Senate Republicans triggered what’s known as the “nuclear option” this week in response to a political roadblock from Democrats. The move allows President Trump’s Supreme Court nominee Neil Gorsuch to be confirmed by a simple majority vote, instead of the longstanding supermajority threshold of 60 votes.
A lot of people on both sides of the aisle have pointed out that changing the 200-year-old Senate rule could politicize the justice system for decades to come. But that’s not the only nuclear option being hotly debated... there’s also the nuclear power option.
In this week’s State Bulletin, we look at the latest on state policies designed to shore up the struggling nuclear energy industry. It's hardly limited to the state level, however. I recently reported on how nuclear advocates are also looking for help through wholesale markets and at the federal level. Former DOE Secretary Ernest Moniz made the case for the U.S. to lead on nuclear power in an interview with Bloomberg Markets this week.
The Third Way released a nuclear policy roadmap on Thursday that offers recommendations on legislation, hearings and appropriations for Congressional lawmakers. The roadmap also includes a handy infographic of active bills in the House and Senate.
And with that, we now go to the states.
Ohio Republicans seek nuclear subsidies
The Ohio State Legislature introduced a bill on Wednesday that would offer zero-emissions nuclear credits (ZENs) to FirstEnergy’s Perry and Davis-Besse nuclear power plants that are on the brink of shuttering. Senate Bill 128 is designed to compensate the state’s two nuclear generating stations for the “clean, reliable and secure power they generate,” according to a press release from Republican bill sponsor Sen. John Eklund.
The ZEN proposal offers a credit of $17 per megawatt-hour of power generated at the two nuclear plants, which should allow FirstEnergy to collect an additional $300 million in revenue per year. Customers in FirstEnergy territory are expected to see a “small increase” on their monthly bill as a result of the proposal, said Eklund. American Electric Power, Dayton Power & Light and Duke ratepayers are not meant to be affected.
There’s a lot of uncertainty around the fate of the bill. Republican Ohio Rep. Bill Seitz gave an overview of SB 128 at an energy conference in February, before the bill was officially introduced, where he highlighted some of the pros and cons of the proposal. A con, he said, is the risk that Ohio customers could end up overpaying to keep the nuclear plants in operation and miss out on lower rates thanks to cheap natural gas.
The GOP-led legislature may decide to rally around the bill to prevent job losses. FirstEnergy is facing severe financial struggles and plans to retire its two Ohio nuclear plants unless it can find a buyer (which seems unlikely in today’s risky nuclear market) or win government support. Together the plants generate more than 2,200 megawatts of electricity and employ about 1,400 people.
If the bill passes, it would go to Governor John Kasich, who has yet to take a public position on the bill. Meanwhile, consumer, clean energy, and natural gas advocates have come out strongly opposed to the nuclear subsidy plan, claiming it distorts competitive power markets and puts other resources at a disadvantage. PJM Interconnection has a similar view. The RTO’s latest “State of the Market” report states that subsidies “threaten the foundation” of its wholesale energy and capacity markets.
“Our position at this point is that we need to protect the integrity of the regional market price," Andrew Ott, president and CEO of PJM Interconnection, told The Plain Dealer in February. PJM prices have been falling in recent years thanks to cheap natural gas and renewables. It’s because of those low prices that nuclear power plants are struggling.
Sen. Eklund believes that wholesale market prices are “unsustainably low” and that letting Ohio’s nuclear plants retire will be make the state vulnerable to volatile fuel prices. This is a bit of an odd position for Eklund and other Republican supporters of SB 128 to take, given that conservative lawmakers are typically pro-free market and because many Ohio Republicans have been vehemently opposed to favorable policy treatment for renewables and energy efficiency.
Rob Rains at the firm Washington Analysis gave the Ohio bill a 45 percent chance of passing. “The measure’s introduction has been delayed for several weeks, and before a vote occurs, there may be further revision to socialize the costs among all Ohio-based distribution utilities,” Rains wrote in a memo.
Zero emissions credits -- everybody's doing it!
Ohio is hardly the first state to consider credits for struggling nuclear power plants. New York created the first zero emissions credit (ZEC) program exclusively for nuclear power last summer, and Illinois followed suit a few months later.
The New York deal will pay out about $500 million a year for the R.E. Ginna and Nine Mile Point nuclear plants owned by Exelon, and the James A. FitzPatrick plant Exelon is purchasing from Entergy Corp. Illinois approved about $235 million in annual payments for 10 years to keep Exelon’s Quad Cities and Clinton reactors open.
Both the New York and Illinois decisions currently face legal challenges, but that’s not stopping nuclear supporters from pursuing zero emissions credits. Exelon, the largest nuclear power plant operator in the U.S., is now pushing for similar revenue support in Pennsylvania and New Jersey.
Last month, Connecticut joined the party with new legislation that would establish a PPA for the state’s sole nuclear power plant. Opponents of the plan recently released a report that calculated the legislation would cost Connecticut consumers $300 million a year.
According to a recent report by Bloomberg Intelligence, if all 28,000 megawatts of nuclear power across the Northeast and mid-Atlantic were to be awarded subsidies at the same level as New York, electricity customers would face $3.9 billion in additional electricity payments each year.
It’s a tricky calculation for state policymakers to make. But Kit Konolige, a senior analyst for Bloomberg Intelligence, thinks the local economic and jobs benefits that come with propping up the plants could prevail. "I think there’s a good chance it will pass in Ohio, Pennsylvania and Connecticut,” he said.
Westinghouse collapse puts utilities in a bind
In other nuclear news, Westinghouse Electric Co., Toshiba Corp.'s U.S. nuclear power business, declared bankruptcy at the end of March. The company was developing two U.S. nuclear power projects, one for Georgia Power and one South Carolina Electric & Gas (SCE&G), which are now in limbo.
S&P Global Ratings recently revised its ratings outlook on both Georgia Power and SCE&G, as well as their parents, from stable to negative. Georgia Power and SCE&G may now look to their respective regulators for approval to take over and complete the projects, according to an S&P memo. Without strong policy support, S&P contends it makes the most sense to abandon the plants.
“[G]iven the significant scale and cost of the new nuclear plants under construction, we expect that neither Georgia Power nor SCE&G will move forward with the decision to complete construction on their own unless they have complete and irrefutable assurance from their respective regulators that they will be able to recover all costs that are incremental to the amounts currently certified,” the memo states.
As of year-end 2016, Georgia Power's certified amount was $5.68 billion, including about $240 million in contingencies. SCE&G's certified capital amount was $6.8 billion.
GTM’s Energy Gang discussed the Westinghouse bankruptcy in depth on this week’s show. Perhaps someone in the Trump administration was listening in. According to federal briefs, the Trump administration is trying to prevent Westinghouse Electric’s nuclear reactor business out of the hands of a Chinese buyer, in favor of an American investor or an American ally. The administration’s chief concern is that the Chinese will obtain nuclear technological secrets that could be used for civilian or military purposes.
Speaking of nuclear power and foreign interests, did you know most of the uranium used in U.S. nuclear power reactors is imported? According to the EIA, owners and operators of U.S. nuclear power reactors purchased 57 million pounds of uranium in 2015 (the most recent year for which data is available). Nearly half of these purchases come from Canada and Kazakhstan. Meanwhile, U.S. uranium concentrate production in 2016 was down 7 percent from the historical peak in 1980.
