Ohio nuke zero emission credits could be problem for PJM
COLUMBUS — States such as Ohio and Illinois that want to help their utilities save uncompetitive nuclear power plants with a special subsidy run the risk of skewing competitive markets, the head of the nation’s largest multi-state high-voltage grid management company said Tuesday.
“Our position at this point is that we need to protect the integrity of the regional market price,” said Andrew Ott, president and CEO of PJM Interconnection, in an interview at the 21st annual Ohio Energy Summit.
PJM manages the high-voltage grid in 13 states and the District of Columbia. More than 65 million people live in the region.
PJM’s regional wholesale power prices have been falling in the last several years, largely because companies building modern gas turbine power plants can out-compete traditional utilities using 50-year-old coal-burning equipment or nuclear reactors, which have added new costs thanks to the disasters in Fukushima, Japan.
Falling wholesale prices throughout PJM should have led to falling consumer prices, but add-on distribution charges here and in other states by public utility commissions have pushed retail prices higher in the last couple of years, Ott showed in his presentation to more than 500 attending the opening session of the energy summit.
And some nuclear power plants have been struggling because of those falling wholesale prices.
Illinois lawmakers created a system to bail out certain of the least competitive nuclear plants in that state. The system appears to have been based on Renewable Energy Credits, or RECs, used for years by states to encourage utilities to buy renewable power or RECs in order to support wind, solar and other fledgling renewable technologies. A market system determined the value of the RECs.
Ohio is about to consider a similar program using “zero emission credits,” or ZECs. The ZEC plan has been initiated only informally at this point by FirstEnergy, which has tried unsuccessfully for more than two years to find ways to funnel more money to its nuclear fleet, particularly the Davis-Besse nuclear plant east of Toledo. The company also owns the larger Perry nuclear plant east of Cleveland.
Early draft versions of the proposal indicate FirstEnergy could collect an additional $300 million a year from customers, increasing monthly consumer bills by about 5 percent and commercial and industrial bills by 5-to-9 percent. That comes on top of a recent $200 million annual increase approved by the Public Utilities Commission of Ohio.
Ott was careful not to sharply criticize or dismiss the ZEC idea out of hand. In fact, he said that a more effective way to create a ZEC program would be through the regional market rather than on a state-by-state basis. That would make the subsidy available to any nuclear plant owner and also spread out the cost over millions of customers. But even that idea could skew market prices.
“Our position is not whether a state should or shouldn’t do whatever it is they want to do, but we have to think about is how do we make sure the market remains competitive,” he said.
And subsidizing some power plants and not others can have the effect of pushing costs to other companies in surrounding states and eventually to customers, he said.
“We have to figure out a way to harmonize what is happening in wholesale markets and what is happening at the state level,” he added.