IEEFA Report: ‘Natural Security’ Argument for Saving 2 Power Plants Is a Red Herring Meant to Distract From an Ohio Valley Electric Bailout

Keeping Kyger Creek and Clifty Creek on Life Support Would Cost Ratepayers $1.4 Billion; Market Conditions Will Continue to Undermine Viability of Aging Coal-Fired Plants; Public Resources Are Better Spent on Investing in Transition; Neither Generator Is Needed for Grid Stability

June 20, 2017  (IEEFA.org) – The Institute for Energy Economics and Financial Analysis (IEEFA) today published a research brief questioning a bill in the Ohio legislature that would bail out two failing coal-fired power plants owned by the Ohio Valley Electric Corporation (OVEC) and keep the plants alive at huge expense to ratepayers.

The plants in question, Kyger Creek and Clifty Creek, were built sixty years ago to provide power to the now defunct Piketon Uranium Enrichment Facility.

The IEEFA brief— “It Is Time to Retire, Not Bail Out, OVEC’s Two Coal Plants”—notes that the bill before legislators is the latest in a series of proposals by Ohio’s electric utilities over the past several years to provide life supports to coal and nuclear plants that are no longer competitive with natural gas and renewable energy.

“The new twist in this legislation is to designate these two plants as ‘national security generation resources,’ which is a red herring because this is nothing but a bail out, plain and simple, for the owners of the plant,” said David Schlissel, IEEFA’s director of resource planning analysis and author of the brief.

Five investor-owned utilities or holding companies in Ohio—Duke Energy Ohio, Columbus Southern Power Company, Dayton Power & Light, FirstEnergy Corporation, and Ohio Power Company—own 38.68 percent of OVEC. The remaining 61.32 percent is owned by companies elsewhere across the PJM and MISO transmission regions.

IEEFA’s key findings:

  • Ohio electricity customers would pay at least $1.4 billion above the cost of market power to keep the two plants in service until 2030. A longer-term bailout would cost even more.
  • OVEC’s cost of power increased by 70 percent from 2007 to 2016, in large part due to ill-advised capital expenditures for pollution control equipment made after the markets were rendering the plants uncompetitive.
  • Market conditions will continue to undermine the viability of the plants for decades to come, potentially increasing the costs of the bailouts.
  • The plants are not needed for grid reliability.
  • A more prudent use of state finances would be to retire the two plants and to provide fiscal support to the local governments during a multi-year transition period, as well as supporting workers who may be laid off.

The report notes that New York State has enacted economic transition legislation that could be used as a model in Ohio.

“Instead of approving a long-term (or even a shorter-term) bailout of OVEC’s investment in Clifty Creek and Kyger Creek, the Ohio legislature should require OVEC’s Ohio owners (a) to determine the least cost way to retire the plants in the near future and (b) to work with the affected states, communities, and employees to plan for the orderly and just transition to a profitable and sustainable energy,” the report concludes.

Full report: “It Is Time to Retire, Not Bail Out, OVEC’s Two Coal Plants”

Media contacts: Jessica Studeny,  jstudeny@ieefa.org, 216-409-9319


About IEEFA: The Cleveland-based Institute for Energy Economics and Financial Analysis (IEEFA) conducts research and analyses on financial and economic issues related to energy and the environment. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.

 

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