Why Ohio Utilities are Facing Backlash from Manufacturers
Ohio's new energy bill raises critical questions for manufacturers and consumers alike. What are the risks involved? #EnergyPolicy #Ohio
Ohio's manufacturers remember energy policy disasters all too well. Right now, they're watching a new energy bill move through Columbus with the kind of alarm that only comes from knowing exactly what happens when utilities gain too much control over power generation — and customers end up holding the bag.
The Ohio Manufacturers' Association (OMA) has come out in direct opposition to the legislation, warning that it creates a backdoor for utilities to re-enter the generation business under terms that socialize financial risk onto ratepayers. That's not a minor procedural complaint. For a state that lives and dies by its industrial energy consumption, the stakes are significant.
Understanding Ohio's Energy Bill
The bill in question would open a path for Ohio's investor-owned utilities to get back into the electricity generation business — a sector they were largely pushed out of following the state's deregulation push in the late 1990s and early 2000s. That deregulation was supposed to introduce market competition, drive down prices, and give large consumers like manufacturers the ability to shop for power. For years, it largely worked.
The core problem with reversing that structure isn't ideological — it's financial architecture. When utilities own generation assets under a regulated model, they earn a guaranteed return on those investments. The risk of cost overruns, technology failures, or market shifts doesn't fall on shareholders — it falls on ratepayers via their monthly bills.
Key stakeholders here aren't just the utilities and manufacturers. Ohio's grid operator, PJM Interconnection, operates one of the most competitive wholesale electricity markets in the country. Any move that distorts how Ohio utilities participate in that market has downstream consequences for grid reliability, capacity pricing, and competitive power procurement across a 13-state footprint. This isn't just an Ohio story.
Concerns from the Ohio Manufacturers' Association
The OMA's opposition is pointed and specific: the bill gives utilities a re-entry ramp into generation with the financial risks transferred to customers rather than absorbed by investors. That framing matters because it cuts through the often-vague language of energy legislation and names the mechanism directly.
Manufacturers are among the largest electricity consumers in any industrial state. Ohio's manufacturing sector — spanning automotive, steel, chemicals, and food processing — runs facilities that consume electricity around the clock. For these operations, energy is not a background cost. It's a core input, often ranking alongside labor and raw materials in the budget. A sustained increase in electricity rates doesn't just squeeze margins — it restructures business cases for staying in Ohio at all.
When utilities take on generation assets under regulated cost recovery, the discipline of market competition disappears. There's no incentive to build efficiently, procure fuel economically, or retire underperforming assets. The meter keeps running, and ratepayers keep paying. The OMA knows this dynamic well — Ohio lived through a version of it before deregulation, and the lesson wasn't cheap.
The competitive concern runs deeper than just rate levels. In a deregulated market, large industrial customers can negotiate power purchase agreements, participate in demand response programs, and strategically manage their load to reduce costs. If the generation market in Ohio begins to consolidate back under utility control, those tools erode. The playing field tilts permanently.
Financial Implications for Consumers
The risk transfer mechanism at the heart of the OMA's objection deserves a closer look because it's where the rubber meets the road for ordinary ratepayers — not just manufacturers.
Under a traditional regulated utility model, when a utility builds or acquires a power plant, it files for cost recovery through the rate base. Regulators review the investment, approve a return on equity (typically in the 9–11% range for Ohio utilities), and the costs get spread across all customers. If the plant underperforms, gets stranded by falling natural gas prices, or becomes uneconomical due to new competition from solar and storage, customers remain on the hook for the original investment. Utilities earn their return regardless.
That asymmetry — utilities capture upside, customers absorb downside — is exactly what deregulation was designed to eliminate. Re-introducing it through a bill framed as energy security or grid reliability doesn't change the underlying math.
The impact on energy prices is rarely immediate. These things unfold over years and rate cases. But the trajectory is predictable: generation assets get added to the rate base, baseline rates climb, and industrial customers with thin margins begin recalculating their Ohio footprint. Small commercial and residential customers, who have fewer options, simply pay more.
Potential Outcomes of the Bill
Best case: the bill passes with meaningful guardrails — independent oversight of utility generation investments, hard caps on cost recovery, and mandatory competitive bidding before any utility-owned generation project proceeds. In that scenario, the legislation serves its stated purpose (grid reliability, perhaps accelerated clean energy build-out) without becoming a blank check for utilities to build assets on ratepayers' dime.
Worst case: the bill passes in its current form, utilities begin acquiring or building generation assets with minimal regulatory friction, and Ohio's competitive power market gradually hollows out. Within a decade, the state finds itself with higher baseline electricity rates than neighboring competitive states, a diminished industrial base, and a generation fleet that doesn't reflect market economics. It's not hypothetical — it's a playbook that's run before in states that never fully embraced deregulation or that quietly re-regulated after the fact.
The long-term industry impact hinges entirely on whether Ohio's regulators — the Public Utilities Commission of Ohio — maintain genuine independence and rigor in reviewing utility generation proposals. History in multiple states suggests that once utilities have legislative permission to re-enter generation, regulatory capture becomes a persistent risk. The incentive structures are simply too powerful.
For Ohio's manufacturing sector specifically, the worst-case outcome creates a compounding problem: not only do energy costs rise, but the policy uncertainty itself becomes a deterrent to new capital investment. Site selection for major manufacturing facilities now routinely includes energy cost modeling over 10–20 year horizons. A state re-entering a regulated generation model introduces variables that are hard to model and harder to mitigate.
The Future of Energy Generation in Ohio
Ohio sits at an interesting inflection point nationally. States like Texas and Illinois have taken divergent paths — Texas with its radically deregulated ERCOT market (which has its own well-documented reliability challenges), Illinois with significant state intervention through its clean energy legislation. Ohio has historically occupied a pragmatic middle ground.
What makes this moment different is the technology context. Distributed solar, large-scale battery storage, and corporate power purchase agreements have fundamentally changed what "reliable" generation looks like. A manufacturer in 2024 has options that simply didn't exist in 2005 — on-site generation, microgrids, long-term renewable contracts. The argument that utilities need to own centralized generation to ensure reliability is weaker today than it's ever been.
Other states navigating similar debates — Michigan, Pennsylvania, and Virginia among them — are watching whether Ohio finds a model that threads the needle between grid stability and market competition. There's no obvious template. But the states getting it right are the ones keeping large industrial consumers at the table during policy design, not treating their objections as a speed bump.
The OMA's opposition isn't obstructionism. It's a signal from the sector most sensitive to energy cost shifts that the bill's risk allocation is wrong. Ohio legislators who ignore that signal aren't just overruling one industry group — they're making a bet that future rate increases won't affect the state's ability to attract and retain manufacturing investment.
That's a bet worth thinking hard about before the vote.
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