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Bailout of Ohio's nuclear power plants may come too late for FirstEnergy Solutions

Source: 
CommsMEA

Akron's FirstEnergy Solutions (FES) might not get the bailout it says it needs in time to save its Perry and Davis-Besse nuclear power plants unless the company is able to change the deadline for refueling the plants a second time.

The company said it's counting on the Ohio Senate to pass something akin to the recently passed House bailout bill, dubbed HB 6. FES said that plan, as recently amended by the Senate but not yet voted on, would give the plants a $150 million annual subsidy they need to remain open.

If FES doesn't get it, the company said, it is set to close the plants by May 2021, resulting in probable layoffs for more than 1,300 Ohio employees who staff and service them.

FES initially said it needed a subsidy in hand by June 30 or it would not be able to refuel the plants in time to keep them in service. When that came and went without a bill's passage, FES said it would need the subsidy approved by July 17.

"We remain on path for a safe deactivation and decommissioning," the company said in a July 1 statement. "Should we receive the long-term certainty that comes with an affirmative vote within this timeframe, we will immediately re-evaluate our options. Given the expectation that the legislation will be passed in the coming weeks, we have communicated our commitment to doing everything possible to accommodate this process, which will come with increased financial burden associated with missing the June 30 fuel purchasing deadline for Davis-Besse."

But a tougher Ohio Senate seems unmoved to be forced to pass the House bill, or its own, by July 17. It has another job lined up first.

"It doesn't make sense to pass any other bill than the budget right now," said John Fortney, spokesman for the controlling Republican Caucus in the Ohio Senate, on July 11.

State legislators already have failed to pass a budget on time, but they passed a temporary measure that runs through July 17. So they now have to hammer out a final budget and pass it by that date, said Fortney, who conceded that may mean FES' bill will have to wait.

But Brenda Adrian, who represents FES as a senior manager with the New York public relations firm Sitrick and Co., said FES' position from July 1 still stands.

The Senate is more concerned with electricity rates paid by residents and businesses around the state than with anything else, Fortney said, and senators may take their time as they hammer out their own version of HB 6.

"Ratepayers come first it's much more important to get the language right than to pass something on an arbitrary deadline," Fortney said.

Although both chambers are firmly in Republican control, they've had their differences, and continue to have them over energy issues.

To pay for the nuclear subsidies, the House favors eliminating standards for renewable energy and any charges to consumers linked to renewable subsidies. The Senate wants to cap state renewable standards before they reach their previously intended peak but not eliminate them. That's still to the dismay of the wind and solar energy industries, which say they'll be severely impacted.

The Senate also has been less willing to write a blank check. It has proposed that if FES gets a subsidy, it also will get state audits in the future something Fortney said his caucus thinks could reduce future subsidies from the initial $150 million.

"If it shows FES is turning things around or making more money, it makes sense to give them less money and also reduce the surcharge to ratepayers," Fortney said. "Our members aren't interested in giving a company a major subsidy for any period of time without being able to see their books."

That last point about open books has been a stickler with critics of the bailout. FES said it can't share its financials because it's in bankruptcy. The company basically is asking legislators to trust it when it says its nuclear plants need a bailout.

Meanwhile, recent testimony in Columbus by outside economists might have led to a more cautious Senate.

One is Paul Sotkiewicz, a former chief economist for PJM Interconnection, which runs the electricity grid in the region. Sotkiewicz, who now is a consultant based in Florida, also is a former economist at the Federal Energy Regulatory Commission.

On June 15, he told legislators that the FES deadline for refueling the plants doesn't exist, and that the company already said in regulatory filings that it has paid for its refueling contracts. What's more, he contended that the Davis-Besse and Perry plants are profitable and stand to remain so for the foreseeable future.

FES spokeswoman Adrian said that Sotkiewicz's report was funded by the American Petroleum Institute, and FES contended his findings should be discounted. The company also said it has not yet paid for its fuel and that Sotkiewicz found a similar plant in Pennsylvania to be unprofitable, questioning his analysis.

But FES said it can't show financials to prove that, and in an interview Sotkiewicz said he is confident in his analysis. He noted that Ohio's nuclear plants face competition from abundant shale gas not seen on the East Coast or other places.

He also said the subsidies don't make sense from a standpoint of providing Ohio and its industries with the cheapest power.

"It just doesn't make any sense from an economic development standpoint. This is just crony capitalism, pure and simple," Sotkiewicz said.

He's not the only economist telling senators the subsidy is foolish, either. Ned Hill, a former urban affairs dean at Cleveland State University and now a professor of public affairs at The Ohio State University, is another.

Hill testified before the Senate on June 25, and in an interview with Crain's said that by giving the nuclear plants a subsidy, Ohio will be doing the opposite of other states, like those to the south in the region served by the Tennessee Valley Authority, which are allowing old, inefficient plants to go away in favor of new, cheaper alternatives.

"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," Hill said.

The testimony of Hill and Sotkiewicz may have been bolstered by Asim Haque, former chairman of the Public Utilities Commission of Ohio and now executive director for strategic policy and external affairs for PJM, whose electrical grid covers Ohio.

He told senators on June 5 that Ohioans could cut electricity costs by about $95 million a year if the state were able to keep the nuclear plants and continue to open new natural gas-fired plants around Ohio. But he said PJM officials think there could be 50% fewer new natural gas plants built in Ohio if nuclear is subsidized, creating the opposite effect and raising costs by about $16 million a year instead.

Clearly, the Senate has a lot of conflicting testimony to wade through. Whether senators believe the critics or FES likely will determine how it moves forward and when.

Many are hoping legislators do provide FES with a subsidy, including officials in Perry, Toledo and the company's hometown of Akron. They say the jobs the company represents are valuable to the state, especially to their communities, and should not be taken lightly.

"If we were trying to get a new company like FirstEnergy to come here, this would not be a question. We would be killing ourselves to get a company like that," said Summit County Executive Ilene Shapiro.

Discussions

Bob Meinetz's picture
Bob Meinetz on Jul 15, 2019 3:52 pm GMT

"'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,' Hill said."

With HB 6, Ohio legislators are not "picking winners and losers" but recognizing them, and it's arguably their responsibility to do so. Ohio's 2008  Renewable Portfolio Standard (RPS) has been an abysmal failure, increasing renewables' share of the state's electricity by a whopping 3% after eleven years and hundreds of $millions in subsidies.

Sure, call HB 6's zero emission credit a "bailout" - one that will replace the RPS bailout of solar and wind in a state which produces little of either. Sounds like the only direction Ohio should be heading.

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