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Ohio senator says nuclear subsidy plan will not be brushed aside

Despite obstacles that have hampered attempts to subsidize unregulated generation in Ohio, state Sen. John Eklund expects his plan to provide financial relief for FirstEnergy Corp.'s nuclear plants to receive "thoughtful and serious consideration." Eklund on April 5 announced the introduction of S.B. 128 in the Ohio General Assembly. The legislation, co-sponsored by Sen. Frank LaRose, implements zero-emissions nuclear credits for in-state nuclear capacity within the PJM Interconnection market.

The credits under the zero-emissions nuclear, or ZEN, resource program would start at an initial set price of $17/MWh for the first two-year period. Ohio's electric distribution utilities would be obligated to buy the credits that are submitted by the nuclear resources to the ZEN program, which would be managed by the Public Utilities Commission of Ohio. The utilities would then recover "all direct and indirect costs for the purchase of zero-emissions nuclear credits through a nonbypassable rider charged to all of its retail electric service customers."

FirstEnergy spokeswoman Jennifer Young said initial estimates indicate the credits will bring in approximately $300 million each year.

"As far as the prospects for the bill are concerned, it's premature to pass judgement on that," Eklund said in an April 7 phone interview. "But I can say that based on my knowledge of our colleagues in the General Assembly, it will get a serious and thoughtful consideration."

'Troubling trend'

Eklund said he became interested in the issue because FirstEnergy's 1,268-MW Perry nuclear plant sits in his Senate district.

"During the course of my service, I've come to understand how very deeply the community depends upon that facility operating and generating tax revenues both to support their local government and their schools," Eklund said, adding he became concerned with reports that the facility could be shut down. "That would be absolutely devastating here in my district, and I believe in northern Ohio, and I believe in the state of Ohio for a number of reasons."

Eklund said he also has serious concerns about maintaining Ohio's fuel diversity.

"And then I realized, of course, similar things are happening in other parts of the country and regard that to be something of a troubling trend," Eklund said. His proposal follows zero-emissions credit, or ZEC, programs designed to support at-risk nuclear generation in New York and Illinois.

These proposals are not without their challenges. A coalition of merchant generators filed a lawsuit Feb. 14 against the Illinois Power Agency and the Illinois Commerce Commission over the state's out-of-market support for at-risk nuclear power. An identical lawsuit against New York's ZEC initiative is also pending before a federal court in that state.

Legal threats

"There's always, it seems to me, lurking somewhere somebody's threat of legal action," Eklund said. "I think that kind of comes with the territory. I don't think it necessarily lowers the chances for the bill in our General Assembly. We're prepared to press forward in spite of what some may view as impending legal action. You've got to pass the bill first [and then] see what legal action comes along."

FirstEnergy management said in February that the company has been "very upfront" with legislators that they should not approve the credits just for FirstEnergy's benefit because of the company's plans to divest the assets. FirstEnergy maintains it intends to exit competitive operations by mid-2018.

The legislation does allow the nuclear credits to be transferred to a new owner of a nuclear resource, without penalty, if the sale or transfer of the facility occurs under the U.S. Bankruptcy code. Otherwise, a transfer or sale of a nuclear resource would reduce the credits by 50% of the asset sale price during the program period and possibly successive program periods.

"We've tried to put some bumpers around it to make sure that if there's a sale. ... It's not just going to be because some company can walk away with pockets full of money," Eklund said. "We're trying to make sure that any decision to sell is made with a keen view towards the impact that it would have on our local communities."

Still, investment banking firm Jefferies LLC put the prospect of the bill becoming law at "less than 30%."

"While momentum can change we don't sense the support in either chamber and believe the governor's commitment to free markets will make this an uphill battle," Jefferies analyst Anthony Crowdell wrote in an April 7 report.