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Hearing draws varied crowd on rate plan for Davis-Besse

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FirstEnergy has proposed a new rate plan that would help secure the future of the Davis-Besse plant in Oak Harbor, Ohio.

THE BLADE
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Perhaps it was no surprise that nearly everyone who spoke recently at a special Public Utilities Commission of Ohio hearing in downtown Toledo had little if anything to say about FirstEnergy Corp.’s massive Sammis coal-fired power plant in southeast Ohio.

But another major plant FirstEnergy is trying to save from financial ruin — its Davis-Besse nuclear power plant in Ottawa County — drew a strong mix of comments, pro and con.

That little-publicized hearing cast off the eerie vibe of a trial, except Davis-Besse isn’t on trial.

Not literally, at least.

But with natural gas prices plummeting, states investing more in renewable energy, and demand for electricity down, the court of public opinion — and the financial marketplace — is taking a harder look at nuclear power nationally.

That’s especially true in states such as Ohio, where electricity was deregulated in 1999. The ensuing price wars between energy sectors has caused a lot of anxiety for FirstEnergy and other utilities heavily invested in coal and nuclear plants.

Plant closings

The Washington-based Nuclear Energy Institute, which does most of the nuclear industry’s lobbying on Capitol Hill, views recent nuclear-plant closings in Wisconsin and Vermont as a sign of troubled times.

Of five nuclear reactors shuttered in recent years, Kewaunee in Wisconsin and Vermont Yankee were two closed purely because of economics, said Richard Myers, NEI’s vice president of policy development, planning, and supplier programs.

Chicago-based Exelon has raised the specter of prematurely closing some or all of its six nuclear plants in Illinois, which insiders say could have a devastating domino effect. Exelon owns the most nukes, and Illinois has more than any other state. According to the Chicago Tribune, Exelon is to decide this summer about “the fate of plants that are on the bubble.”

If PUCO agrees to FirstEnergy’s proposed rate plan, more long-term stability for coal and nuclear would be assured in Ohio.

Critics call it a bailout, arguing that winners and losers should be determined by price alone.

“This does not sound like free-market capitalism to me,” Doug Jambard-Sweet of Maumee said.

Coal and nuclear are two “baseload” forms of electricity, meaning they are the energy workhorses that can be counted on to generate power 24 hours a day.

Though coal still provides the vast majority of Ohio’s electricity, its national market share is down to 40 percent, its lowest in decades. That’s expected to keep falling because of tougher U.S. Environmental Protection Agency air-quality regulations that are pushing investors away from plants whose greenhouse-gas emissions contribute to climate change. Coal plants are the leading producer of carbon dioxide, energy production’s predominant greenhouse gas.

Unique ‘attributes’

The NEI argues that nuclear power deserves special treatment because of its unique “attributes.”

Nuclear is not entirely carbon-free. Watchdogs point out the carbon dioxide released by mining and processing uranium fuel. But the plants themselves issue no carbon emissions. The nuclear industry’s contribution to climate change is tiny in proportion to the millions of megawatts its plants have generated over several decades, NEI contends.

Former U.S. Environmental Protection Agency Administrator Carol Browner — known as America’s “climate czar” when she worked for President Obama from 2009 to 2011 as the White House Office of Energy and Climate Change Policy director — is now part of a pro-nuclear campaign called Nuclear Matters. She is to be featured at an event Feb. 5 at Davis-Besse.

In a statement to The Blade, Nuclear Matters said the existing array of 99 nuclear plants — which collectively generate about 20 percent of the United States’ electricity — is an “essential part of our energy portfolio.”

“Despite their significant benefits, many well-functioning nuclear energy facilities — most of which have decades of useful operating life remaining — are at risk of closure or have announced their early retirement,” the group said, urging private and public officials to “work together to ensure that nuclear energy is properly valued in electricity markets.”

Ohio is one of 13 states with nuclear plants in deregulated markets.

PUCO hearing

The PUCO hearing in downtown Toledo, sandwiched between sessions Jan. 12 in Akron and Jan. 20 in Cleveland, drew a wide mix of people including Ottawa County commissioners, township officials, labor leaders, business executives, school officials, community organizers, anti-nuclear activists, and consumers who just want to keep their monthly electric bills down.

FirstEnergy had people in the audience, as did the Ohio Office of Consumers’ Counsel — the little-known Ralph Nadar-like arm of state government with lawyers who stand up for little guys. Groups not normally not involved in debates over nuclear power, such as the Ohio chapter of the American Association of Retired Persons, weighed in with policy statements too.

On the eve of those three hearings, the NEI issued a report claiming Davis-Besse contributes $1.1 billion to Ohio’s economy, $805 million of it in Ottawa County. Davis-Besse also is one of the region’s largest employers, employing 700 full-time workers and offering temporary work to hundreds of area contractors.

