The Ohio Senate has passed a bill to prop up two nuclear power plants in the state operated by bankrupt subsidiaries of FirstEnergy Corp.
The state House is expected to concur in a vote in the coming weeks before the legislation heads to Republican Gov. Mike DeWine. The governor is expected to sign the bill, which would provide the facilities $150 million annually for seven years beginning in 2021.
The nuclear subsidies bill has progressed in the Republican-controlled legislature since May, when the House passed a different version despite fierce objections from the natural gas industry and even environmental groups. The Senate Energy and Public Utilities Committee drafted a substitute version of House Bill (HB) 6, which ultimately passed the Senate late Wednesday.
“We assign better than even odds that the full House approves the substitute bill, despite the changes made to the proposal in the upper chamber,” said ClearView Energy Partners LLC in a note to clients on Thursday. “Likewise, we think Gov. Mike DeWine would sign the bill into law.” FirstEnergy, which had previously announced plans to close the facilities absent any legislation or market reforms, is also now unlikely to do so given the momentum of HB 6, ClearView added.
The Senate’s version would also provide $20 million in assistance to solar projects being built across the state. The funds would come through a monthly surcharge ranging from 85 cents for smaller residential customers to $2,400 for larger industrial customers. The $170 million in subsidies was even larger in previous versions of the bill. Unlike the House version, the Senate’s substitute would weaken, but not eliminate the state’s renewable portfolio standards and energy efficiency programs, which Republicans lawmakers have been working to diminish for years.
Previously, 12.5% of the state’s electricity was required to come from renewable resources by 2026, but under the HB 6 substitute that has been reduced to 8.5% by 2025 and would then be terminated after that. The legislation would also lower annual energy efficiency targets for utilities.
The natural gas industry has fought the subsidies hard, arguing that they would undermine the wholesale power markets by depressing energy prices and putting gas-fired generators and others at a competitive disadvantage. Natural gas production in the state has skyrocketed in recent years, topping 2 Tcf in 2018 thanks to development in the Utica Shale.
That has attracted an influx of developers who have invested $11 billion to build more than 11,000 MW of gas-fired capacity in Ohio alone, according the Ohio Independent Power Producers.
New Jersey-based LS Power warned on Monday that an expansion at its 700 MW dual-fuel simple-cycle Troy Generation Facility in Luckey, OH, would be cancelled if nuclear subsidies are enacted in the state. The expansion would add 500 MW of capacity at the facility, which burns both natural gas and fuel oil.
"The handouts to nuclear plants jeopardize the economics of the other already economic generators, including the Troy facility, which could chill investment and lead to the unintended consequence of reduced reliability for Ohio's electric generation fleet,” the company said. “ In light of the harmful impacts that the nuclear handouts will have on the market and generators like Troy, LS Power would be forced to terminate development of the Troy expansion project if nuclear handouts are passed by the Ohio legislature."
The 900 MW Davis-Besse and the 1,268 MW Perry nuclear power plants are owned by FirstEnergy Solutions Corp., which filed for bankruptcy last year. The facilities employ more than 1,400 workers. HB 6 advances at a time when similar measures in other states, including Connecticut, Illinois, New Jersey and New York, have succeeded.
Low-cost gas has made it difficult for nuclear facilities to compete in wholesale power markets. FirstEnergy Solutions said when it filed for bankruptcy that prolific natural gas supplies from the Appalachian Basin have eroded profits from power sales in recent years.