How to Build an Annual Electricity Budget in Ohio
The short answer
Build the budget from components, not from last year's total. For each account: expected kWh × your supply price, plus capacity and transmission if they're passed through, plus the utility's delivery charges and riders, plus Ohio's kWh excise tax (there is no sales tax on electricity). Then map every date that changes a price — June 1, when default prices and capacity tags reset; your contract expiration; and any rate-case change at your utility — onto your fiscal year.
This page covers building the budget. To explain budget-vs-actual variances once the year starts, see electricity variance analysis for controllers. For a 12–24 month price forecast, see energy budgeting in an inflationary market. For a full breakdown of each charge on the bill, see Ohio commercial electricity cost components.
The budget formula, line by line
| Line | How to estimate it | Where the input comes from |
|---|---|---|
| Usage (kWh) | Last 12–24 months, adjusted for weather and known changes (new equipment, hours, closures) | Utility bills or online account |
| Supply (generation) | kWh × contract price, or kWh × default price (price to compare) if you haven't shopped | Supplier contract or the bill |
| Capacity | Capacity tag (kW) × daily capacity price × days, if your contract passes it through | Bill, supplier invoice or utility |
| Transmission | Pass-through or included, depending on contract | Supplier contract |
| Delivery (distribution, demand charges, riders) | Trailing 12 months from bills, adjusted for approved rate changes | Utility bills and tariff |
| kWh excise tax | Tiered per account per month (see below) | Ohio Revised Code 5727.81 |
Budget each account separately. Demand charges, the capacity tag and the kWh tax tiers all apply per account, so averaging several sites together hides real differences.
Supply price
- Under contract: use the contract price, and read the contract to see whether capacity, transmission or other items are passed through on top.
- On default service: the standard service offer (SSO) price resets every June 1. For June 2026–May 2027, the small-business default generation price averages about 9.38¢/kWh at Ohio Edison, 9.45¢ at The Illuminating Company and 9.43¢ at Toledo Edison; Duke Energy Ohio's Rate DM charges about 11.36¢ for the first 2,800 kWh. AEP Ohio and AES Ohio business prices vary by rate schedule — use the price to compare on your bill. See the Ohio price to compare.
Capacity
If your contract passes capacity through, the cost is your capacity tag times the PJM price. Each kW of tag costs about $120 a year at the 2026/27 price of $329.17/MW-day. Tags reset each June 1 based on your load during the prior summer's PJM peak hours. See capacity tags explained.
Delivery and riders
Delivery isn't shoppable, but it does change. Recent Ohio cases:
- AEP Ohio: April 2026 order produced a net annual revenue decrease of about $58.7 million, including a tax refund over 18 months; a new three-part bill format starts in fall 2026.
- FirstEnergy (Ohio Edison, CEI, Toledo Edison): net reduction of about $39.4 million a year effective March 1, 2026 (CEI up, Ohio Edison and Toledo Edison down); a three-year plan for 2027–2029 was filed in May 2026.
- Duke Energy Ohio: filed in March 2026 seeking about 3% for non-residential customers, expected to take effect around May 2027.
- AES Ohio: a November 2025 settlement raised base distribution revenue about $168 million a year; a three-year plan filed July 21, 2026 proposes about 1% a year.
Under HB 15, utilities must file rate cases by the end of 2029 and every three years after that, so expect a delivery change roughly every three years.
kWh excise tax
Ohio has no sales tax on electricity. Instead, each end user pays a monthly kWh excise tax per account:
| Monthly kWh | Rate per kWh |
|---|---|
| First 2,000 | $0.00465 |
| 2,001–15,000 | $0.00419 |
| Above 15,000 | $0.00363 |
Very large users (over 45 million kWh a year) can self-assess at lower rates.
The dates that change your costs
| Date | What changes | Budget action |
|---|---|---|
| June 1 each year | Default (SSO) prices, capacity price and capacity tags | Split the fiscal year at June 1 |
| Contract expiration | Price rolls to the supplier's variable rate unless you renew or switch | Budget a new price from the expiration date; start shopping months earlier |
| Rate-case effective dates | Delivery charges | Adjust delivery from the effective month |
| Meter-read dates | When a switch actually takes effect | Allow one to two billing cycles for any switch |
For small commercial accounts (demand of 25 kW or less), two HB 15 protections help here: suppliers must send notices 90–60 days and 45–15 days before a fixed contract rolls to a variable price, and send customers on variable prices an annual notice. Larger accounts get neither, so put every expiration date in the budget file.
Fiscal-year example: a calendar-year budget that includes capacity pass-through should use the 2026/27 price ($329.17/MW-day) for January–May 2027 and the 2027/28 price ($333.44/MW-day) for June–December 2027, applied to whatever tag takes effect on June 1.
Illustrative example: one small commercial site
Assumptions: Ohio Edison small-business account using about 33,000 kWh a month (396,000 kWh a year), staying on default service, which already includes capacity in the generation price. Delivery taken from the last 12 bills.
| Line | Calculation | Annual budget |
|---|---|---|
| Generation (SSO) | 396,000 kWh × ~$0.0938 | ~$37,145 |
| Delivery and riders | Trailing 12 months, adjusted for the March 2026 rate change | From your bills |
| kWh excise tax | ($9.30 + $54.47 + $65.34) = $129.11 a month × 12 | ~$1,549 |
The default price for June 2027 onward isn't known yet, so a budget that runs past May 2027 needs a range for those months rather than a single number. If this site signs a fixed contract, replace the SSO line with the contract price and add any pass-through lines the contract lists.
Mistakes that break energy budgets
- Using last year's average ¢/kWh. It mixes fixed charges, demand and usage, and hides the June 1 reset.
- Ignoring the contract expiration. An expired fixed contract can roll to a variable price without anyone noticing until the bill arrives.
- Budgeting utility rebates. None of Ohio's investor-owned utilities offers general business efficiency rebates in 2026.
- Adding sales tax. Electricity isn't subject to Ohio sales tax; the kWh excise tax is already on the bill.
- Assuming the Ohio RPS charge continues. The renewable portfolio requirement is 8.5% for 2026 and ends after 2026. How any change appears in supplier pricing depends on your contract.
FAQ
How do I estimate next year's electricity cost for an Ohio business?
Multiply expected kWh by your supply price, add capacity and transmission if they're passed through, add delivery charges from recent bills adjusted for approved rate changes, and add the kWh excise tax.
Why does my Ohio electric budget change on June 1?
Default service prices, the PJM capacity price and customer capacity tags all reset on June 1 each year.
Is there sales tax on business electricity in Ohio?
No. Ohio exempts electricity from sales tax and instead charges a tiered kWh excise tax per account.
How much contingency should an energy budget include?
Size it to the share of cost that isn't fixed: little for a fixed all-in contract, more for index pricing, pass-through capacity or months after a contract expires.
Sources
- PUCO Energy Choice Ohio (Apples to Apples): https://energychoice.ohio.gov/
- Ohio Revised Code 5727.81 (kWh excise tax): https://codes.ohio.gov/ohio-revised-code/section-5727.81
- Ohio Revised Code 5739.02 (sales tax exemptions): https://codes.ohio.gov/ohio-revised-code/section-5739.02
- PJM capacity auction results: https://www.pjm.com/markets-and-operations/rpm