News and Analysis
The House-passed plan to create ratepayer-funded subsidies for Ohio’s nuclear power plants (House Bill 6) will discourage independent power plant developers from building new electricity generation in the Buckeye State, despite the ongoing shale boom. That’s according to new analysis by energy expert Susanne Buckley, managing partner at Scioto Energy, an OMA Connections Partner.
Buckley says that HB 6 tells potential developers who are considering Ohio: “Beware! The playing field is not level. Participate at your own risk as we favor your competition.”
She adds, “(T)he bottom line is that customers would be forced to subsidize two nuclear plants that are not profitable on their ow by paying them $176 million per year.” At the same time, the bill would “gut” the existing renewable energy and energy efficiency programs. 6/10/2019
Asim Haque, an executive at PJM Interconnection, this week presented informational testimony before the Ohio Senate Energy and Public Utilities Committee. PJM’s data provides a more accurate understanding of the new costs facing electric ratepayers under House Bill 6, as passed by the House last week. Moreover, PJM’s modeled scenarios demonstrate how HB 6 will stunt new investment in natural gas generation and increase energy market costs.
Even though the PJM modeling examined only the wholesale market — and not the increased costs spurred by changes to the capacity auction — it still shows that ratepayers would experience a net increase in electricity costs due to the subsidies proposed by the nuclear bailout legislation.
A spokesperson for Ohio’s residential consumer advocate, the Office of the Ohio Consumers’ Counsel, interpreted PJM’s data by saying, “Consumers in the region would save more than $1.5 billion in 2023 alone if the nuclear plants in Ohio and Pennsylvania are shut down and expected new, efficient power plants are built. PJM’s findings for consumer savings from power plant competition confirm that a competitive generation market is better for millions of Ohio consumers (as opposed to) charging them for bailouts and subsidies under HB 6.” 6/6/2019
On Wednesday, the Ohio House of Representatives voted 53-43 to approve House Bill 6, legislation that would create substantial, ratepayer-financed subsidies to Ohio’s nuclear power plants. The measure now goes to the Ohio Senate, which is expected to commence hearings next week, underscoring the bill’s high priority status.
The OMA continues to oppose HB 6.
Preceding this week’s vote by the full House, additional amendments were made by the House Rules Committee, an unusual step. The OMA issued a key vote alert to lawmakers, urging opposition to the bill. In the end, Speaker Larry Householder (R-Glenford) won passage. Seventeen Republicans voted against the bill, while 10 Democrats voted for the bailout package.
According to a profitability analysis conducted by the OMA, it is estimated that HB 6 will result in an annual profit of $176 million to the hedge fund owners of the nuclear facilities — and more than $1 billion over the life of the bill. The analysis raises the question as to why the State of Ohio would want to overpay by such a large sum to keep the plants open. The OMA’s estimates were based on PJM market monitor data and are conservative — especially if the plants are profitable, as another study suggests (see separate story). 5/30/2019
The OMA Energy Committee held its quarterly meeting Thursday, May 30 — less than 24 hours following the House’s approval of HB 6, legislation to heavily subsidize Ohio’s nuclear power plants.
Chaired by Brad Belden, president of The Belden Brick Co., the committee heard expert analysis of the nuclear bailout bill, as well as other energy issues currently before policymakers — including a provision in the House-passed version of the state budget (HB 166) that would alter Ohio’s current prohibition of excessive profits by utilities. The new language, which is opposed by the OMA, would allow FirstEnergy operating companies to keep “significantly excessive profits” rather than issuing refunds to more than a million customers.
Guest speakers at Thursday’s meeting included:
- Michael Bryson, senior vice president – operations at PJM Interconnection;
- Richard Ricks with NiSource, Columbia Gas of Ohio; and
- Susanne Buckley with Scioto Energy.
The Energy Committee’s next meeting is set for August 29. 5/30/2019
OMA’s Energy Committee heard the latest analysis of the nuclear bailout bill during its May 30 meeting.
The two nuclear power plants set to receive state subsidies worth an estimated $165 million per year under House Bill 6 already could be quite profitable. That is according to a new report sponsored by the American Petroleum Institute and authored by Paul Sotkiewicz, the former chief economist for PJM Interconnection LLC, the largest U.S. power grid operator.
