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Battle lines drawn in latest Ohio subsidy fight

Trade groups and consumer advocates have expressed disappointment and outrage over Ohio's latest effort to subsidize coal and nuclear plants, while the governor indicates he supports assisting nuclear assets.

"As I have previously stated, Ohio needs to maintain carbon-free nuclear energy generation as part of our energy portfolio. In addition, these energy jobs are vital to Ohio's economy," Ohio Gov. Mike DeWine said in a May 29 statement.

The Ohio House of Representatives voted 53-43 on May 29 to approve House Bill 6 and send the controversial legislation to the state Senate. The bill is largely designed to provide financial support for the 908-MW Davis-Besse and 1,268-MW Perry nuclear plants owned by FirstEnergy Solutions Corp., or FES, as well as two coal plants operated by Ohio Valley Electric Corp.

"Unfortunately, Bob and Betty Buckeye will pay hundreds of millions of dollars more for corporate welfare (on top of $15 billion already paid) to [FirstEnergy Corp., American Electric Power Co. Inc., Dayton Power and Light Co. and Duke Energy Corp.] if legislation passed today by the Ohio House becomes law," Merrilee Embs, spokeswoman for the Office of the Ohio Consumers' Counsel, said in a written statement.

Utility subsidiaries of AEP, Duke Energy, FirstEnergy and AES Corp. have ownership stakes in the two coal plants. Buckeye Power Inc. and bankrupt power provider FES also have ownership in the plants.

In addition to supporting baseload facilities, H.B. 6 repeals Ohio's renewable energy and energy efficiency standards and establishes the Ohio clean air program. Certified clean air resources, including nuclear plants, would receive credits of $9 per MWh.

Under the bill, Ohio's electric distribution utilities would collect a monthly charge from retail electric customers. The state treasurer would deposit the money into the Ohio clean air program fund.

Starting Jan. 1, 2020, residential customers would be charged 50 cents per month, a fee that increases to $1 per month starting in 2021 through 2026. Commercial customers would pay a monthly fee of $10 in 2020 and $15 from 2021 through 2026. Industrial customers would pay $250 per month for the duration of the program, which sunsets on Dec. 31, 2026. Commercial or industrial customers that exceeded 45 million kWh of electricity at a single location in the preceding year would be subject to a $2,500 monthly charge.

The bill also includes fees of $2.50 per month for residential customers and capped at $2,500 per month for other customer classes to subsidize the Kyger Creek coal plant in Ohio and Clifty Creek coal plant in Indiana.

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"What an absolute embarrassment for Ohio, and complete disregard for facts and sound public policy," Neil Waggoner, campaign representative for Sierra Club's Beyond Coal Campaign in Ohio, said in response to the May 29 vote. "Ohio needs a real comprehensive energy policy. House Bill 6 is the opposite of that."

API Ohio, a division of the API national trade group that represents the oil and natural gas industry, said the bill "disadvantages natural gas and other power generators that have delivered savings and cleaner air to Ohio over the last decade."

The Federal Energy Regulatory Commission stepped in and halted previous efforts by AEP and FirstEnergy to subsidize their unregulated coal and nuclear plants. Former Ohio Gov. John Kasich also opposed these subsidies and prior legislation stalled in the Ohio Legislature.

AEP Executive Vice President and CFO Brian Tierney told analysts and investors in late April that the company supports comprehensive legislation that offers a "balanced" approach to energy policy issues in Ohio.

"If it's just a bailout for one company or another, it's not as beneficial to all Ohio customers," Tierney said on the company's first-quarter 2019 earnings call.

AEP Ohio, the trade name for Ohio Power Co., called the latest version of the bill "a positive step in Ohio energy policy."

"It addresses legacy energy issues that have plagued the state for several years while providing the opportunity for a diverse energy mix in the state," AEP Ohio spokesman Scott Blake said in an email. "This bill will allow AEP Ohio to make investments that our customers have been asking us to provide."

Height Securities LLC said in a May 30 research report that the bill, which also allows large-scale solar projects to qualify for subsidies, will likely be approved by the Senate and ultimately signed into law.

"Eleventh-hour lobbying by DeWine proved successful in the House, and we expect he and other nuclear supporters will maintain the pressure during the Senate debates," Height Securities analyst Josh Price wrote.