On May 15, 2025, Governor DeWine signed HB 15, which ushers in a new energy era in Ohio with sweeping changes to utility regulations, including reducing tangible personal property tax on all new generation - including energy storage systems, expanding behind-the-meter generation potential and creating a new incentive designation for development on brownfields or former coal mines.
Supporters say it has the potential to put Ohio at the forefront of energy production with the state’s strong natural gas supplies, making it a net exporter of power.
Reduction in Property Taxes
Beginning in tax year (TY) 2027, the new law reduces the assessment rate for electric generation and energy conversion equipment of electric and energy companies from 24% to 7% (and from 25% to 7% for rural electric companies) for property placed in service. It also reduces the assessment rate for electric transmission and distribution property from 88% to 25% for property placed into service on or after TY 2027. Similarly, the assessment rate of tangible personal property (TPP) of pipeline companies placed into service on or after TY 2027 is reduced from 88% to 25% of its value. These lower assessment rates will significantly lower the annual property tax liabilities for these investments.
The definitions of “energy resource” and “energy facility” are revised to include an energy storage system which is TPP that permits the storage of energy for future use as electricity. This allows such systems to be classified as production equipment and eligible for the reduced assessment rates described above.
Notably, the statute clarifies that projects where the taxpayer has opted to be certified as a Qualified Energy Project (QEP) and therefore exempt from property, must remain a QEP and cannot opt in to the lower assessment rates above. It makes sense for project owners to evaluate the merits of other property tax exemption/abatement programs such as the Enterprise Zone and Clean Air Improvement Program, both of which provide property tax exemptions, along with the QEP, versus the lower assessment rates now in place.
Behind the Meter Generation
The new law prohibits utilities from providing behind the meter electric generation service, with an exception for those already in process. However, it revises the definition of self-generator to mean an entity that owns or hosts an electric generation facility on property the entity controls that produces electricity primarily for the owner’s consumption and that meets other requirements including the facility being installed or operated by a third-party under a contract, including a lease, power purchase agreement or other service contract; the facility connects directly to the owner’s side of the meter and the facility delivers electricity without the use of a utility’s distribution or transmission systems to deliver its electricity. This will help developers site projects anywhere in the state.
The statute also allows for the creation of mercantile customer self-power systems, which provide electric generation service to one or more mercantile customers. These systems can be owned or operated by a mercantile customer group, group of mercantile customer members or an entity that is not a mercantile customer member.
Both self-generators and mercantile customer self-power systems are exempt from the definition of “electric light company” under the PUCO general powers laws which means they are not considered public utilities.
New Incentive
The law provides a five-year property tax exemption for TPP used to transport or transmit electricity or natural gas within an approved priority investment area (PIA), which is a new designation created by the bill. Local governments are authorized to designate, with state approval, a brownfield or former coal mine as a PIA. The bill requires the Power Siting Board (PSB) to adopt rules providing for the accelerated review of certain gas and electric utility projects located in an approved PIA. This designation also makes a project eligible for a grant award under the Brownfield Remediation Program with a $10 m. grant cap.
The enrolled bill can be found here
The Kroll Tax Services team can assist you in determining the impacts these statutory changes will have on the taxability and ultimate tax liabilities for your Ohio projects under development.
