Wednesday, March 8, 2017

Landlord Tenant Bill HB 0376

I just wanted to weigh in on HB 0376.

I think this bill is bad for Utah.

The bill would make it difficult for tenants to defend themselves in complex eviction cases involving allegations of "nuisance" or "breach of contract." These are not straight-forward non-payment of rent cases. The bills changes the law so that tenants will only have ten days to prepare for an eviction hearing. Ten days might be enough time in a more straight-forward non-payment of rent case (which generally is just a question of accounting), but cases involving allegations of "nuisance" or "breach of contract" are often factually complex and require time for investigation before a hearing is held on the merits. Ten days is not enough time to prepare a defense for these type of cases. I think the change proposed by this bill is a bad idea.

The bill would also subject commercial tenants to expedited process. This is bad for business. I have seen fledgling businesses ruined because a landlord wrongfully evicted them. Again, there should not be an eviction hearing within ten days when the case involves complex contractual relations between a landlord and a commercial tenant. Having a hearing on occupancy within ten days is a huge disruption to businesses. Because it is anti-business, I recommend rejecting the bill. Commercial tenants should have the same procedural rights as parties in other contractual disputes (21 days to respond, trial after 120 days, etc.) The business community should reject this change. It has potentially large ramifications on Utah businesses, many of which are tenants.

Finally, a seemingly minor change in the law changes the word "answer" to "answer or response." This change seems minor, but it has far-reaching implications. The change would mandate an eviction hearing after a tenant files a "response" in the form of a motion to dismiss based on lack of jurisdiction. This change in language would create a situation where the Court would be required to have an eviction hearing before the court has even determined whether it has jurisdiction over the case. This is likely unconstitutional. The Court cannot evict someone without first determining whether it has jurisdiction over the case. Therefore, this seemingly minor change has huge legal and constitutional implications and will create problems for the Court's trying to implement the change.

I think HB 0376 is an unnecessary and problematic change to a system that is already extremely expedited compared to most civil litigation.

Please call your state Senator and Representative and tell them that you oppose House Bill 0376. If you can, please pass this message along. Thank you!

Sunday, November 13, 2016

Direct Democracy

I believe in direct democracy.

Currently in the United States we have a system of representative democracy. We vote for representatives who in turn make the laws. 

I believe the American people should make the laws directly, rather than relying on representatives. It is only fair that we should be able to vote directly on the policies that will effect their lives. 

Every citizen should vote on every law.

In the past this would have been impractical, because it would take massive time and resources to bring together an entire nations worth of votes on every tiny legislative question. However, now, thanks to advances in technology, it is possible for every citizen to weigh in on every policy choice.

There are still practical challenges to direct democracy. 'Information costs' are the cost of getting information necessary to making efficient decisions. Our government and economy are incredibly complex. The average voter simply does not have the time or resources necessary to learn everything she needs to know to make informed decisions about every proposed piece of legislation. 

Here is what I propose.

My system of direct democracy would deal with information costs through proxy voting. 

Proxy voting is a device currently used in corporate governance. Basically, individual stockholders can appoint a proxy to vote on their behalf. Most of these proxies are large investment advising organizations that are able to do the hard work of analyzing corporate plans and voting in the stockholders best interest. 

Under my proposed system of direct democracy proxy voting would be an option: you can vote on each issue yourself, abstain, or you can appoint a proxy to vote on your behalf. These proxies would be professional, non-profit, organizations devoted to policy analysis and policy writing. I envision that under such a system there would be a proliferation of such organizations all vying for the privilege of voting on your behalf. 

Citizens would give their vote to the proxy that best represents their policy preferences. Citizens would always have the right to pull their vote back and appoint a different proxy. Citizens would also have the option to vote directly on issues that they are particularly passionate about, while leaving most of their voting to their proxy. 

To fund the proxies I would give Citizens a tax credit each year (maybe $100) to compensate them for the cost of hiring a proxy.

Because citizens can change proxies at any time, proxies will have a strong incentive to make their clients happy by enacting policies that closely match their preferences. Proxies will be allowed to charge uniform fees, but will not be able to accept additional money from wealthy citizens or corporations. 

My system of direct democracy would replace the Congress. The executive and judicial branches would essentially remain unchanged. The bill of rights will not change--there will be limits on what the populace can do with their votes. Therefore, there will still be checks and balances against excesses of democracy.

My system would be better for the following reasons:

1. Popular sovereignty, legitimacy, and lawfulness--My system best reflects the value of popular sovereignty. The citizens will directly choose the laws that govern them. My system will enhance the legitimacy of government, because the laws will be a direct reflection of the popular will. This would likely have positive effects on law enforcement, because the laws they are enforcing will have greater legitimacy.

3. Complexity--My system would better handle complexity, because professional proxy organizations would be in charge of policy writing and analysis. (Senators and representatives are good at winning popularity contests, not necessarily good at writing policy). Proxy organizations will have a strong incentive to do a good job, because their pay will be directly related to job performance. Market forces and competition will quickly discipline poor performance. 

4. Diversity--My system will eliminate binary voting. Rather than having only two parties to choose from, voters will be able to more accurately express their policy preferences among hundreds or thousands of proxies. For example, a social conservative that is fiscally liberal will be able to appoint a socially-conservative, fiscally-liberal proxy to vote on her behalf. Under our current system, socially-conservative, fiscally-liberal citizens don't have a party that represents their policy preference. 

5. Partisanship and identity politics--My system will help unite the country by eliminating partisanship and reducing identity politics. Two parties will be replaced by a whole bunch of proxies. This will help focus the populace on policy choices rather than personalities and identity politics.

6. Reduced gridlock--My system would permit interesting coalitions to develop. Because each issue is voted for directly, social conservatives and fiscal liberals could unite to pass welfare legislation or fiscal conservatives and social libertarians could unite to pass criminal justice reform, etc. Again, the law will much better reflect the popular will free from partisan distortion.


7. Flexibility and responsiveness--My system would be more flexible and responsive. Voters can change proxies at any time. The system will be able to quickly adapt to changes in global affairs, technology, etc.

