The Kilowatt-Hour (KwH) tax in Ohio, first enacted by the General Assembly in 2001 as part of the state’s push to deregulate its electric utility sector, continues to have a lasting impact on both residential consumers and businesses alike.
Originally introduced as part of broader utility deregulation efforts, the KwH tax was designed to apply to electric distribution companies serving end users within the state.
Additionally, certain self-assessing commercial and industrial users of electricity are also subject to the tax.
Electric distribution companies pay rates based on their monthly distribution to each end user. The rates are tiered according to the amount of kilowatt-hours the individual end user consumes, as shown in the schedule below:
Monthly Distribution Rate per kWh
- The first 0 – 2,000 kWh 0.465 cents
- The next 2,001 – 15,000 kWh 0.419 cents
- For 15,001 kWh and above 0.363 cents
Larger consumers, such as manufacturers and large commercial enterprises, pay a higher rate, while smaller households and businesses with lower consumption incur a smaller tax burden.
Over the years, the tax has raised concerns among businesses that use significant amounts of electricity.
We got a chance to talk to Tim Sreet from the Logan County Electric Cooperative and talked about the tax:
Small manufacturers and industrial companies have particularly voiced frustrations, saying the tax puts them at a competitive disadvantage compared to companies in other states where similar taxes may not exist.
For these businesses, the added cost of electricity—whether it’s for production, heating, or cooling—adds to an already complex set of operating expenses.
Residential customers have experienced more mixed reactions. While many benefit from deregulation, which has introduced competitive electricity pricing options, the structure of the KwH tax has kept rates unpredictable.
In high-use households, particularly those with electric heating or cooling, the tax can result in higher-than-expected electricity bills during peak consumption periods.
Some lawmakers have begun discussing reforms to the tax, arguing that the rate structure no longer serves the state’s best interests.
They point out that while deregulation was intended to encourage competition, the tax system has created disparities that could hinder economic growth, particularly in energy-intensive industries.
Others, however, argue that the tax is necessary to maintain the state’s revenue from the energy sector. The kWh tax does not apply to:
- the federal government
- end users located at a federal facility that uses electricity to process uranium
- qualified use of electricity by qualified end users in qualified manufacturing processes
- qualified regeneration facilities
Find more about the tax HERE.
