Ohio Senate Passes Nuclear Bailout Bill, House Action Expected Next Month

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--In the end, an historic heat wave -- and millions of dollars in advertising -- may save two Ohio nuclear power plants.

As dangerously high temperatures wracked Ohio (and much of the rest of the country) last week, and as a blitz of TV and radio ads warned Ohioans about the potential closure of the two nuclear power plants in the state, the Ohio Senate on July 17 passed a nuclear bailout bill that provides up to $150 million a year to the Perry Nuclear Generating Station and the Davis-Besse Nuclear Power Station. Right now, both of those plants are owned by a subsidiary of FirstEnergy Corporation (NYSE:FE) (Akron, Ohio). That subsidiary is in Chapter 11 bankruptcy. Whether it will continue to own and operate the plants once the financial aid begins to flow is unclear: The subsidiary, Akron, Ohio-based FirstEnergy Solutions (FES), declined to comment on the Senate's passage of the bill.

Davis-Besse, located in northwest Ohio, is a one-unit plant with 908 megawatts (MW) of electric generating capacity. It began operating in 1977. The Perry plant, which began generating electricity in 1987, is a one-unit, 1,268-MW facility in northeast Ohio. FES has for years been seeking financial support for those plants and has threatened to close them if it did not receive financial aid. FES has said it plans to close Davis-Besse in 2020 and Perry in 2021 unless it received financial support from the state of Ohio. It has not disclosed the financial data for either plant. About 1,480 people are employed at the two facilities, according to fact sheets from FES.

For more on FES' efforts to secure financial support for its Ohio plants, see June 11, 2019, article - State-level Nuclear Subsidies: Yes, No and Maybe, April 6, 2018, article - Investors Yawn after FirstEnergy Unit Files Chapter 11, Plans to Close Four Nuclear Units, October 4, 2017, article - Electricity Scrum Set to Resume in Ohio Legislature, and May 30, 2017, article - Down but Not Out? FirstEnergy Still Seeking $300 Million Per Year in Nuclear Support.

Earlier this year, Ohio's House of Representatives passed House Bill 6 (H.B. 6), a nuclear bailout bill providing up to $190 million per year for 2020-2026 to the owners of the two nuclear plants. On July 17, the state Senate passed the bill, albeit with less generous provisions, with up to $150 million in annual support for the two facilities, but with a one-year delay in when the subsidies would be paid.

But as the Senate was passing the bill, the House recessed for two weeks. House leaders said they expect to consider the Senate's revisions to H.B. 6 in August. If the representatives don't approve the Senate's revisions, a conference committee made up of members from the two chambers will be tasked with working out differences in the bill.

Ohio Governor Mike DeWine has said he would support a bill to keep the two nuclear plant operating. The bill has drawn the ferocious opposition of the Oil & Gas industry, environmental and sustainable energy groups, energy economists and other groups. For weeks, Ohio TV and radio stations have been blanketed with ads for and against the measure.

As revised by the Senate, H.B. 6 provides $170 million per year in support to the state's power sector. Most of that -- about $150 million -- would go to the two FES nuclear plants. The remaining $20 million in annual subsidies would go to six solar facilities being built in rural areas across the state, according to Ohio media reports.

Also, under the Senate revisions, starting January 2021, Ohio residential customers would be required to pay a $1.50-per-month surcharge to subsidize coal plants in Ohio and Indiana operated by the Ohio Valley Electric Corporation (Piketon, Ohio), which is unconnected to FES or FirstEnergy. Commercial and industrial customers would pay an assessment of up to $2,400 per month to subsidize those coal-fired plants, according to a report in the Cleveland Plain Dealer.

The bill also would scale back the state's energy-efficiency and renewable-energy goals.

Elected GOP officials in Ohio have targeted the renewable energy and energy efficiency programs for years, claiming the programs are an unnecessary intrusion into the market, raise electricity costs and pick winners and losers. Ironically, those same GOP officials voted to support H.B. 6.

H.B. 6 scales back the percentage of renewable energy each electric utility must provide, to 8.5% by 2026 from the earlier requirement of 12.25% in 2027. Ohio's renewable portfolio standard is one of the lowest in the country, far behind levels mandated by Oregon, Hawaii, California. New York and other states.

The bill also allows utilities to eliminate energy-efficiency programs once they can show those programs have lowered electric demand by 17.5%. Those mandates have been in place for years, and most utilities are reportedly close to reaching them. In calculating that reduction, the law allows utilities to count efficiency savings from prior years, which makes the goal easier to reach.

Several economists have told Ohio lawmakers that the subsidies don't make economic sense, according to a report in Crain's Cleveland Business. On June 25, Ned Hill, a former urban affairs dean at Cleveland State University and now a professor of public affairs at The Ohio State University, told Ohio senators: "Ohio is heading in the wrong direction by allowing in-state corporate redistributive politics to increase electricity rates -- and picking winners and losers while a major competing region is busy cutting electricity costs and not subsidizing legacy generating capacity."

Officials for the Pennsylvania-New Jersey-Maryland Interconnection (PJM) (Valley Forge, Pennsylvania) also have been critical of efforts to provide financial support for uneconomic coal and nuclear plants. "Efforts to subsidize less-competitive plants will result in higher power prices for Ohioans," PJM officials said. "Such actions have the potential to roll back the progress and stability that the markets have facilitated. Such actions could prevent the building of more efficient and cost-effective plants, including cleaner technologies like solar and wind."

Officials from PJM and other agencies also have said the region's electricity market would not suffer if the two Ohio nuclear plants close. The Trump administration has been trying various means to keep open uneconomic power plants, which has drawn widespread criticism -- except from companies that mine coal. For more on that, see August 13, 2018, article -- Markets, Trump Still Split Over Plan to Rescue Uneconomic Generators.

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