FirstEnergy’s commitment to Davis-Besse includes millions of dollars spent during a record two-year outage last decade to get the plant back online in 2004 after what federal prosecutors described as one of nuclear history’s biggest cover-ups. They claimed FirstEnergy put profits so far ahead of safety in the newly deregulated energy market that the utility cut far too many corners and nearly allowed the plant’s original reactor head to burst in 2002.

Once that crisis subsided, FirstEnergy moved forward with its biggest sign of a long-term commitment to Davis-Besse. After years of planning, the utility spent more than $600 million last year to replace the plant’s two massive steam generators.

FirstEnergy also expects to get a 20-year extension soon to the plant’s federal operating license that would allow it to stay online through April 22, 2037 — another multimillion-dollar effort.

But without the new rate plan, FirstEnergy fears a day will come in which Ohio’s highly competitive deregulated energy market will make it hard for the utility to justify Davis-Besse’s continued operation.

Jim Lash, FirstEnergy’s president of generation, shrugs off an economist’s 2013 report that claimed Davis-Besse is among a dozen plants most likely to experience premature closings. But he acknowledges the energy markets “are continuing to change” and said the request made to PUCO is to “establish future certainty.”

The PUCO filing will either cost ratepayers up to $3.2 billion more or $2 billion less in the long run, according to competing analyses generated by the Ohio Office of Consumer Counsel and FirstEnergy, respectively.

Mr. Myers said Ohio is one of several states that need “well-structured” markets that recognize the energy security and fewer climate-altering emissions from the nuclear industry.

He stopped short of calling for a government mandate.

“I’m not sure government mandates are the only solution,” Mr. Myers said. “Clearly, if you’re going to create portfolio standards, there’s no reason you could not include nuclear with solar and wind.”

Power grid

The NEI points to last winter’s polar vortex weather pattern, citing natural-gas pipeline disruptions because of extreme Arctic cold. Baseload generators averted chaos by keeping enough electricity on the power grid, it claims.

Tom Kauffman, NEI spokesman, said Ohio and other states came close to rolling brownouts and blackouts, a statement reinforced by Pennsylvania-based PJM Interconnection, the operator of a 13-state regional grid that includes Ohio.

In a follow-up letter to U.S. EPA Administrator Gina McCarthy, PJM expressed concerns about an over-reliance on “intermittent resources,” an apparent reference to natural gas and renewable energy sources, and said it is “critical that the nuclear fleet in our region remains economically viable.”

Deregulation has created two worlds for nuclear power: strong business in regulated states and a lot of worry in deregulated ones, Mr. Kauffman said.

The only two sites with new nuclear reactors under construction are in Georgia and South Carolina, two regulated states.

In unregulated states, nuclear power has trouble competing against natural gas and renewables, Mr. Kauffman said.

On a regional basis, PJM has “proposed a new way to compensate power suppliers that rewards resources that deliver energy when most needed, such as a cold snap,” according to Ray Dotter, a spokesman for the grid operator.

“Under the plan, resources that fail to perform when needed would make payments that would go to the resources that met the need,” he said.

FirstEnergy’s new rate plan, filed last August, would be in effect from June 1, 2016, through May 31, 2019. The filing includes a request for a 15-year commitment to Sammis and Davis-Besse under a stability plan it calls “Powering Ohio’s Progress.”

According to the utility, that plan will freeze distribution rates while helping keep “critical base load power plants available to serve Ohio customers.”

Bill Malcolm, an AARP Ohio staffer who specializes in utility issues, said it is a “bad deal for Ohio consumers.”

According to Scott Gerfen, Ohio Consumers Counsel spokesman, FirstEnergy has already received billions of dollars for its transition to deregulated power plants under Ohio’s 1999 law that lifted market restrictions.

Michael Shields, a researcher for Policy Matters Ohio, said FirstEnergy shouldn’t be rewarded for failing to diversify its energy mix with renewables. That was required by law until last summer, when the utility successfully lobbied the Ohio legislature to freeze clean-energy standards.

Gov. John Kasich signed the freeze into law, making Ohio the first state to call a time-out on renewable-energy mandates.

“The rate case now pending before us is the result of FirstEnergy’s decision to waste that opportunity [to diversify],” Mr. Shields said. “Sammis and Davis-Besse are inefficient plants which can no longer compete on that market, and have been operating at a loss. Under the proposed agreement, the utilities would pay a premium for power from these plants, then pass that expense on to consumers.”

A similar proposal by Columbus-based American Electric Power is also pending before the utilities commission.

Contact Tom Henry at: thenry@theblade.com, 419-724-6079, or via Twitter @ecowriterohio.

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