8. Elimination of money and corruption in politics--Under my system, there is no potential for bribery--you would need to bribe the entire nation (or at least a majority). Not only would this be extremely impractical, it would also be extremely obvious and easy to prosecute. There would be no large campaign donors to corrupt our politicians, because there are no campaigns and there are no politicians. There is only us, voting on the laws that we think will best serve the country. 

We should institute a system of direct democracy. Every citizen should have an equal voice on the laws that govern us. 

Wednesday, February 26, 2014

Persecuting Mormons Doesn't Bother Scalia


Just came across this gem and I thought I would share it. It is Justice Scalia comparing discrimination against homosexuals in our age to discrimination against polygamist Mormons in the 19th century. He concludes that there was nothing wrong (at least constitutionally) with discriminating against Mormons, and so there is nothing wrong with discriminating against gay people. This favorable endorsement of religious/sexual intolerance in American history is fairly shocking.

This is also the text where Scalia predicts that if the Courts protect the rights of homosexuals, then they will also have to protect polygamists against discrimination. (Oh No! Can't be extending Constitutional protection to the Brown family!)

We, as Mormons, should be the biggest advocates for gay rights. Mormons were the gays of the 1800s. (Of course gays were also the gays of the 1800s.)

Anyways, here it is:

"But there is a much closer analogy, one that involves precisely the effort by the majority of citizens to preserve its view of sexual morality statewide, against the efforts of a geographically concentrated and politically powerful minority to undermine it. The constitutions of the States of Arizona, Idaho, New Mexico, Oklahoma, and Utah to this day contain provisions stating that polygamy is ‘forever prohibited.’ …  The Court's disposition today suggests that these provisions are unconstitutional, and that polygamy must be permitted in these States on a state-legislated, or perhaps even local option, basis—unless, of course, polygamists for some reason have fewer constitutional rights than homosexuals."


--Justice Antonin Scalia, dissenting opinion in Romer v. Evans.

Thursday, November 7, 2013

Moles (A Poem)

Holes are for moles.
They break through the surface
of the brown Earth with
their pink snouts.
It is obscene.

Monday, October 28, 2013

Darkness Visible



“…Yet from those flames. No light, but rather, darkness visible.”

--John Milton, Paradise Lost

 A central tension in the work of Hannah Arendt’s work involves the nature of evil. Is evil radical or is it banal? In her correspondence with Scholem, Arendt says that she has changed her mind on the nature of evil and has decided that it is never radical.  She says the following:

“[Evil] spreads like a fungus on the surface. It is 'thought-defying,' as I said, because thought tries to reach some depth, to go to the roots, and the moment it concerns itself with evil, it is frustrated because there is nothing. That is its 'banality.' Only the good has depth and can be radical.”

For Arendt, evil is banal, NOT radical, because it lacks depth. According to St. Augustine evil is merely the absence of good. It does not have a positive existence, but is nothing more than lack. This corresponds well with Arendt’s description of the thinness of evil, and its lack of substance. While Arendt's evil lacks substance like in St. Augustine's philosophy, Arendt’s description of evil as the perversion of Kant's categorical imperative in Eichmann in Jerusalem also fits Emmanuel Kant’s model of “radical evil” very well. And Arendt refers to totalitarianism as radical evil in a very Kantian way in her book Origins of Totalitarianism. 

Kant created a taxonomy of evil with three categories: frailty, impurity, and perversion. Frailty and impurity are low level evils in which a person is still motivated by the categorical imperative, but either fails to live up to her duty, or else fulfills her duty because she is motivated by extraneous desires. Only in the case of radical evil, or perversion, is a person no longer motivated by a categorical imperative. Instead, radical evil/perversion involves turning morality on its head and substituting the letter of the law for the spirit of the law. In this case a person ceases to use duty as a standard to judge their weakness against, and instead use duty as a means to justify their actions. This is exactly the uncritical attitude towards one’s actions that Arendt found in Eichmann. Therefore, Arendt seems to accept Kant’s description of evil, even if she does not accept his label. It is not clear if Arendt's concept of evil is banal (Augustinian lack of goodness) or radical (Kantian perversion).

I have decided that I agree with Arendt, in her correspondence to Scholem, that evil is not radical but is banal. Saying that evil is radical suggests that it is somewhat heroic. But evil is cowardly. Evil, the perversion of the categorical imperative, comes to pass because people are not courageous. They satisfy themselves by saying that their activity is in accordance with some law or duty, rather than challenging themselves and questioning whether the way they live is according to moral maxims or just according to custom. Evil happens because people doubt their moral feelings of sympathy. We stop trying to imagine the impact of one’s actions on others, because it is too difficult, and we don't want to change to accommodate others (especially others that don't look or act like us). This relates to St. Augustine’s concept of evil as the mere absence of good. Evils is the absence of imagination and compassion. Evil is passive. Because evil is passive and cowardly, it is very banal. It is never heroic.

Saying that evil is “radical” also suggests that evil is creative or new. It is not. It lacks creativity and is merely the passive acceptance of suffering. That is why Arendt says that left alone evil will passively cover the Earth, “like a fungus,” without active effort on the part of individuals to imagine how they can improve the World.


The banality of evil fits Eichmann very well, because he was an unimaginative, pathetic bureaucrat. However, I wonder what Arendt would say about the Fuhrer himself? He may be an example of radical evil; because he was the source of everyone else’s perverted law. Was Hitler active evil? In him it seems we might have an example of sadistic courage. He even went to jail for his beliefs at one point. 

So, is Hitler an example of positive evil? I tend to think no. Hitler was probably a coward that could not face his own perverted self. He was not creative or imaginative at all.

A better model for radical evil may be Satan in Milton’s Paradise Lost. He rejects God, develops his own personal ethics, and chooses to resist God’s will despite the impossible odds. Satan is the hero in Paradise Lost (and not even really an anti-hero like in popular shows like Breaking Bad); but he is also supposed to be evil (he is Satan after all). However, Satan's behavior in Paradise Lost is likely more in tune with Kant/Arendt’s model for good, not evil. So Milton’s Satan may not be a candidate for radical evil either. Alternatively, if Milton's Satan is evil, then he is probably just a resentful reactionary, and therefore guilty of being banal for pathetically justifying his lack of creativity.

