FirstEnergy's Perry nuclear plant. Credit: Wainstead / Creative Commons

The growing debate over nuclear power’s role in curbing emissions is running headlong into an ongoing controversy over “bailouts” for Ohio’s largest utility.

FirstEnergy, which has previously sought support for noncompetitive power plants, is now asking Ohio lawmakers for “zero emission credits” for its aging nuclear plants. Environmental and consumer advocates say the plan is just another bid for more subsidies.

After FirstEnergy president and CEO Chuck Jones reported “excellent results in distribution and transmission service reliability and plant operations” during a February 22 earnings call with financial analysts, he said the company wants a zero-emission nuclear, or “ZEN,” program to support the company’s Davis-Besse and Perry nuclear generating plants in Ohio.

“The ZEN program is intended to give state lawmakers greater control and flexibility to preserve valuable nuclear generation,” Jones said. A bill to implement the program will be introduced soon, he said.

“This attempted bailout does nothing to move Ohio forward, and would hold us back from a rapidly evolving clean energy transition that is creating a lot of new opportunity, more sustainable jobs, and cutting edge technologies,” said Trish Demeter of the Ohio Environmental Council.

“Our recommendation to policymakers has been to secure for millions of Ohioans the benefits of lower electric prices that can result from competition under Ohio’s 1999 deregulation law,” said Molly McGuire, spokesperson for Ohio Consumers’ Counsel Bruce Weston. “Unfortunately, what has happened over the last sixteen years is utility dependence on government-approved subsidies–$14.5 billion to date–funded by Ohio families and businesses. These subsidies should end for the protection of Ohio consumers and the competitive markets that serve them.”

Different from other states’ programs

FirstEnergy is promoting its ZEN program as an environmentally friendly way to fight climate change. “Davis-Besse and Perry produce approximately 90 percent of Ohio’s carbon-free electricity, and 11 percent of the power consumed in Ohio each year,” reported company spokesperson Jennifer Young.

Lawmakers in both New York and Illinois have recently agreed to similar plans to subsidize nuclear plants in those states. Such “around market” moves have been underway for some time, according to a February 2017 report by the Denver, Colorado firm of Wilkinson Barker Knauer.

Environmental groups have taken diverging positions. In Illinois, the Sierra Club and some other groups supported the bill that led to nuclear plant subsidies there, while organizations such as Wind on the Wires and the environmental justice group Blacks in Green opposed it.

In New York, the subsidies for nuclear power came with a commitment that half of the state’s electricity will come from renewable sources by 2030.

“FirstEnergy CEO Chuck Jones points to recent efforts in New York and Illinois to provide zero-emission credits for nuclear reactors, yet they were just one piece of packages that transition those states to cleaner, healthier energy systems,” noted Dick Munson of the Environmental Defense Fund. “FirstEnergy, on the other hand, has no interest in advancing efficiency and renewable energy; it simply wants subsidies so it can maintain the status quo.”

‘Only one way?’

On the earnings call, Jones said FirstEnergy is “advocating for Ohio’s support for its two nuclear plants, even though the likely outcome is that FirstEnergy won’t be the long-term owner of these assets.”

The Davis-Besse power plant in Oak Harbor and the Perry nuclear plant in North Perry are now valued at about $1.5 billion, including the value of their nuclear fuel. “The debt is significantly higher than that,” Jones noted. “Absent something to raise the value of these units and make them attractive to a buyer, there’s only one way for us to exit this business.”

In response to a question about how decommissioning of the plants would work in case of a bankruptcy, FirstEnergy counsel Leila Vespoli said that would be the responsibility of the license owner at the time, not FirstEnergy. Unless and until a sale occurs, though, the responsible party would be First Energy Solutions, or FES.

The company now has a separate board for FirstEnergy Solutions and has written down most of its generation assets, Jones noted. “We’re working on separating FES from the unregulated money pool” of FirstEnergy, he added.

Although Vespoli and Jones stressed that a separate corporate entity owns the nuclear power plants, FirstEnergy’s utilities have already been before Ohio regulators seeking ratepayer subsidies for affiliate-owned generation.

The Public Utilities Commission of Ohio ruled last spring that it would allow extra charges to guarantee sales of all power from the Davis-Besse plant and certain coal plants. When federal regulators said they would require strict scrutiny of the deal, FirstEnergy dropped references to power purchases but still asked for the rider, which critics said would have cost ratepayers $4 billion. The company’s funding requests grew over the ensuing months.

Last fall the PUCO ruled that ratepayers would instead have to pay a “distribution modernization rider” of $200 million per year. Despite the name, the money collected is not for any specific grid projects. Instead, it’s supposed to boost FirstEnergy’s credit rating to make it easier for the company to borrow money as and when it eventually does any such work.

Back in the fall, FirstEnergy claimed the money would not be enough. Now the company is asking lawmakers for more.

Details and costs for customers for FirstEnergy’s ZEN program are not yet known, said Young.

Nonetheless, FirstEnergy materials circulated to some state legislators this winter suggested that a $17/megawatt-hour credit would raise rates for its average residential customer “less than 5 percent” through a non-bypassable rider. That means all distribution customers would have to pay for it, regardless of who their generation provider was.

Ohio Rep. Bill Seitz (R-Cincinnati) noted last week that FirstEnergy’s new nuclear plan presented a “very difficult issue” and added that he didn’t know where the legislature would come out.

At the same conference, Seitz said plans were underway to scrap Ohio’s renewable energy and energy efficiency standards “in their entirety” and to replace them with voluntary goals. Seitz has previously said he also wants to keep the state’s property line setbacks for wind farm turbines, which were tripled in 2014.

Moreover, Ohio Rep. Louis Blessing (R-Colerain Township) circulated a memo last month looking for co-sponsors on a draft bill that would make Ohio’s renewable portfolio standards into voluntary goals and reduce the 2027 target to 17.2 percent.

 ‘Not all zero emissions are alike’

“FirstEnergy’s two nuclear plants are old, and we are asking why Ohioans should be paying for a nuclear subsidy when other resources are less risky, less expensive and much better for the environment overall,” said Demeter at the Ohio Environmental Council.

“Not all zero-emissions sources are alike,” she stressed. “Nuclear energy carries with it a heavy toll when evaluating this resource cradle-to-grave.” In Demeter’s view, it makes much more economic sense to invest heavily in renewables, which avoid those risks.

“Once a wind turbine or solar panel is installed, there is no fuel that must be extracted from the ground, and there is no waste to deal with afterwards,” she noted. And combining them with innovative technologies like battery storage “will make renewables virtually unstoppable as the primary energy source we rely on in the near future.”

Demeter also distinguished FirstEnergy’s ZEN proposal from the state’s renewable portfolio standard.

“Ohio’s RPS is a market mechanism to ensure we’re maximizing clean energy opportunities in Ohio, and diversifying our energy portfolio in a responsible way,” she explained. “What FirstEnergy is asking for is a direct subsidy of two nuclear power plants that appear to be losing money in the regional energy markets.”

“The company is seeking ratepayer protection for these plants, but shareholders, not ratepayers, should be on the hook for the bet the company made on nuclear plants,” Demeter said.

Kathi is the author of 25 books and more than 600 articles, and writes often on science and policy issues. In addition to her journalism career, Kathi is an alumna of Harvard Law School and has spent 15 years practicing law. She is a member of the Society of Environmental Journalists and the National Association of Science Writers. Kathi covers the state of Ohio.