Editorial: Utility customers shouldn't bear economic development costs
Adesire by officials in southeastern Ohio to have a steel plant locate in Scioto County is understandable. After all, one company considering locating a plant in the region could mean 1,100 full-time jobs, according to developers.
That economic boost is certainly worth pursuing. But officials should be careful that they don’t go too far in their quest by placing a financial burden where it doesn’t belong. That would be the case with an idea being floated by Ohio Rep. Terry Johnson. A possible plan he spelled out this week would involve customers of electric utilities being charged an extra fee to help finance the plant up front, according to a news release from Johnson.
The issue has come up because a company called New Steel has been exploring the possibility of building a steel plant in Scioto for five years. But so far, no plans have come to f r u it ion .
To potentially jumpstart such a project, Johnson envisions the possibility that New Steel could work out a power purchase agreement with a major electric utility. Such a deal could involve receiving the money for the plant’s construction up front with New Steel paying back the electric provider with a predetermined amount of electricity the plant would purchase over a set length of time.
But Johnson himself noted a potential roadblock. “The hang-up with this type of deal is that a public utility company will want a mechanism in place to hedge their risk since they would be providing a lot of cash up front,” Johnson said.
And that mechanism? Making use of the Ohio Public Utilities Commission’s authority to allow a utility company to put a “rider,” or surcharge, on customers’ electric bills within its service territory for economic development purposes, according to Johnson.
How big that fee would be and for how long it will be applied wouldn’t be known until a specific deal is proposed. But Johnson is hoping to spread the cost as much as possible. He has introduced legislation that would amend state law so that the cost could be spread beyond just one utility’s customers to all electric company customers in the state. The idea is that applying the surcharge to all customers’ bills would mean a lower per-customer fee.
But in proposing this idea, Johnson and others who might be backing such a plan are ignoring the larger questions: Why should utility customers be paying anything extra to finance a private venture? Why should they be shouldering the risk if the steel plant venture can’t get off the ground through private financing or doesn’t work out? But that’s exactly what could happen. If the venture eventually turns sour, it’s likely the utility involved can recover its costs by collecting the money from other ratepayers. And what options would the ratepayers have? Not many, other than continuing to pay a surcharge.
If Johnson and other elected officials believe a new steel plant is worthy of the public’s support for starting up, they should take the direct approach by appropriating money for it. They are the ones who are most directly accountable to the people, and their decision can be judged by the people who elect t hem .
Customers of public utility companies have no such power of the vote. Their only commitment should be to pay for the electricity they use, not to pay extra to finance private ventures they have no control over.
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