FirstEnergy CEO Chuck Jones appeals to Ohio Senate committee to support nuclear power subsidy
COLUMBUS, Ohio — FirstEnergy’s effort to persuade state lawmakers that its nuclear power plants won’t survive without a state-mandated customer surcharge is now focused on the Ohio Senate.
FirstEnergy CEO Chuck Jones, accompanied by lobbyists, told members of the Senate Public Utilities Committee on Thursday that its Davis-Besse and Perry nuclear power plants may never make money competing in regional wholesale electric markets against gas turbine generators.
The company wants to remedy that with legislation (Senate Bill 128) creating “zero emission credits,” or ZECs, to reflect the value of a nuclear power plant’s absence of carbon dioxide emissions.
The ZECs would raise consumers monthly electric bills by 5 percent, and produce an estimated $300 million a year, for up to 16 years, in new money for the power plants.
That consumer cost and the economic impact of closing the plants concerned the lawmakers and they had about an hour’s worth of questions after Jones finished his 20-minute presentation.
“My constituents care about turning on the lights and having a cheap price,” said Sen. Sean O’Brien, a Democrat from Bazetta Township, in Trumbull County.
“Why are we investing $300 million a year in non-competitive plants when experts tell us that we have at least 30 years in the shale gas play?”
Sen. Troy Balderson, R-Zanesville, wanted to know whether a state-mandated subsidy would increase profits for the company. He said he did not get a straight answer. And he questioned why customers could not opt out of paying the ZEC charge. Republican lawmakers included a business customer opt-out in legislation last year slowly ending green energy mandates.
The company is modeling its ZEC initiative on programs launched earlier in New York and Illinois. Competitors have filed federal suits challenging the subsidies in both states and have already said they would file suits here.
“Nuclear power plants in Ohio are losing money,” Jones said. “Why are they losing money? It’s not because they can’t compete in a competitive market.
“They are losing money because there is no competitive market.”
He was referring to the 13-state competitive market managed by PJM Interconnection, the same PJM that the company fought to get into in the past. That was before the shale gas revolution and build-out of gas turbine power plants that upended the supremacy of coal and nuclear.
Here’s how:
PJM uses competitive auctions to determine which power producers are chosen first to push power into the high-voltage grid supplying local electric companies. Today, gas plants and sometimes wind get the first nod because they can offer the lowest prices.
Jones believes that nuclear provides something else — no carbon dioxide emissions among other attributes. The concern about the importance of CO2 emissions comes from a company that a decade ago fought a federal pollution suit before agreeing to a settlement requiring it to spend nearly $2 billion to clean up or close some of its coal-burning power plants.
But it’s one of the company’s main arguments now to save its nuclear fleet.
“The current wholesale electricity market construct does not value certain attributes that these [nuclear] plants provide to Ohio,” said Jones, including economic, environmental, fuel diversity and other benefits.
In other words, FirstEnergy is arguing that the lowest price is not always the best price, as determined by the PJM day-ahead, hour-to-hour and even minute-to-minute competitions.
PJM’s top managers are aware of the plight of the nuclear plants and recently presented a proposal to the Federal Energy Regulatory Commission about how to fix the situation — without breaking market discipline and handing out subsidies, which would distort competitive markets.
“It’s getting at the problem from completely the opposite side,” said Stu Bresler, a PJM senior vice president for operations and markets, in an interview.
PJM is proposing that groups of PJM states in which nuclear power plants are operating put a price on carbon dioxide and require power companies to pay those carbon fees to the states.