If St. Augustine is correct, then evil is like darkness: darkness is merely the absence of light, and evil is merely the absence of good. In that case, the question may be whether it is possible to have flames that emit “no light, but rather darkness visible?”

Thursday, June 27, 2013

Inclusion Through Exclusion: Exempting Mercantile Customers to Encourage Them to Contribute to Energy Efficiency Goals

Inclusion Through Exclusion:
Exempting Mercantile Customers to Encourage Them to Contribute to Energy Efficiency Goals

By Zach Myers
JD Candidate, 2014
Georgetown University Law Center






There is an ironic tension between the concepts of ‘exemption’ and ‘integration’ in Ohio Rev. Code Ann. § 4928.66(A)(2)(c) (2008).  The statute creates an “exemption” that “integrat[es]” mercantile customers into a utility’s energy efficiency program.[1]  Mercantile customers are thus “included in the juridical order solely in the form of [their] exclusion.”[2]  This linguistic tension between exempting customers from a program, while also integrating them into that program is at the heart of the conflict between private businesses interests, and the public interest.  Private businesses are interested in opting-out of utility riders without incurring legal duties; while, the public is likely best served by integrating businesses into the utilities energy efficiency program to ensure that exempted funds are used to reduce energy consumption.  Whether the essential nature of the program is one of ‘exemption’ or ‘integration’ is for Ohio’s Public Utility Commission to determine over the coming months.
Public utility energy efficiency programs have the potential to align private behavior with public interests.  The Public Utilities Commission of Ohio likely has the legal authority structure its energy efficiency rider exemption according to ACEEE best practices. By so structuring its exemption, the Commission can encourage large customers to contribute to energy savings goals; and, thereby, align private customers’ behavior with the public’s interest.
II.                 ENERGY EFFICIENCY COST RECOVERY MECHANISMS
Encouraging energy efficiency can align the interests of individuals with the public’s interest, because increased energy efficiency reduces the cost of service.[3] Saving energy through energy efficiency investments is, on average, much cheaper for public utilities than purchasing new generation.[4]  “Saving a kilowatt hour through energy efficiency improvements is easily one-third or less the cost of any new source of electricity supply, whether conventional fossil fuel or renewable energy source.”[5]  Because increasing energy efficiency can be much cheaper than building new generation, increasing energy efficiency can reduce costs to consumers.
Not only does energy efficiency reduce costs, it also tends to enhance energy system reliability, and reduces emissions from fossil fuels.[6]  Because increased energy efficiency reduces costs of electrical service, increases reliability, and reduces fossil fuel emissions, increasing energy efficiency is in the public interest.[7]
Despite the public benefits of energy efficiency, utilities have a natural incentive to discourage demand-side energy efficiency.[8]  Utilities revenues are based on the volume of electricity they sell. As a result, the less kWhs utilities sell, the less revenue they receive.[9]  Furthermore, unlike sales of kWhs, utilities’ fixed operating costs do not change.[10]  Because fixed operating costs are high, kWh sales have dramatic increasing marginal profitability.[11]  Therefore, utilities have a strong incentive to keep energy consumption high so that they can sell more electricity and maximize profits.[12]
Many States have instituted programs to correct utilities aversion to demand-side energy efficiency.[13]  Effective cost recovery mechanisms can compensate utilities for revenue foregone by increased energy efficiency.[14]  Along, with recovering foregone revenue, successful energy efficiency programs will encourage utilities to invest in demand-side energy efficiency by setting performance targets and allowing utilities to recoup the costs of energy efficiency investments.[15]  By requiring utilities to meet energy-savings performance targets, and compensating utilities for energy efficiency investments (including lost revenue), a well-structured cost-recovery mechanism can align the interests of the utility, with the public’s interest in increased energy efficiency.[16]
Consistent with this approach, electric utilities in Ohio must operate energy efficiency programs that meet statutorily-set yearly energy savings goals (starting at .3% kw savings per year and ending at 2% kw savings per year for every year after 2018).[17]  The electric utilities may institute a “revenue decoupling mechanism,” e.g. a rider, in order to offset the costs of its energy efficiency program.[18]  The Commission is responsible for reviewing electric utilities decoupling mechanism.[19] The Public Utilities Commission of Ohio has approved an energy efficiency cost recovery mechanism to encourage its electric utilities to make energy efficiency investments.[20]
About half the states that have an energy efficiency cost recovery mechanism provide some type of “opt-out” or “self-direct” option for large industrial customers.[21]  Exemptions for such customers are sometimes based on the unfounded assumption “that industrial companies are better at acquiring energy efficiency than [public utilities] and will always acquire all cost-effective energy efficiency on their own.”[22]
