Ohio’s nuclear future uncertain

Subsidies in New York, Illinois get court victories

Bills going through the Ohio legislature that would subsidize the state’s two nuclear power plants have stalled, but similar energy credits approved in Illinois and New York have won their first round of legal battles.

FirstEnergy has been lobbying for a Zero Emission Nuclear Resource Program or “ZEN” for its nuclear power plants in North Perry and Oak Harbor, which are struggling to compete with cheaper natural gas. The Akronbased company has said it is looking to sell or shutter its nuclear plants as it seeks to exit the competitive power generation business.

Under the proposal, the ZEN credits would last at least four years, working on two-year periods for up to 16 years (eight program periods). The Environmental Defense Council has placed the price tag for the Ohio proposal at $5.25 billion. The Ohio Consumers’ Counsel, representing utility ratepayers, calculated the costs to each of FirstEnergy’s 2 million residential customers at $57 a year, on average with the potential that the Public Utilities Commission of Ohio could allow upward adjustments. Businesses and factories would see a larger annual cost increase.

“I am not sensing a keen desire on the part of the House members to vote on this and doubt that we will have more hearings in the

near future unless something cataclysmic should happen,” House Public Utilities Chairman Bill Seitz, RCincinnati, said in May.

In August, Gov. John Kasich further dampened the chances of the bill’s passage, saying he couldn’t see supporting the plan.

Should the bill manage to overcome its shrinking odds, there is some good news for ZEN supporters. Legal challenges to similar energy credits approved in Illinois and New York were dismissed in federal court. (If Ohio’s ZEN program is approved, it is expected to face a similar legal challenge.)

In Illinois, state lawmakers passed the “Future Energy Jobs Bill,” which was

signed by Republican Gov. Bruce Rauner in December. The bill gives $235 million a year over the course of a decade to subsidize two plants owned by Chicagobased Exelon Corp., together employing roughly 1,500 people. Exelon had been threatening to close the two plants.

New York’s subsidies were approved by the New York Public Service Commission, a board appointed

by the governor with the state senate’s approval. Those subsidies could raise as much as $7.6 billion dollars over a 12-year period split amongst three plants. As is the case in Illinois, all the plants receiving subsides are owned by Exelon.

The Electric Power Supply Association, competing power generators and other entities in both states filed lawsuits in federal court in hopes of halting the ZEN programs. In both cases, the generators argued that ZEN credits encroach upon the Federal Energy Regulatory Commission’s jurisdiction over wholesale electric markets.

Both cases cited a 2016 U.S. Supreme Court decision, Hughes v. Talen. In that case, the Supreme Court ruled Maryland’s attempt to subsidize the construction of a natural gasfired generator encroached upon FERC’s jurisdiction under the Federal Power Act.

Both cases were dismissed in July, first in Illinois then in New York a few weeks later. In both cases, the courts found that the ZEN programs are not preempted by the Federal Power Act

“States may influence, through regulation, which generators participate in FERC’s market, even though the end result may affect the wholesale market,” the decision in the Illinois case read.

In New York the judge said, “Fatal to plaintiffs’ argument is their failure to offer any cogent explanation why ZECs (another acronym for the energy credits) are preempted but other state incentives to generate clean energy—such as tax exemptions, land grants, or direct financial subsidies— are not.”

The battle is not over, however. Both decisions have been appealed to the U.S. Court of Appeals.

Commissioners going to Washington

In mid-October, representatives from the Lake and Ottawa county commissioners will meet with

Department of Energy Secretary Rick Perry to discuss the nuclear plant situation.

Ohio county commissioners were invited to Washington, D.C. in August to meet with administration officials. While attending the event Lake County Commissioner Jerry Cirino and Ottawa County Commissioner Mark Stahl took aside a Department of Energy official to talk about their concerns over the situation.

The pair followed up that conversation with an email requesting a meeting with Perry.

“The closure of these plants, in our opinion, would deal a severe blow to the local economies, with very little time to develop alternatives to replace lost property tax revenues,” the pair wrote. “We would also see the loss of over 1,500 high-paying jobs directly related to the plants as well as hundreds of others on the periphery.

That meeting will take place Oct. 18. The total list of officials at the meeting is still being finalized, Cirino said Sept. 19.

The Perry Nuclear Power Plants employs more than 700 people and generated more than $4.5 million in tax revenue in 2016. The Perry School District is the biggest beneficiary of those funds, receiving $2.1 million last year.

“I’m not pushing for the ZEN as it is,” Cirino previously told the News-Herald. “I’m not pushing for any particular solution. All I want to do is to do my job, which is to help protect the economic vitality of this county and this plant closing would be a huge blow.”

Will the FERC prop up nuclear plants?

FERC Acting Chairman Neil Chatterjee appeared before a House Energy subcommittee Sept. 14.

Chatterjee spoke to the committee less than a month after the Department of Energy released a grid reliability report. Perry ordered a 60-day study in April “extent to which continued regulatory burdens,

as well as mandates and tax and subsidy policies are responsible for forcing the premature retirement of baseload (coal and nuclear) power plants.”

According to Utility Dive, the report found the retirement of coal and nuclear plants has not threatened grid reliability to this point, but it recommended that the FERC explore how to “better compensate generators for their resiliency attributes if reliability comes under threat in the future.”

At the House committee hearing, Chatterjee said the FERC is “fuel neutral,” but said “we will look to ensure that as our grid undergoes this transition to be sure that we evaluate the attributes of fuel sources to see what values they provide and see if there is a demonstrated need for reliability, whether or not these things can be compensated.”

Chatterjee said that “while FERC prefers to rely on competitive forces when reasonable, it recognizes that traditional regulatory measures are sometimes necessary in wholesale electricity markets.”

“Also, these changes affect each region of the country differently, and FERC has endeavored to allow markets to evolve to address unique regional needs while taking generic action when it is warranted,” he said.

The acting chair said at the hearing he wouldn’t speculate on if and what the FERC would do to help coal and nuclear plants according to the Washington Examiner.

“I don’t want to get that far ahead,” Chatterjee told the committee.

“The point that I made was if there was some demonstrated threat to reliability there would be options available to the commission to take action.”

The key word there is “if,” he said.

“We would have to have a record, we’d have to have careful analysis and then make that determination. But if it was in fact determined that there were reliability issues that needed to be addressed, certainly we would have some options.”