The natural gas industry went before Pennsylvania lawmakers to again spar with representatives of the nuclear power sector, who pushed in recent testimony before the state Senate’s consumer protection committee for passage of a bill requiring electric distribution companies and suppliers to purchase credits from nuclear plants.
Marcellus Shale Coalition (MSC) President David Spigelmyer, who heads arguably the state’s most influential oil and gas trade group, said legislation being advanced in both chambers to support nuclear power would make “fundamental and profound changes” to Pennsylvania's energy markets and impose “massive new costs on consumers.”
MSC, which represents more than 200 companies across the oil and gas value chain in the state, doesn’t represent the power sector. Spigelmyer noted, however, that generators have invested more than $13 billion in the state. Across Ohio, Pennsylvania and West Virginia, he said investment estimates run as high as $25 billion in new gas-fired plants.
Spigelmyer called for a “level playing field that does not discriminate based on fuel source.” He added that “backdoor cash subsidies to prop up uneconomic power units should not be advanced under the guise of rewarding environmental performance.”
Last month, state Republican Rep. Tom Mehaffie, who co-chairs the Nuclear Energy Caucus, introduced House Bill 11, which would add a third tier to Pennsylvania’s Alternative Energy Portfolio Standards (AEPS) to include nuclear power as a qualifying resource. That bill was followed by state Senate Bill 510, introduced on April 3 by Republican state Sen. Ryan Aument, who co-chairs the caucus as well. That legislation would also add nuclear energy to the state’s AEPS.
The AEPS requires that 18% of electricity supplied by distributors and suppliers come from alternative energy sources by 2021. The law currently recognizes 16 other forms of electricity generation, including wind, solar and waste coal.
The legislation comes on the heels of similar measures in other states to subsidize nuclear power, including those in Connecticut, Illinois, New Jersey and New York as the industry struggles to compete with the low cost of gas-fired generation that is dominating the power stack due to abundant supplies.
Spigelmyer urged lawmakers to keep the state’s energy market intact. He noted that the state’s 1996 Electricity Generation Customer Choice and Competition Act, which helped Pennsylvania transition to a competitive power market, has greatly benefited consumers and lifted all power sources.
He said the nuclear industry is strong, citing Energy Information Administration (EIA) data that showed the nation’s nuclear generation reached an all-time peak in 2018 and has increased by nearly 5% since 2012. In Pennsylvania, he noted, nuclear energy accounted for the largest share, or 32%, of power generation last year, while gas accounted for 30%, coal accounted for 29% and other sources, such as renewables, provided the rest.
The independent market monitor of PJM Interconnection also recently found that nuclear was dominant throughout the regional grid operator’s footprint, which includes shale-rich Ohio, Pennsylvania and West Virginia.
GT Power Group’s Glen Thomas, president of the Pennsylvania-based consultancy, agreed with Spigelmyer during his testimony before the committee. Thomas noted that electricity rates in the state were 15-20% higher than the national average prior to passage of the1996 law. The state is now the nation’s largest net exporter of electricity and rates have fallen significantly below the national average since then.
Thomas warned that the legislation would give nuclear power a competitive advantage and warned that one subsidy could lead to others. “Subsidies are contagious, once they start going, the game becomes not how do I make myself more efficient, it becomes how can I get a subsidy sufficient enough to keep me competitive in the market.”
Exelon Corp.’s Kathleen Barron, senior vice president of government and regulatory affairs, whose company has pushed for the nuclear subsidy legislation, countered the gas industry during her testimony by stressing that nuclear power provides the “backbone” of the state’s electric generation. Pennsylvania is the second-largest nuclear capacity state in the country with nine nuclear reactors at five different facilities, two of which are operated by Exelon.
Both Exelon and FirstEnergy Corp. have already announced plans to shutter both Three Mile Island and the Beaver Valley Power Station in the coming years. Barron said policy flaws have put much of the nation’s nuclear fleet on a similar trajectory.
She suggested that the current market construct in the region, as executed by PJM and regulated by the Federal Energy Regulatory Commission, is not working because it fails to consider the merits of certain fuel sources, including their impact on the environment and reliability, in favor of the cheapest price for generation.
“You will hear opponents claim that we should all ‘play by the rules,’ but let me offer some perspective on that,” Barron said. “When the rules allow you to pollute for free, not show up when customers need the power, and get paid the same as power plants that don’t pollute and run 24/7, of course you like the rules. Fossil generators have the luxury of having the costs of their pollution borne by society so they do not have to factor those costs into their market offers.”
Indeed, lawmakers on the committee seemed to indicate that they would not rule out the legislation entirely as other power sources have received subsides over the years -- especially those already eligible for credits under the AEPS. At times, the hearing this month veered toward discussion of a carbon tax to address broader questions of how the market could be better modified to acknowledge concerns about the power sector’s impact on climate.
At the same time, however, the bills could be a tough sell in Pennsylvania, the nation’s second-largest gas producing state, where volumes exceeded 6 Tcf last year. Nearly one-quarter of all the growth in the nation’s gas-fired power additions came in Pennsylvania last year, according to the EIA. Moreover, there are about 20 gas-fired facilities under construction or being upgraded in PJM.