Mercantile customers should be interested in increasing the energy efficiency of their facilities, because doing so can reduce their electrical costs.  As a result, there is a superficial alignment between mercantile customers’ interest in reduced costs, and the public’s interest in increased energy efficiency.  However, energy efficiency investments are only one among many types of cost-saving and business-expanding investments which mercantile customers consider.[23]  Because energy efficiency investments compete with other investment opportunities, there are significant opportunity costs to financing increased energy efficiency.[24]  These opportunity costs may overcome the public’s interest increasing energy efficiency absent regulatory intervention.[25]  The experience of utilities in Utah, Wyoming, and Oregon suggest that this is the case. [26] In those States, large industrial customers were prodded to invest in energy efficiency to obtain a fee waiver.[27]  The State’s found that even very sophisticated customers failed to invest in many cost effective energy efficiencies.[28]  Furthermore, because opportunity costs likely prevent many energy efficiency investments, it is invalid to assume that exempted funds will be used to fund increased energy efficient investments without encouraging customers to treat those funds as dedicated to energy efficiency.[29]
While industrial companies likely do not invest in every cost effective energy efficient practice, some sophisticated customers do have knowledge, experience, and expertise about their business that can be help the utility increase energy savings beyond what the utility could do on its own. [30]  Because some industrial customers have such expertise, a well-structured and administered “self-direct” program can yield greater energy savings from large, sophisticated customers than would otherwise be achieved through a generalized public program.[31]
In an attempt to realize the benefits of industrial self-direction, the Ohio legislature authorized the Commission to exempt “mercantile customers” from energy efficiency programs.[32] “Mercantile customers” are customers that consume “more than seven hundred thousand kilowatt hours per year.”[33] In order to exempt mercantile customers the Commission must determine that that exemption “reasonably encourages such customers to commit” “demand-response or other customer-sited capabilities to” the “utility’s energy efficiency … or peak demand reduction programs.”[34]
Recently, the Commission has approved a new “pilot program” for an exemption from its energy efficiency cost recovery mechanism, and is evaluating “the appropriate level and length for energy efficiency exemptions” under Ohio Rev. Code Ann. § 4928.66(A)(2)(c).[35]  The Commission will also “review the experience of other jurisdictions which have enacted similar self-direct programs.”[36]
The Commission is considering the recommendations of the American Council for an Energy Efficient Economy (“ACEEE”).  ACEEE has promulgated, inter alia, the following best practices for incorporating mercantile customer efforts into a utilities energy efficiency program:
1.      Develop a program structure that encourages large customers to treat the exempted rider money as dedicated funds for energy efficiency.
2.      Include a mechanism to recoup funds if large customers do not use exempted rider funds to pay for modifications that increase energy efficiency.
3.      Retain a portion of energy efficiency rider for administrative costs of the self-direct program, and for certain prioritized costs.
4.      Disallow credit for past energy efficiency investments.[37]
The Commission is interested in whether it has the legal authority to implement these ACEEE best practices.
“Due deference should be given to statutory interpretations by an agency that has accumulated substantial expertise and to which the General Assembly has delegated enforcement responsibility.”[38]  Based on its expertise, the Court has deferred to the Commission’s discretion in determining how to achieve the goals of increased energy efficiency and reduced peak consumption.[39]
            Along with institutional deference based on expertise, the Commission also has also been given discretion to structure rules for exemptions by its organic statute.[40]  Under § 4928.66(A)(2)(c), “any mechanism designed to recover the cost of energy efficiency…may exempt mercantile customers… if the commission determines that that exemption reasonably encourages such customers to commit” capabilities to energy efficiency programs.[41] "[U]sage of the term 'may' is generally construed to render optional, permissive, or discretionary the provision in which it is embodied."[42]  Because the Commission ‘may’ exempt mercantile customers, the statute is permissive or discretionary.[43]  “When a statute does not prescribe a particular formula, the PUCO is vested with broad discretion.”[44]  Because the language of the exemption is permissive, the Commission has discretion to determine the appropriateness of a mercantile exemption as an element of an energy efficiency cost recovery mechanism.[45]   
This broad discretion is tempered by the requirement that the Commission only approve a mercantile exemption if it “determines that that exemption reasonably encourages” customers to commit their capabilities to energy efficiency programs.[46]
The Commission should require its utilities to use a disbursement device which encourages customers to treat rider funds as exclusively tied to energy efficiency investments.[48]  The utilities have several options for meeting this requirement: dedicated escrow accounts, rebates earned only upon project completion, and rate credits earned concurrently with measurable energy efficiency investments or energy savings.[49]
Because requiring the utility to encourage mercantile customers to treat rider funds as exclusively tied to energy efficiency investments “reasonably encourages [mercantile] customers” to commit their capabilities to the utilities energy efficiency program, the Commission likely has the authority to do so.[50]


