for state facilities through pool purchasing, provide lower cost financing for new power generation projects, coordinate state supported energy research and development funds, and support the energy efficiency efforts of utilities. Acting on behalf of Ohio's economy and Ohio consumers, the Authority will also be empowered, but not required, to make reduced-cost power available to key industrial sectors, lead Ohio's deployment of renewable energy installations, and provide incentives to utilities making early use of next generation energy technology.

Let me say, this is not a plan for the utilities. It's not a plan for the manufacturers. It's a plan for Ohio. It's a plan to protect existing jobs and to attract new jobs. We need to realize that competing and colliding self interests will not advance a more sensible and secure energy policy. But our collective interest in the health of our economy, the health of our environment, and the health of our future will move us forward. Cynics might say that our best days are behind us. But they are wrong. Energy can be the key to our economic renaissance. A secure energy future will protect Ohio jobs. A secure energy future will create jobs for those who will help us harvest renewable and next generation energy. A secure energy future means that Ohio will attract jobs from states with higher electricity rates.

My friends, in Ohio we've long been at the forefront of energy advances. Before this state was even two decades old, we were a manufacturing giant because Ohio mills successfully created power from running water. Before this state was a century old, Ohioan Charles Brush was one of the very first to harness the power of electricity. As a youngster, Charles Brush lived on a farm and went on to graduate from a Cleveland public high school. He began his path-breaking work with the modest tools available to him. His early experiments on developing an electric generator depended for power on horses walking on a treadmill. But his work progressed until he had developed a machine that was the basis of commercial electric power generation. Charles Brush also worked with electric lighting. His innovations led to the first electric streetlights in the world. They were installed in his hometown of Cleveland in 1879. A crowd of more than a thousand gathered in the center of the city to see them turned on for the first time. Within two years, Brush's Ohio-made lights were illuminating the streets of major cities across the country including New York, Boston, and San Francisco. And it was in his backyard in Cleveland that a few years later Charles Brush built the first automatic, electricity-generating windmill in the world. That windmill is the predecessor of the kind of alternative energy source we must make better use of today. Because we're on the cusp of a new generation of energy technology, and we must stake our claim.

Ohio can lead the way in the generation of energy, in the manufacturing of hardware necessary to create that energy, and in a sensible plan to provide energy to our people and our companies. This is a good day for Ohio. Because as a writer once put it, "When you have energy, you have hope."