Bailout Bill a bonanza for FirstEnergy solutions, but a boondoggle for Ohio consumers
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Key Findings
There is no reason to be concerned that retirement of Davis-Besse and Perry will lead to electricity blackouts or other reliability problems.
PJM as a whole has more than enough capacity to reliably serve projected demand, as can be seen in the results of the annual capacity auctions PJM conducts to ensure that it will have enough power during peak periods.
FirstEnergy Solutions and proponents of the bailout argue that closing Davis Besse and Perry will drive up electricity bills in Ohio, going so far as to say, “Looking at Ohio specifically, electric bills for the average residential consumer will increase by $2.50-$5.00 per month, according to recent studies.”
Executive Summary
The impetus for Ohio House Bill 6, is the undeniable fact that energy markets are changing, making nuclear and coal-fired power uncompetitive with natural gas and renewables for electricity generation. FirstEnergy Solutions is seeking a bailout of its two nuclear plants, Davis Besse and Perry. Its remaining coal-fired power plant in Ohio, Sammis, may benefit from the bailout as well. If the bill passes, the cost to Ohio consumers and businesses is estimated at more than $300 million per year in perpetuity.
Ironically, although bailout proponents acknowledge the role of market forces in creating current conditions, they are using distorted and, in some cases, highly misleading arguments about the way energy markets work to bolster their arguments for House Bill 6.
The Institute for Energy Economics and Financial Analysis (IEEFA) has examined the claims made by FirstEnergy and its supporters and has found that:
- FirstEnergy’s nuclear and coal plants are not needed to ensure electricity supply or reliability in Ohio.
- Taking the nuclear plants off the market is unlikely to drive up electricity rates in Ohio – but reducing energy efficiency and renewable energy could have that effect.
- If Ohio is serious about providing low cost sources of clean energy, it would make more economic sense to invest in solar energy than to subsidize aging nuclear plants.
IEEFA recommends that Ohio follow the lead of New York state and allocate resources to support the tax bases of all school districts and communities going through the economic transition caused by the closure of coal and nuclear plants.
The state should also embark on a serious program to support workers who lose their jobs when coal and nuclear plants close. This should include pushing for thorough and timely clean up and decommissioning of these facilities, with hiring preferences for people currently employed at the plants.
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