Decisionmakers have a strong aversion to loss, and will likely be motivated more by the threat of losing money than by the opportunity to gain money.[51]  Because people have a unique aversion to loss, a credible threat to recoup rider funds is will “encourage” mercantile customers to contribute their capabilities to energy efficiency goals.[52]  Mercantile customers will not treat their obligations to invest in energy efficiency lightly if the utility has a reliable mechanism in place to take-back exempted money when customers fail to use their funds to increase energy efficiency.
The Commission already requires utilities to “[i]dentify all consequences of noncompliance by” mercantile customers who agree to integrate their capabilities into the utilities energy efficiency programs.[53]  Because, utilities are already required to “identify consequences of noncompliance,” requiring the utility to identify a method of recoupment, is an incremental change to existing regulation.[54]  Because the existing regulation was well within the discretion of the Commission, this incremental change is likely permissible.[55]
Because a recoupment method that retrieves funds from customers’ who fail to meet their energy efficiency obligations “encourages [mercantile] customers” to commit their capabilities to the utilities energy efficiency program, the Commission has authority to require utilities to adopt such a method. [56]



Retaining a portion of cost recovery mechanism revenue from exempted customers can maximize the public benefit of energy efficiency programs.[57]  Retained revenue from industrial customers can be used for the administrative costs of overseeing a successful “self-direct” energy efficiency program.[58]  Maximizing energy savings from industrial customers requires “reporting and savings validation” and “rigorous performance requirements.”[59]  To pay for this oversight, some revenue should be retained from industrial customers via an energy efficiency cost recovery mechanism.[60]  Therefore, full exemption from the rider is likely bad policy.[61]
Along with paying for administration of a self-direct program, retaining revenue may best realize the public interests tied to increased energy efficiency by funding “prioritized program costs,” such as low-income programming.[62]  Such programs may rely on cross-rate subsidization to spread the benefits of energy efficiency equitably.[63]
Not only is it practical to retain funds from industrial customers for administrative costs and prioritized program costs; doing so is equitable.  “All ratepayers enjoy the benefits of energy efficiency in the form of lower demand for new resources, reduced environmental impacts of energy supply, reduced power and fuel costs and other factors.”[64]  Industrial consumers should contribute to the costs of energy efficiency programs, because they share the benefits of increased energy efficiency.[65]
Because the public interest likely favors retention of a portion of industrial consumers’ energy efficiency funds, the Public Utilities Commission of Ohio is interested in whether it had the authority to adjust the level of exemptions for “mercantile customers” under Ohio Rev Code Ann. § 4928.66(A)(2)(c).
                                                        i.            The Commission likely has authority to adjust the level of exemption under Ohio Rev Code Ann. § 4928.66(A)(2)(c), because retention of a portion of the funds from mercantile customers can still “reasonably [encourage mercantile] customers to commit their capabilities” to energy efficiency programs.
Because a mercantile exemption under § 4928.66(A)(2)(c) must reasonably encourage customers to commit their capabilities to the utility’s energy efficiency goals, an exemption should be a significant portion of the overall rider fee; because the bigger the exemption level, the greater the incentive for mercantile customers to commit their capabilities to the utility’s energy efficiency goals.  On the other hand, even a relatively small exemption from rider fees will likely “reasonably encourage” mercantile customers to contribute their capabilities to the utility’s goals—this is especially true given the current bifurcated structure of the law in which customers can receive rebates under  exemption under Ohio Admin. Code Ann. § 4901:1-39-05(G), and then on top of the rebate receive a rider exemption under Ohio Admin. Code Ann. § 4901:1-39-08.[66]  Therefore, while a very high the exemption level would create a very strong incentive for customers to commit their capabilities to energy efficiency goals, even relatively modest proportions (e.g. 50% or 60%) will likely “reasonably encourage[] customers” to do so.[67]
Not only is a less than full exemption sufficient to “reasonably encourage[]” mercantile customers, but having the utility retain a portion of the energy efficiency rider likely better encourages mercantile customers to contribute to energy efficiency.[68]  To encourage customers to commit their resources to utility energy efficiency programs utilities are best served by well-structured reporting, measurement, and verification procedures.[69]  However, administration of such procedures cost money.[70]  Therefore, in order to effectively encourage customers to commit demand response and other cited capabilities to energy efficiency programs, the Commission may reasonably find that a portion of the energy efficiency cost recovery mechanism fee should be retained by the utility for the purpose of administering a structured energy efficiency “self-direct” program.[71]  A rule requiring retention of a portion of a utility’s energy efficiency cost recovery mechanism is a reasonable interpretation of Ohio Rev. Code Ann. § 4928.66(A)(2)(c)’s requirement that a mercantile exemption “reasonably encourage[] customers” to commit resources to the utilities energy efficiency or peak demand reduction programs.
Not only does permitting retention of a portion of an exempted company’s cost recovery mechanism fee meet the requirement for mercantile exemptions under Ohio Rev. Code Ann. § 4928.66(A)(2)(c), it also meets the general requirements for energy efficiency cost recovery mechanisms under Ohio Rev. Code Ann. § 4928.66(D).
Under Ohio Rev. Code Ann. § 4928.66(A)(2)(c) a mercantile exemption is discussed as a potential component of a cost recovery mechanism (“Any mechanism designed to recover the cost of energy efficiency … may exempt mercantile customers…”).  Because a mercantile exemption is a component of the cost recovery mechanism, the statute likely requires the exemption to conform to the requirements for cost recovery mechanisms.[72]  Energy-efficiency cost-recovery mechanisms must (1) provide “for the recovery of revenue that otherwise may be forgone by the utility as a result of … any energy efficiency or energy conservation programs” and (2) reasonably align “the interests of the utility and of its customers in favor of those programs.[73]