Sotkiewicz’s analysis shows that the costs of running FirstEnergy Solutions’ Davis Besse and Perry plants are nearly 25% below the industry average for single-reactor sites — and that they are averaging $28 million and $44 million a year, respectively, in net profits. The ratepayer-funded subsidies provided by the House-approved HB 6 would only add to that profit. 5/30/2019
On an 8-5 vote, members of the House Energy & Natural Resources Committee on Thursday, May 23, passed the nuclear power bailout bill. The approved language was the 17th version of the measure, which the OMA continues to oppose.
Supporters of Substitute House Bill 6 have dropped the pretense of carbon reduction and changed their rallying cry to energy security.
The new version of Sub HB 6 would still bail out Ohio’s two nuclear power plants, but it also would expand ratepayer-funded subsidies to two 1950s-era coal plants owned by the Ohio Valley Electric Corporation (OVEC). One of the OVEC plants is in Indiana.
The OMA Energy Committee will meet on Thursday, May 30, providing yet another opportunity for members to get an update. 5/23/2019
The new language would allow FirstEnergy operating companies to keep “significantly excessive profits” rather than issuing refunds to more than a million customers, including manufacturers.
This week, the Ohio Senate Finance Committee held hearings on the budget legislation. In written testimony to the committee, the OMA said the amendment to the SEET would do nothing to protect ratepayers.
“The amendment allows FirstEnergy to realize rapacious profits from Ohio customers,” the OMA wrote. “For these reasons, we urge the Senate to strip the unjustified and inequitable amendment from Amended Substitute House Bill 166.” See the OMA’s full testimony here. 5/23/2019
In the debate over House Bill 6 — legislation that would provide hundreds of millions of ratepayer dollars to Ohio’s nuclear power plants — millions have already been spent. That is due to an ongoing advertising blitz meant to sway public opinion.
According to Dayton Daily News reporter Laura A. Bischoff, “Generation Now, a dark money group, has spent more than $2.76 million on TV and radio ads in favor of the bill.” The group reportedly has close ties to the Ohio House Speaker, Bischoff has reported.
Of the 18 nuclear power plants in the region, Ohio’s two aging nuclear plants and the Three Mile Island facility in Pennsylvania are the only three that are unprofitable, according to a report from PJM Interconnection, an electricity transmission company. 5/23/2019
Republicans on the House Energy & Natural Resources Committee this week adopted the latest substitute version of the nuclear bailout legislation, Sub. House Bill 6. This marks the 14th version of the bill since its introduction a month ago. The OMA has been opposed to the legislation due to the new costs and risks it would impose upon manufacturers and other customers. Here is the OMA’s customer cost impact analysis.
Also this week at the Statehouse, FirstEnergy’s budget amendment — which would allow the monopoly distribution company to retain “significantly excessive” profits on the backs of captive customers — was considered in the Senate. Other legislation surfaced this week in the House that would allow utilities to capture even greater above-market costs from customers under the Electric Security Plan process.
The OMA Energy Committee meeting on May 30 will shed more light on the latest policy developments that could affect manufacturers. You can register here to join the discussion. 5/16/2019
Regional grid operator PJM‘s electricity capacity auction has been delayed from this month to August. The reason? The Federal Energy Regulatory Commission (FERC) has ruled PJM’s capacity auction rules to be “not just or reasonable” due to the proliferation of state subsidies for uneconomic power generators.
While PJM attempts to preserve competitive wholesale electricity markets, the FERC order ensures PJM’s capacity construct “will not interfere with the states’ ability to choose the path of re-regulation, whether via a conscious policy decision or a simple failure to take steps to prevent re-regulation as described on an unplanned basis.”
Manufacturers should take note of this development. The $300 million subsidy proposed by Substitute HB 6 — pending in the Ohio House — would trigger FERC’s recommended rule changes at PJM. In doing so, this would create an additional $80 million in increased capacity costs for Ohio’s two nuclear plants, both owned by FirstEnergy Solutions. Moreover, Sub HB 6 could also subsidize uneconomical coal plants and power-purchase agreements for unknown quantities of renewable energy. Each would result in what FERC describes as “unplanned re-regulation.” Unplanned re-regulation is serious — competitive electricity markets save Ohio’s ratepayers $3 billion annually.
See this memo by OMA consultant RunnerStone to learn more and see cost impacts to different sized manufacturers. 5/16/2019