FirstEnergy Solutions closes in on $1B nuke subsidy as Ohio lawmakers streamline legislation

Source: By John Funk, Utility Dive • Posted: Wednesday, July 17, 2019

HB 6 would annually funnel $150 million in new statewide customer charges to FirstEnergy Solutions (FES), a former subsidiary of Akron-based FirstEnergy Corp., to subsidize its two nuclear plants in northern Ohio.

The subsidy would amount to $1.1 billion through 2026. Opponents, who are not convinced that FES needs the money, have demanded independent audits be required. While the legislation does not require an annual outside audit, beginning in 2022, it would accept a retrospective “review” of operations based on an FES internal audit.

The legislation would also set aside $20 million a year for seven years, for a total of $140 million, to aid the development of utility-scale solar farms. Six large solar farms in rural Ohio generating a total of more than 1,000 megawatts have already been approved and more project proposals are expected.

Coal plants are also in line for a subsidy. The legislation would raise $50 million a year for a total of $450 million in new customer charges by 2030 to subsidize two large coal plants operated by The Ohio Valley Electric Corp. (OVEC), which is jointly owned by the state’s utilities.

OVEC has operated the two plants, one in Ohio and one in Indiana, since 1955. Their power originally was used to energize a now-closed uranium enrichment facility in southern Ohio; the plants now sell into PJM wholesale markets, often at a loss, they say.

The new subsidy would flow to OVEC when it could prove it was losing money. If OVEC were to make a profit, that money would flow back to customers, under the terms of the bill.

The legislation would save customers money, say backers, because it would also eliminate monthly customer charges to reimburse utilities for the cost of creating and maintaining energy efficiency programs.

HB 6 sponsors in the House, who introduced the initial version of the bill on April 12, said the average customer charge for the efficiency programs and renewable energy was $4.30 a month. The average surcharge for commercial customers was $24 and for industrial customers, $309.

A customer cost analysis consisting only of charts accompanying the newly amended legislation asserts that residential customers are paying an average of $4.74 a month for the renewable mandate and would pay $1.92 a month for the power plant subsidies.

The analysis does not include estimated costs for commercial and industrial customers, but speculation is that commercial and smaller industrial customers could face higher “clean air” charges than they have had to pay for the renewable and efficiency mandates. The state’s heaviest industries are expected to fare better.

If passed out of committee, approved by both the House and Senate and signed by the governor, the bill would be a long-sought victory for FirstEnergy (FE). Both FE and FES have lobbied for passage of the bill against stiff opposition presented by more than 100 stakeholders.

FE initially tried to secure a customer-paid subsidy for its nuclear plants in a rate case filed in 2014 with the Public Utilities Commission of Ohio. The commission approved a subsidy, paid for by customers, but the Federal Energy Regulatory Commission intervened.

FE also tried twice two years ago to push a nuclear subsidy bill through the legislature, and even after the company spun off FES as an independent company in 2018, FE CEO Chuck Jones publicly said securing state or federal subsidies for the nuclear plants was “the right thing to do” for Ohio.

FES, under federal bankruptcy protection since March 31, 2018, expects to emerge later this year debt free.  And though its nuclear plants are showing an operating profit in monthly reports to the bankruptcy court, the company claims the unaudited reports do not show a complete picture as, for example, a quarterly earnings report would do.