The Trump Administration plan to bail out struggling nuclear and coal-fired power plants comes two months after FirstEnergy Solutions filed what many experts see as a historic and potentially landmark petition for relief under Chapter 11 bankruptcy laws.
FirstEnergy Solutions is a subsidiary of Akron-based FirstEnergy Corp. The FirstEnergy Solutions bankruptcy filing includes FirstEnergy Nuclear Operating Co., which oversees the Davis-Besse nuclear plant east of Toledo, the Perry nuclear plant east of Cleveland, and the twin-reactor Beaver Valley complex west of Pittsburgh.
The case has become a high-profile one nationally because FirstEnergy is one of America’s largest utilities.
Those nuclear plants — in addition to numerous coal-fired power plants under FirstEnergy — represent a huge chunk of electricity for the regional electric grid Pennsylvania-based PJM Interconnection operates in 13 states, including Ohio. That grid, which serves 65 million people, is the nation’s largest.
Because nuclear and coal-fired plants have become so unprofitable — unable to compete against record-low natural gas prices — FirstEnergy appealed to U.S. Department of Energy Secretary Rick Perry for help when it filed for bankruptcy in March.
It called upon him to exercise emergency authority under a pair of federal laws typically reserved for wars or natural disasters.
Now, with administration spokesman Sarah Huckabee Sanders announcing on Friday that President Trump has directed Mr. Perry to prepare “immediate steps” to keep such plants open, the utility appears to be getting its wish.
According to The Associated Press, such a move is “unprecedented intervention into U.S. energy markets.”
When asked if it was legal, Jeff Shields, a spokesman for the nation’s largest electric grid operator, PJM Interconnection, told The Blade this: “Stay tuned.”
Matter of national security?
PJM stated at the time of the FirstEnergy bankruptcy filing that the grid will continue to have more than enough electricity if FirstEnergy follows through with its announced plans to close those four nuclear plants in 2020 and 2021. The grid operator later said it had agreed to study the potential impact of becoming more reliant on natural gas and other energy sources that critics believe can be intermittent or more vulnerable to disruption.
The Trump Administration, in an announcement, said it was taking the unprecedented step to keep failing nuclear and coal plants running as a matter of national security.
PJM responded by stating again that the planned shuttering of those plants pose “no immediate threat to system reliability,” and warned of higher prices, as have many others.
“Markets have helped to establish a reliable grid with historically low prices,” according to the newest PJM statement. “Any federal intervention in the market to order customers to buy electricity from specific power plants would be damaging to the markets and therefore costly to consumers.”
“The PJM electrical grid is more reliable than ever, with 23 percent reserve margins and billions of dollars of new investment. All of this is occurring while emissions are decreasing and wholesale prices are at historic lows for the 65 million customers we serve,” the company said.
Just days ago, yet another influential party came forward and accused FirstEnergy of embellishing the nature of 2018 market conditions and appealing to the Trump Administration for a bailout it claims is not deserved.
The Office of the Ohio Consumers’ Counsel has filed a formal protest with U.S. Bankruptcy Judge Alan M. Koschik about FirstEnergy’s request for an emergency order from Mr. Perry to ensure the utility’s nuclear and coal-fired power plants remain economically viable. Created by the Ohio General Assembly in 1976, the OCC is a 35-member state office with a $5.5 million budget that aims to serve the interests of Ohio’s residential customers on matters of investor-owned electric, natural gas, telephone, and water services.
It calls FirstEnergy’s request “extraordinary,” as well as “fundamentally unjust and unreasonable for Ohio consumers,” adding Ohioans will be subject to “paying subsidies and above-market prices for electricity” if a bailout is granted.
“Requiring customers to subsidize certain coal-fired and nuclear facilities in [the] PJM [region] would inflict unjust, unreasonable and unduly discriminatory rates on Ohio consumers and consumers throughout the PJM region,” the filing states. “Subsidizing certain power plants [and not others] would also undermine the functioning competitive wholesale market that provides consumers reliable electric service at the lowest possible cost.”