Requiring retention of a portion of the cost recovery mechanism fee is a reasonable method to recover “revenue forgone by the utility to implement its energy efficiency program.”[74]  Administrative costs are shared by all customer classes, including exempted mercantile customers.[75]  Because the utility must forego revenue to monitor mercantile customer’s energy savings, retaining a portion of mercantile customer’s fees is a fair method to ensure that the utility recovers revenue forgone for administration of its energy efficiency program, and comports well with the requirements of Ohio Rev. Code Ann. § 4928.66(D).
Potentially limiting the Commission’s discretion is the rule that “an administrative agency cannot ignore its own rules.”[76]  The Commission has so far implemented the Ohio Admin. Code § 4901:1-39-08 exemption as a complete exemption for an indefinite period.[77] Because the Commission’s rules and orders treat the § 4901:1-39-08 exemption as an 100% exemption, the Commission must expressly overrule its prior policy in order to change the level of the exemption.[78]  Orders of the Commission must be lawful and reasonable.[79]  Therefore in its order overruling its past policy of full exemption the Commission should explain that allowing the utility to retain a portion of the energy efficiency rider can more effectively “encourage[]” mercantile customers to contribute to energy efficiency goals. [80]  It should also explain that the old policy did not a poor job capturing revenue foregone by the utility to pay for administration of its energy efficiency program.[81]
The language of Ohio Rev. Code Ann. § 4028.66(A)(2)(c) is comparable to statutory language underlying exemptions to fee riders in other jurisdictions in which utilities retain a portion of the rider.
In Utah and Wyoming, Rocky Mountain Power retains 50% of its fee from exempted customers.[82]  Rocky Mountain Power is governed by 16 USC § 2621(d)(17) (2007). 16 USC § 2621(d)(17) requires that the rates charged by any electric utility “(i) Align utility incentives with the delivery of cost-effective energy efficiency; and (ii) Promote energy efficiency investments.”  This language is very similar to the language of Ohio Rev. Code Ann. § 4928.66(A)(2)(c)—Both statutes require that an exemption “encourage,” “promotes,” or “align” mercantile customers with certain energy efficiency goals.[83]  Rocky Mountain Power permits retention of a portion of its utility’s cost recovery mechanism based on statutory authority very similar to Ohio Rev. Code Ann. § 4928.66(A)(2)(c).  This provides persuasive authority that the Commission and do the same thing under the authority of its similarly-worded statute.[84]
Because retention of a portion of the funds from mercantile customers can still “reasonably [encourage mercantile] customers to commit their capabilities” to energy efficiency programs, the Commission likely has authority to adjust the level of exemption under Ohio Rev Code Ann. § 4928.66(A)(2)(c).
A particularly vexing problem facing the Commission is how to treat historic energy efficiency investments.  Granting credit for historic investments may be politically expedient, because businesses feel that it is fair to give credit to those who signed up early for the benefits of energy efficiency.[85]  However, “giving such credit does not acquire a single new kWh” of energy,[86] because ‘encouraging’ past events is (so far) [87] a physical impossibility.[88]  Instead, “offering such credit is preferential treatment of a single class of customer” without “any energy saving purpose.”[89]  Because credit for historic investments has no public benefit, and actually costs money that could be used for increased energy efficiency in other sectors, it is particularly susceptible to criticism for being a form of “corporate welfare.”[90]  Because the program is susceptible to such criticism, the political expediency of garnering favor with businesses should be weighed against the political cost of this preferential treatment. [91]
Despite the undesirability of giving credit for past investments, the Commission may not have the authority to permit an exemption based solely on prospective energy efficiency investments.  The Commission has authority to authorize an exemption for “mercantile customers that commit their demand-response or other customer-sited capabilities, whether existing or new, for integration into the electric distribution utility's” energy efficiency program.[92]  The term “whether existing or new” may mean that any exemption that the Commission authorizes must count both past (“existing”) and future (“new”) investments.[93]  However, the term “whether existing or new” may also grant the Commission discretion to determine for itself whether to authorize an exemption based on past investments, or future investments, or both, based on what will “reasonably encourage [mercantile] customers.”[94]  Therefore, the term is textually ambiguous.  The legislative record does nothing to resolve this ambiguity.[95]
The Commission has so far permitted the utility to credit historic investments, based on the 3-year-look-back measurement method. [96]  However, the commissioner has also stated that there is a difference between what the Commission is authorized to incentivize and that which the Commission must count under the 3-year-look-back procedures.[97]  Therefore, the 3-year-look-back requirement for counting may not apply to incentivizing and likely does not require the Commission to give credit for historic investments.[98]
Eventually, the issue of whether to credit historic investments may become a moot point.[99]  At some point, all the relevant historic investments will all be credited.[100] At that point, mercantile customers will be forced to make new, prospective, energy efficiency investments in order to qualify for the exemption.[101]
Because the statutory term “whether existing or new” is ambiguous, and because the Commission has recognized a distinction between what is counted under a 3-year-look-back and what is incentivized by a mercantile exemption, the Commission likely does not have to permit exemptions based on historic energy efficiency investments.[102]
However, the Commission should consider seeking guidance or further legislation before acting in this area of textual ambiguity.  
Because the limiting language of its organic statute calls for an exemption that “encourages” customers to contribute to energy efficiency, the Commission likely has the legal authority to implement the ACEEE best practices.  If the Commission implements ACEEE’s recommendations it will encourage large customers to contribute to energy savings goals; thereby, aligning private behavior with the public interest.



