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Repealing subsidies to 2,176 MW of Ohio nuclear power leaves uncertainty

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Repealing subsidies to 2,176 MW of Ohio nuclear power leaves uncertainty


DeWine has signed House Bill 128

Mixed views on replacement law

New York — Ohio Governor Mike DeWine has signed House Bill 128, ending the customer-funded subsidies for two of Energy Harbor's nuclear power plants, and leaving questions about the future of the 2,176 MW of carbon-free resources. Analysts and experts are mixed on whether replacement legislation to support the nuclear plants could emerge.

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DeWine signed HB 128 on March 31, which repealed key pieces of the highly controversial House Bill 6 that was tied to an alleged bribery scheme promoted by FirstEnergy and subsidiary FirstEnergy Solutions.

The US Attorney's Office for the Southern District of Ohio and the Federal Bureau of Investigation in July 2020 announced charges related to a more than $60 million bribe paid to Ohio House Speaker Larry Householder and his associates. Householder pleaded not guilty in the case and a trial is pending.

Following a bankruptcy proceeding, FirstEnergy Solutions was renamed Energy Harbor, now a private company which owns the Davis-Besse and Perry nuclear plants that received the subsidies, as well as three other nuclear power plants located in Ohio, Pennsylvania and West Virginia.

Former owner FirstEnergy Solutions argued financial support was required to keep Davis-Besse and Perry from retiring due to revenue shortfalls resulting from declining wholesale energy, capacity, and ancillary service market prices in the PJM Interconnection markets where the plants are located.

The subsidy debate was heated, with opponents claiming the nuclear power plants did not require a financial boost. Ultimately, a referendum push to overturn the HB 6 legislation failed.

"The nuclear subsidies included in HB 6 were unnecessary and unjustified, and only passed due to the alleged unprecedented corruption in the legislative process and referendum effort," Todd Snitchler, president and CEO of merchant generator trade group Electric Power Supply Association, said in an emailed statement.

Replacement legislation

It is unclear if a new effort to support the nuclear plants will emerge from the Ohio Legislature.

The definition of power generation units at risk of retirement is that the are not expected to recover their avoidable costs from market revenues, which are a combination of energy and ancillary service revenues and capacity market revenues, according to Monitoring Analytics, PJM's independent market monitor.

Based on the IMM's analysis in its 2020 State of the Market Report for PJM, no nuclear plants are considered to be at risk of retirement. "The single site nuclear plants, Davis Besse and Perry, receive a subsidy and are not expected to retire," the IMM said in the report which was published before the subsidy was repealed.

"We believe that nuclear subsidies will come back in some form," Matt Williams, power market analyst with S&P Global Platts Analytics, said in an April 1 email.

"Though with how slow the legislature has been moving on this issue, specifics and timing remain uncertain," Williams added.

However, EPSA's Snitchler is less optimistic about Ohio policymakers reinstating a financial support mechanism.

"It is unlikely that new legislation to support the plants will come forward," he said in an April 1 email.

"First, the new owners have said they don't want the subsidies," Snitchler said. And after having passed and now repealed the plant bailouts, in addition to the widespread public outcry surrounding the issue, it's highly unlikely lawmakers will have the appetite to revisit this unpopular policy AGAIN for the third year in a row."

Just over 8 GW of nuclear capacity across the US is currently slated for retirement, with Platts Analytics assessing roughly 5 GW of nuclear capacity at high risk of retirement before license expiration, according to a recent research note.

The alleged corruption involving passage of HB 6 has clouded other aspects of Ohio energy policy because the law significantly walked back support for energy efficiency and the state's renewable portfolio standard. The law also provided subsidies to two Ohio Valley Electric Corporation coal-fired power plants.

"HB 128 does not address the modifications made to energy efficiency and renewable portfolio standards by HB 6. With that, we are not expecting these measures to revert to their pre-HB 6 levels," Platts Analytics' Williams said.

Other elements of the HB 6 legislation, including the repeal of subsidies for OVEC coal generation, are still being debated in the Ohio Legislature, Snitchler said.

"We are watching this closely, and hope to see more good news for Ohio consumers and competition," he said. "Subsidies for existing resources are unnecessary and damaging at a time when PJM markets are delivering the energy resources to reliably meet consumer demand and reduce carbon emissions at historically low costs."

Energy Harbor did not return a request for comment.