Ohio Lawmakers Announce Plan to Subsidize Nuclear Plants

Ohio lawmakers on April 12 announced a plan to provide financial support to the state's two nuclear power plants by adding a surcharge to customers' electric bills. The bill's supporters said it also would generate as much as $300 million annually for clean power generation in Ohio, though the measure calls for abolishing mandates for renewable energy.

House Speaker Larry Householder (R-Glenford), leader of the state's Republican-controlled House that is backing the bill, said the proposal-called the Ohio Clean Air Program (OCAP)-would do more than save the nuclear plants. About half the money raised by the surcharge would go to Davis-Besse nuclear plant near Toledo and the Perry plant near Cleveland.

The nuclear plants are scheduled to close by 2021 unless operator FirstEnergy Solutions (FES) can find a buyer for the plants or financial relief to keep them open. FES sought bankruptcy protection in March 2018, just after the company notified regional transmission organization (RTO) PJM Interconnection that it would close four uneconomic nuclear units-a total of 4 GW, including the two Ohio plants-in the RTO's footprint. FES also asked the Department of Energy (DOE) to save its struggling nuclear and coal plants through a Federal Power Act Section 202c emergency order.

FirstEnergy Corp., parent of FES and FirstEnergy Nuclear Operating Company (FENOC), in late September 2018 said the bankruptcy court approved the company's definitive settlement agreement in the Chapter 11 proceedings of FES and FENOC.

Friday's announcement in Ohio comes as lawmakers in other states, including Pennsylvania, pursue efforts to save nuclear power.

Funding for Renewables

The other half of the money raised by the bill add-on would provide funding to expand renewable energy development in Ohio. The surcharge calls for adding $2.50 to a monthly residential bill. Commercial users would see a $20-a-month increase, and industrial customers could see an increase of as much as $250 a month.

Former Ohio Gov. John Kasich (R) had blocked efforts by fellow members of his party to end renewable energy standards or make them voluntary. Current Gov. Mike DeWine (R), who took office in January, has said he supports what he calls a "balanced energy plan," which includes nuclear power and a "pathway" for solar and wind energy.

Instead of mandates, Householder said the new Ohio Clean Air Program would offer companies $9.25 for every megawatt-hour of zero-carbon-emissions electricity.

Ohio lawmakers to date have been reluctant to subsidize the nuclear plants. Nuclear subsidies already are in place in Illinois, New Jersey, and New York, aimed at keeping plants open that otherwise would likely close due to competition from gas-fired and renewable energy power generation.

Critics of the Ohio plan said it supports nuclear energy at the expense of renewable energy.

Trish Demeter, vice-president of energy policy with the Ohio Environmental Council Action Fund, in a statement said, "[The bill] is nothing more than another bailout tax for failing nuclear plants paid for on the backs of hardworking Ohioans. Adding insult to injury, the proposed bill would dismantle one of the only state policies that reliably deliver electric bill savings to customers, decrease air pollution, and create new jobs in Ohio."

Incentives for Generators

Householder at a news conference said the program would provide incentives for the state's power generators to produce carbon-free electricity. He said it was important for industry in Ohio, and would support all the state's energy resources. "This program will steer our state in the right energy and clean air direction," he said.

The bill was introduced in the statehouse by Republican representatives Jamie Callender (Concord Township) and Shane Wilkin (Hillsboro). Though it adds a surcharge to customers' bills, supporters said incentives to build and maintain zero and reduced carbon emissions power plants would result in lower electricity bills.

"We all have a duty to be stewards of the environment," said Householder. "We can all agree that we need to improve the quality of our air, water and ground. We must ensure these are as clean as practical and we leave our environment healthy for our children and grandchildren. This program will steer our state in the right energy and clean air direction for 11.6 million Ohioans."

"The good news for electric customers is that for many, their bills will actually go down," said Callender, chair of the House Public Utilities Committee. "This is because there are already charges on their bills in the form of a Renewal Portfolio Standard and Energy Efficiency Standard/Peak Demand. The new program seeks to offer an alternative way to encourage cleaner energy production in Ohio."

"This legislation looks to Ohio's energy future by investing in clean energy," said Wilkin. "It addresses the global need of generating power and balancing it with a portfolio of supporting cleaner resources to meet the state's demand."

Questions about the reliability of power in the region have persisted since FES first announced its plan to close the nuclear plants. However, Stu Bresler, senior vice president of operations and markets for PJM Interconnection, which coordinates the movement of wholesale electricity in all or parts of 13 states, including Ohio, told legislators last week that taking the nuclear plants offline "is not expected to adversely impact the reliability" of the transmission system.

PJM in November 2018 said plant closures in the region would not adversely impact power reliability and resilience across its territory.

Said Bresler: "Efforts to subsidize less competitive plants will result in higher power prices for Ohioans. 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."

Bresler said subsidies for uneconomic power sources could increase power costs by as much as $3.8 billion across PJM's territory.

PJM data shows that coal continues to lead the generation profile in Ohio, producing about 33% of the state's power in 2018. That compares to 25% for natural gas, 11% for nuclear power, and 1% for wind. The state imports about 24% of its electricity, according to PJM.

Several new gas-fired power plants have come online or are under construction in Ohio. The state has a ready supply of natural gas from the Utica and Marcellus shale plays.

Lightstone Generation CEO Lee Davis, whose company in 2017 spent $2.2 billion on two natural gas power plants and one coal plant in southern Ohio, told state lawmakers last week to reject nuclear subsidies, saying non-competitive generation should not be rewarded.

State representative Ryan Smith (R-Bidwell) also said he could not support the subsidies. Smith in a tweet said, "Ohio has its own version of the Green New Deal but this one is offered by Republicans. This not only abdicates our authority but taxes ratepayers."

-Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine).

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