Ohio’s Nuclear Bailout Plan Balloons to Embrace Coal (while Killing Renewable Energy Rules)

While other states are embracing renewable energy, Ohio is heading in the opposite direction. A bill passed this week by the Ohio House would subsidize nuclear and coal power while cutting state support for renewable energy and energy efficiency, with the utilities’ customers footing the bill.

Advocates and analysts are trying to make sense of a plan that seems to defy political and economic logic: It would support uneconomical power plants by increasing costs for businesses and homeowners, both with new charges on their bills and through the cancellation of programs that help them save money on energy.

The measure now heads to the Ohio Senate, and the idea of a nuclear bailout has the support of Republican Gov. Mike DeWine. If it becomes law, it would mean Ohio is decisively turning away from policies that aid the transition to renewable energy, said Kit Kennedy, senior director of the climate and clean energy program for the Natural Resources Defense Council.

“Ohio is moving in an unprecedented and troubling direction with this bill, which is quite dramatically different from how other states are handling similar issues,” she said.

The state’s renewable energy and energy efficiency standards, already weakened once since becoming law in 2008, have been under continual attack from Republican lawmakers who say they oppose mandates and subsidies. Yet that’s what they now want to offer coal and nuclear.

Clean energy advocates are pinning their hopes on the idea that the Ohio Senate, which, like the House, is controlled by Republicans, will change the bill. DeWine indicated that the bill is a “work in progress,” telling Gongwer News Service on Thursday that he wants to find a way to support nuclear and allow wind and solar to grow.

Ohio would be the fifth state to subsidize nuclear power plants that otherwise might close for financial reasons, following Connecticut, Illinois, New Jersey and New York. The difference is that the other four passed nuclear aid as part of a package that included support for renewable energy, part of a larger strategy to promote carbon-free electricity generation.

The Ohio bill begins to make sense only as a bailout for one company as opposed to comprehensive energy plan, said Ari Peskoe, director of the Electricity Law Initiative at Harvard Law School. That company is FirstEnergy Solutions, the owner of the state’s only two nuclear plants and the leading architect of the bill. It’s a subsidiary of Akron-based FirstEnergy that FirstEnergy is in the process of spinning off.

FirstEnergy Solutions filed for bankruptcy last year, in large part because its plants can’t compete on the market, and company officials have said the nuclear plants will need to close if they don’t get government aid.

“FirstEnergy has really been a failure in the generation business, and so it’s been looking for a bailout,” Peskoe said.

Mark Durbin, a FirstEnergy spokesman, praised the House’s 53-43 vote to pass the bill while also noting that his company is separate from FirstEnergy Solutions. He said customers “are better served with a diversity of generation sources.”

What the Bill Does

The bill would impose a statewide charge of $1 per month on households for a “clean air program”; businesses would pay higher charges. Nearly all of the $190 million to be raised would go to the two nuclear power plants.

In addition, the bill would allow a separate charge of up to $2.50 per month to guarantee profits at the two coal-fired power plants—one in Ohio and one in Indiana—owned by Ohio Valley Electric Corp. (OVEC). This provision, added to the bill during weeks of testimony and debate, helped to win support from the utility American Electric Power, which owns about 40 percent of OVEC and has long pushed for this kind of guarantee to help keep the 1950s-era plants in operation.

Despite these two new charges in utility bills, the measure’s supporters claim they are providing a net savings to ratepayers because they also are repealing state requirements that utilities meet annual benchmarks for renewable energy and energy efficiency. Utilities pay for projects to meet the clean energy standards through bill charges that average about $4.60 per month, which would go away or phase out under the law.

But this tally of shifting charges misses the point that energy efficiency programs lead to savings for consumers.

From 2009 to 2017, the energy efficiency programs implemented by Ohio utilities led to savings of $5.1 billion, according to an analysis of regulatory filings by Midwest Energy Efficiency Alliance. Energy efficiency also helps to slow the growth of electricity demand, which reduces the need to build new power plants.

“No analysis can reach the conclusion that reducing efficiency results in lower bills or cleaner air,” said Rob Kelter, senior attorney for the Environmental Law and Policy Center, in testimony before a House panel early this month.

‘The Audacity of Rent-Seeking’

The criticism of the bill is coming from across the ideological spectrum.

Left-leaning groups are appalled that renewable energy and energy efficiency standards would be eliminated. Groups on the right see this as an unfair and costly example of the government putting the needs of a politically savvy company ahead of the needs of the public.

Travis Kavulla of the R Street Institute, a conservative think tank, said he is troubled by this kind of lobbying for subsidies that generate little public benefit—what economists call “rent-seeking.”

“People constantly underestimate the audacity of rent-seeking in the electricity marketplace,” said Kavulla, a former Montana utility commissioner.

At the same time, the bill has the support of some labor unions that represent plant workers, a power bloc that often leans toward Democrats. Support from labor is one reason that 10 Democrats voted for the bill.

For the Trump administration, the Ohio legislation is the trifecta it wants on the national level. It has proposed providing aid to the country’s economically struggling nuclear and coal plants, an idea that has so far not borne fruit, and it has tried to cut support for renewable energy and efficiency.

The common thread between the national push and the one in Ohio is FirstEnergy Solutions, a company that is seeking help in both venues.

“They’ve proven to be much better at generating income through lobbying than through running their utility company,” Ned Hill, an Ohio State University economist who has testified against the bill, said of FirstEnergy Solutions.

Bob Paduchik, an adviser to the Trump re-election campaign, spoke with Ohio lawmakers in recent days to encourage them to support the bill, according to reports on Cleveland.com and other outlets. Paduchik, an Ohioan with a background in the energy industry, said his support for the bill is not part of his role with the Trump campaign.

A Lost Opportunity

The legislative session began in January with the election of Republican Rep. Larry Householder as speaker of the House. He ousted the Republican incumbent following a campaign in which FirstEnergy supported candidates loyal to Householder.

Householder, who has long history in the legislature, was able to take control by forming a coalition of Republicans and Democrats. The bipartisan nature of Householder’s win led some environmental advocates to hope that any nuclear bailout—already a high priority for the speaker—would include provisions long sought by Democrats, such as an easing of rules that limit where wind turbines can be placed.

One of the great disappointments with this bill is it is so far removed from what might have been, doing harm to clean energy programs rather than helping them, said Kennedy of NRDC.

“It seems to be an approach that is negative to consumers and businesses in Ohio and negative in terms of climate change,” she said.