[1] Ohio Rev. Code Ann. § 4928.66(A)(2)(c) (2008)
[2] Giorgio Agamben, Homo Sacer: Sovereign Power and Bare Life 12 (1998).
[3] Anna Chittum, Am. Council for an Energy Efficient Econ., Implementing Industrial Self-Direct Options: Who Is Making It Work?, Proceedings of the 2009 ACEEE Summer Study on Energy Efficiency in Industry 4.14-4.27, 4.17 (2009) http://www.aceee.org/sites/default/files-/publications/proceedings/SS09_Panel4_Paper07.pdf [hereinafter Chittum, Implementing Industrial Self-Direct Options]; Anna Chittum, Am. Council for an Energy Efficient Econ., Follow the Leaders: Improving Large Customers Self-Direct Programs 1 (2011) http://www.aceee.org/sites/default/files/publications/researchreports/ie112.pdf [hereinafter Chittum, Follow the Leaders].
[4] Katherine Friedrich, et al., Am. Council for an Energy Efficient Econ., Saving Energy Cost-Effectively: A National Review o the Cost of Energy Saved Through Utility-Sector Energy Efficiency Programs, Report U092 ii (2009) http://www.aceee.org/sites/default/-files/publications/researchreports/U092.pdf.
[5] Id.
[6] Chittum, Follow the Leaders, supra note 1, at 3.
[7] See id.
[8] Nat’l Action Plan for Energy Efficiency Leadership Grp., Aligning Utility Incentives with Investment in Energy Efficiency ES-3 (2007)
[9] See id.
[10] Id.
[11] See id.
[12] Id.
[13] Chittum, Implementing Industrial Self-Direct Options, supra note 1, at 4.14.
[14] Nat’l Action Plan for Energy Efficiency Leadership Grp., supra note 6 at 5-1; see, e.g. Ohio Rev. Code Ann. § 4928.66(D) (Lexis 2008)
[15] Id. at 6-1; see e.g. Ohio Rev. Code Ann. § 4928.66(D) (Lexis 2008).
[16] See id.
[17] Ohio Rev. Code Ann. § 4928.66(A)(1)(a) (Lexis 2008).
[18] Id. at § 4928.66(D).
[19] Id.
[20] In the Matter of the Application of Columbus Southern Power Company for Approval of its Program Portfolio Plan and Request for Expedited Consideration; Case No. 09-1089-EL-POR Opinion and Order § VI, 2010-Ohio PUC LEXIS 516, *61-63 (2010).
[21] Chittum, Follow the Leaders, supra note 1, at iii (“Forty-one states in the US have some sort of a [cost recovery mechanism] in place. Of those, 23 have some sort of opt-out or self-direct provision in place.”).
[22] Id. at 17
[23] Namrita Kapur, et al., Envl. Def. Fund, Show Me the Money: Energy Efficiency Financing Barriers and Opportunities 12 (2011) http://www.edf.org/sites/default/files/11860_EnergyEfficiency-FinancingBarriersandOpportunities_July%202011.pdf.
[24] Id.
[25] See id.; see also Stephen Heins, Energy Efficiency and The Specter of Free-Ridership: Is a Kilowatt Saved Really a Kilowatt Saved? (“Energy efficiency projects have to compete with all other capital initiatives, including investments in new production assets or processes, which are usually given first priority.”)
[26] See Chittum, Follow the Leaders, supra note 1, at 17. (“[O]pt-out and self-direct programs have proven this to be true. In Utah, Wyoming and Oregon, customers can opt out of all or part of their CRM fees if the can prove that they have in fact done all cost effective energy efficiency… To date, no company has taken advantage of these exemptions in any of these states, because there are always some cost-effective projects that could be identified during an energy audit.”) (citations omitted).
[27] Id.
[28] See id.
[29] Id.
[30] Id. at 11.
[31] Id.
[32] Ohio Rev. Code Ann. § 4928.66(A)(2)(c).
[33] Ohio Rev. Code Ann. § 4928.01(19)
[34] Id. at § 4928.66(A)(2)(c).
[35] In the Matter of a Mercantile Application Pilot Program Regarding Special Arrangements with Electric Utilities and Exemptions from Energy Efficiency and Peak Demand Reduction Riders, Case No. 10-834-EL-EEC, Entry ¶ 5, 2010 Ohio PUC LEXIS 952, *3-4 (Sept. 15, 2010)
[36] Id.
[37] Chittum, Follow the Leaders, supra note 1, at 21.
[38] Constellation NewEnergy, Inc. v. Pub. Util. Comm., 104 Ohio St. 3d 530, 540, 2004-Ohio-6767, *51, 820 N.E.2d 885, 895 (citations omitted).
[39] In Re Columbus Southern Power Co., 129 Ohio St. 3d 46, 51-52, 2011-Ohio-2383, *30, 950 N.E.2d 164, 170.
[40] Ohio Rev. Code Ann. § 4928.66(A)(2)(c).
[41] (emphasis added)
[42] In re Ormet Primary Aluminum Corp., 129 Ohio St. 3d 9, 12, 2011-Ohio-2377, *16, 949 N.E.2d 991, 995 (quoting State ex rel. Niles v. Bernard, 53 Ohio St.2d 31, 34, 7 O.O.3d 119, 372 N.E.2d 339).
[43] See id., 129 Ohio St. 3d at 12, 2011-Ohio-2377 at *16, 949 N.E.2d at 995; see also Columbus Southern Power Co., 129 Ohio St. 3d at 51-52, 2011-Ohio-2383 at *30, 950 N.E.2d at 170 (4928.66(A)(2)(c) permits the commission to ‘exempt mercantile customers’ from paying energy-efficiency and peak-demand-reduction charges if those customers ‘commit their demand-response or other customer-sited capabilities’ toward the utility's energy-reduction goals.”) (emphasis added).
[44] Columbus Southern Power Co., 129 Ohio St. 3d at 51, 2011-Ohio-2383 at *27, 950 N.E.2d at 169.
[45] Ormet Primary Aluminum Corp., 129 Ohio St. 3d at 12, 2011-Ohio-2377 at *16, 949 N.E.2d at 995.
[46] Ohio Rev. Code Ann. § 4928.66(A)(2)(c); see also S. 127-221 Final B. Analysis (Ohio 2008) (“any mechanism designed to recover the cost of the act's energy efficiency … can exempt mercantile customers that commit their demand-response or other customer-sited capabilities to the electric distribution utility's … energy efficiency … programs, provided the PUCO determines that that exemption reasonably encourages such customers to commit those capabilities to those programs”) (emphasis added).
[47] Ohio Rev. Code Ann. § 4928.66(A)(2)(c).
[48] Id. at 21.
[49] Id.
[50] Ohio Rev. Code Ann. § 4928.66(A)(2)(c).
[51] See Richard H. Thaler & Cass Sunstein, Nudge: Improving Decisions About Health, Wealth, and Happiness 37 (2008).
[52] See id.; Ohio Rev. Code Ann. § 4928.66(A)(2)(c).
[53] Ohio Admin. Code § 4901:1-39-05(G) (2009).
[54] See id.
[55] See Columbus Southern Power Co., 129 Ohio St. 3d 46, 51-52, 2011-Ohio-2383, *30, 950 N.E.2d 164, 170.
[56] Ohio Rev. Code Ann. § 4928.66(A)(2)(c).
[57] Chittum, Follow the Leaders, supra note 1, at 8 (“At the far end of the self-direct continuum are the more structured programs with high levels of oversight… These programs usually let a customer self-direct most of their CRM fees, but retain a portion of those fees to fund administration of the program and other programs that serve other public benefits, such as market transformation and low-income programs. Highly structured and well administered programs with substantial oversight offer the best examples of successful and effective self-direct programming.”).
[58] Id. at 21-23.
[59] Id. at 23.
[60] Id. at 21.
[61] See id. at 6, 19, 21.
[62] See id. at 21.
[63] See id.
[64] Id. at 18.
