ELECTRIC-RATE SUBSIDIES TO INDUSTRY DWARF FEDERAL SUBSIDIES TO RENEWABLE ENERGY

Ohio households have electric rates that are twice as high as those for industry. In effect, industrial companies do not pay their fair share and consumers subsidize the shortfall. And it is costly. The average household pays about $300 extra per year because of this subsidy. This amount is about equal to the Ohio income tax paid by a family of four with an annual income of about $25,000.

There has been extensive coverage in the Columbus Dispatch about two special additions to consumers’ electric bills:

A monthly charge of $2-3 has been added to the bills of AEP customers to subsidize Ormet, an aluminum smelter about 150 miles from AEP‘s heartland in Franklin County. While Ormet failed to obtain an additional subsidy and declared bankruptcy, other such subsidies exist for energy-intensive companies.

Renters have no choice of electric company. This is the landlord’s decision. Several landlords in Columbus have formed electricity-distribution companies, which charge far in excess of even AEP rates.

While I am unaware of such special deals in other states, I can compare their basic subsidies. It turns out that none of our immediate neighbors charge consumers twice the rate charged to industry. In West Virginia the consumer rate is slightly more than 1.5 times the industrial rate. Since our economic indicators are comparable to those of our neighbors, I doubt that the electricity-rate imbalance is contributing anything to our economic well-being.

Probably some imbalance in electric rates is reasonable. Companies that use large amounts of electricity should get a bulk discount, as is the case for any other commodity. In Ohio the discount is one-third off the fair price. An open discussion is needed to decide what is an equitable discount.

State government, particularly the General Assembly and PUCO, has the power to bring the rate differential into better balance and relieve some of the consumers’ burden. I urge them to do so.

Documentation is available by e-mail: alanpeg@alum.mit.edu

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