Few experts would disagree it’s much harder for nuclear and coal-fired plants to be profitable since Ohio enacted electricity deregulation in 1996. The Washington-based Nuclear Energy Institute, for one, has said — as hard as it is for nuclear plants to turn a profit now — the most economically distressed ones are in states like Ohio that have deregulated electricity markets.
But the biggest blow came about a decade ago, with rock-bottom natural gas prices brought on by the advent of a horizontal drilling technique in hydraulic fracturing, or “fracking,” of shale. It’s been a game-changer globally for the oil and gas industry, allowing drillers to tap into previously inaccessible reserves.
In recent years, the NEI’s pitch on Capitol Hill has been for utilities with nuclear plants to get special consideration in the market for what the lobbyist group considers “unique attributes” of nuclear power — its potential to generate power around the clock for months at a time and its relatively low emissions.
But while President Trump campaigned on a platform that included more support for nuclear and coal, both of those energy sectors are concerned about more plants closing because of failing economics while they wait for a bailout or some other solution. FirstEnergy’s situation is seen by some experts as a test case, causing a flurry of reactions as both sides of the issue see a lot at stake.
AGs opposed to bailout
Last month began with attorneys general from nine states and the District of Columbia urging Mr. Perry to reject FES’ request for relief from the Trump administration, calling the company’s justification “legally flawed” and “a grave abuse of the Federal Power Act,” a section of which provides for relief during national emergencies.
The letter was signed by AGs from Massachusetts, Connecticut, Illinois, Maryland, North Carolina, Oregon, Rhode Island, Virgnia, Washington, and Washington, D.C.
The U.S. Nuclear Regulatory Commission and the Federal Energy Regulatory Commission will hold a joint meeting Thursday at FERC’s headquarters in Washington to discuss grid reliability, decommissioning, and other nuclear issues. The North American Electric Reliability Corp., which is charged with ensuring the grid remains reliable across the continent, will be part of that meeting.
Meanwhile, the Chicago-based Environmental Law & Policy Center — which called upon the NRC to investigate the utility’s decommissioning trust fund days before FES filed for bankruptcy protection — also took that request last month to Judge Koschik through a 96-page petition, where it was joined by the New York-based Environmental Defense Fund, the Ohio Environmental Council, and Ohio Citizen Action.
Those environmental groups hope to get a hearing from the judge on Friday. They cited findings by a private consultant, the Callan Institute, which claimed FES has fallen far off pace of meeting its financial obligation.
But David McIntyre, a spokesman for the NRC’s headquarters, said a 2017 report issued by FirstEnergy’s nuclear company shows it “demonstrated reasonable assurance that adequate funds would be available for decommissioning.”
The company’s next report is due by March 31, 2019. That report is to be based on information through Dec. 31, 2018.
Such reports are normally required once every two years, but FES will soon be put on annual cycles, per NRC regulations, because it has announced plans to shutter its plants.
The announced closure dates are May 31, 2020, for Davis-Besse; May 31, 2021, for Perry and Beaver Valley Unit 1, and Oct. 31, 2021, for Beaver Valley Unit 2.
The plants may not be closed if a buyer or bailout emerges.
Thomas Mulligan, FES spokesman, said the subsidiary has no immediate plans to comment on filings and other developments in the bankruptcy case.
But in the aftermath of President Trump’s directive, Don Moul, president of FES generation companies and chief nuclear officer, had this to say: “We welcome President Trump’s support and his recognition of the critical role that our plants play in the security and resilience of the nation’s electrical system. We look forward to reviewing Secretary Perry’s order when it is issued. While this marks an important first step, until timing and details of the order are clear, additional support at the state level will be necessary to protect the jobs in Ohio and Pennsylvania.”
Guidelines: Please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. Comments that violate these standards, or our privacy statement or visitor's agreement, are subject to being removed and commenters are subject to being banned. To post comments, you must be a registered user on toledoblade.com. To find out more, please visit the FAQ.