[65] Id.; see also Chittum, Implementing Industrial Self-Direct Options, supra note 1, at 4.17 (“U.S. commercial and industrial electric customers pay about 40 percent of all collected PBF fees, but they experience over 62 percent of the PBF-funded savings in all Consortium for Energy Efficiency (CEE)-member programs… Thus, while the argument that PBF-paying customers are not seeing the benefits of their contributions may be true for some individual customers, it appears that overall, commercial and industrial customers enjoy a larger percentage of the benefits than they pay into the pool of funds.”).
[66]Ohio Admin. Code Ann. § 4901:1-39-08(H) (2009) (“Any request for an exemption may be combined with any other reasonable arrangement, approved pursuant to Chapter 4901:1-38 of the Administrative Code…”); See also In the Matter of the Application of Columbus Southern Power Company for Approval of its Program Portfolio Plan and Request for Expedited Consideration, Case No. 09-1089-EL-POR, Case No. 09-1090-EL-POR, Opinion and Order, 2010 Ohio PUC LEXIS 516, *33-34 (May 13, 2010) (discussing Options 1 and 2).
[67] See id. at § 4928.66(A)(2)(c).
[68] Anna Chittum, Am. Council for an Energy Efficient Econ., Follow the Leaders: Improving Large Customers Self-Direct Programs 21 (2011)
[69] Id. at 8.
[70] See id at 21-23.
[71] See Ohio Rev. Code Ann. § 4928.66(A)(2)(c); Chittum, supra note 38 (“At the far end of the self-direct continuum are the more structured programs with high levels of oversight… These programs usually let a customer self-direct most of their CRM fees, but retain a portion of those fees to fund administration of the program and other programs that serve other public benefits, such as market transformation and low-income programs. Highly structured and well administered programs with substantial oversight offer the best examples of successful and effective self-direct programming.”) (emphasis added).
[72] See Ohio Rev. Code Ann. §§ 4928.66(A)(2)(c), (D).
[73] Ohio Rev. Code Ann. § 4928.66(D)
[74] See id. at § 4928.66(D).
[75] See Chittum, supra note 38, at 8, 21-23.
[76] State ex rel. Kroger Co. v. Morehouse (1995), 74 Ohio St.3d 129, 133, 1995 Ohio 300, 656 N.E.2d 936.
[77] In the Matter of the Mercantile Customer Pilot Program for Integration of Customer Energy Efficiency or Peak-Demand Reduction Programs, Case No. 10-834-EL-POR, Finding and Order ¶ 5, 2012 Ohio PUC LEXIS 775, *4-5 (Sept. 5, 2012) (The Commission has previously found that, for purposes of the EEC Pilot a 100 percent rider exemption is appropriate for so long as the mercantile customer demonstrates energy savings at its own facility or facilities equal to or greater than the electric utility's benchmark requirement (‘the Benchmark Comparison Method’”).
[78] See id.; Kroger Co., 74 Ohio St. 3d at 133, 1995-Ohio-300 at *8, 656 N.E.2d at 939.
[79] Ohio Rev. Code Ann. § 4903.13 (“A final order made by the public utilities commission shall be reversed, vacated, or modified by the supreme court on appeal, if, upon consideration of the record, such court is of the opinion that such order was unlawful or unreasonable.”).
[80] See Ohio Rev. Code Ann. §§ 4928.66(A)(2)(c), 4928.66 (D), 4903.13.
[81] See Ohio Rev. Code Ann. §§ 4928.66(A)(2)(c), 4928.66 (D), 4903.13.
[82] Chittum, supra note 38, at 41 (“If a customer can prove, using an external auditor, that they have achieved all cost efficiency, they may receive a 50% credit of all [cost recovery mechanism] charges for two years.”).
[83] See Ohio Rev. Code Ann. 4928.66(A)(2)(c); 16 USC § 2621(d)(17).
[84] See 16 U.S.C. § 2621(d)(17).
[85] See Anna Chittum, Am. Council for an Energy Efficient Econ., Follow the Leaders: Improving Large Customers Self-Direct Programs 19 (2011) http://www.aceee.org/sites/default/files/publications/researchreports/ie112.pdf [hereinafter Chittum, Follow the Leaders].
[86] Id.
[87] Stephen Hawking, Space and Time Warps (accessed December 19, 2012) (“…rapid space-travel, or travel back in time, can't be ruled out, according to our present understanding”).
[88] Id.
[89] Id.
[90]  Ralph Nader, Cutting Corporate Welfare 30 (“a program is considered corporate welfare if its public cost outweighs its public benefits”); CATO Institute, CATO Handbook For Policymakers (“Many federal programs are sustained by special-interest groups working with policymakers seeking narrow benefits at the expense of taxpayers and the general public.”); see also, e.g. Office of Air and Radiation, U.S. Environmental Protection Agency Office of Environmental Justice In the Matter of the Fifth Meeting of the National Environmental Justice Advisory Council, 9 Admin. L.J. Am. U. 623 (describing a situation in which an energy efficiency program was accused of being “corporate welfare”); Alliance for Materials Mfg. Excellence, Policy Brief (in which an industry group deflected criticism claiming that its members received “corporate welfare” from a DOE energy efficiency investment program).
[91] See id.
[92] Ohio Rev. Code Ann. § 4928.66 (A)(2)(c).
[93] See id.
[94] See id.
[95] The term did not supplant previous language in a meaningful way, and the term was not meaningfully discussed by the Senate’s or House’s Bill Analyses. See S.B. 221 As Pending in the H. Pub. Utils. Comm., 127th Gen. Assemb. (Ohio 2008); S. 127-221 S. Final B. Analysis (Ohio 2008).
[96] In the Matter of the Adoption of Rules for Alternative and Renewable Energy Technology, Resources, and Climate Regulations, and Review of Chapters 4901:5-1,4901:5-3,4901:5-5, and 4901:5-7 of the Ohio Administrative Code, Pursuant to Amended Substitute Senate Bill No. 221, Case No. 08-888-EL-ORD, Entry on Rehearing ¶ 17 (Oct. 15, 2009); see also In the Matter of a Mercantile Application Pilot Program Regarding Special Arrangements with Electric Utilities and Exemptions from Energy Efficiency and Peak Demand Reduction Riders, Case No. 10-834-EL-EEC, Entry ¶ 7, 2010 Ohio PUC LEXIS 952, *6-9 (Sept. 15, 2010); Chittum supra note 69 at 9, 37-38.
[97] In the Matter of the Adoption of Rules for Alternative and Renewable Energy Technology, Resources, and Climate Regulations, and Review of Chapters 4901:5-1,4901:5-3,4901:5-5, and 4901:5-7 of the Ohio Administrative Code, Pursuant to Amended Substitute Senate Bill No. 221, Case No. 08-888-EL-ORD, Entry on Rehearing ¶ 17; In the Matter of a Mercantile Application Pilot Program Regarding Special Arrangements with Electric Utilities and Exemptions from Energy Efficiency and Peak Demand Reduction Riders, Case No. 10-834-EL-EEC, Entry ¶ 7, 2010 Ohio PUC LEXIS 952, *6-7.
[98] See id.
[99] Chittum, supra note 69, at 38.
[100] See id.
[101] Id.
[102] See Ohio Rev. Code Ann. § 4928.66(A)(2)(c); Columbus Southern Power Co., 129 Ohio St. 3d at 51, 2011-Ohio-2383 at *27, 950 N.E.2d at 169.