By Michael Carroll | From Watchdog.org
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Pennsylvania state lawmakers are wading into a policy dispute that pits two groups of energy behemoths in the state against each other and raises the possibility of ratepayer subsidies going to struggling nuclear power plants.
More than 60 Pennsylvania state lawmakers formed a bipartisan Nuclear Energy Caucus to foster discussions about the future of the state’s nuclear plants. Those nine plants, which supply 35 percent of Pennsylvania’s electricity, have been facing tough times due to the current production of low-cost natural gas in the state and relatively low power demand in the years after the 2008 recession, according to energy industry observers.
And the issue gained some urgency recently when Chicago-based Exelon Corp. gave notice that it plans to close the Three Mile Island nuclear plant in Middletown prematurely in the fall of 2019, unless Pennsylvania comes up with a policy shift to keep the plant economically viable.
“Like New York and Illinois before it, the Commonwealth has an opportunity to take a leadership role by implementing a policy solution to preserve its nuclear energy facilities and the clean, reliable energy and good-paying jobs they provide,” Exelon President and CEO Chris Crane said in a prepared statement.
Illinois Gov. Bruce Rauner signed a bill into law last December that allows an Exelon subsidiary to collect up to $235 million from ratepayers annually to keep unprofitable Illinois nuclear plants operating. Similar debates involving nuclear energy plants have taken place in Ohio, Connecticut and New York.
But both the petroleum industry and some consumer groups are vowing to fight efforts to grant subsidies to Pennsylvania’s nuclear industry, arguing that such subsidies would sock consumers with higher utility bills and distort competitive energy markets.
“A bailout will cost Pennsylvania consumers and businesses billions in surcharges over a long period of time and an untold cost for an unwarranted interference in the competitive markets,” Michael Messer, president of Industrial Energy Consumers of Pennsylvania, said in an opinion article this month.
But John Keeley, spokesman for the Nuclear Energy Institute in Washington, said there’s much more to the debate than simply the cost of nuclear power vs. natural gas. The state also must take into account the reliability of nuclear power, its lack of carbon emissions and its ability to avoid disruptions even during extreme weather.
“What you do not want to do is make a rash decision based solely on the price today,” Keeley told Watchdog.org. A diverse range of electricity suppliers – nuclear, renewable sources such as solar and wind, natural gas – creates a more dependable electricity grid, he said.
And Keeley stressed that closing down a nuclear plant is a permanent, irrevocable decision, spelling the end of hundreds of high-paying jobs and the resulting economic benefits that help sustain communities.
“What you see in Pennsylvania is that policy makers are trying to act to preserve key assets on the grid before they lose them,” he said.
Creating a zero-emissions nuclear credit that’s funded by a small surcharge on utility bills provides a good long-term investment in clean air and a balanced energy grid, according to Keeley. Allowing nuclear plants to close when they are still safe and operational can backfire on consumers, he said, noting that when the San Onofre nuclear plant in California shut down, electricity rates rose by 35 percent.
“The downstream impact is significant and catastrophic,” Keeley said.
At the core of the debate is whether Pennsylvania residents will see their aging nuclear plants as albatrosses or assets. Messer argues that having ratepayers prop up high-cost nuclear energy simply promotes inefficiency.
“The expansion of the Marcellus [natural] gas industry and lower energy costs create a new opportunity to expand business and generate new high-paying jobs for the benefit of all Pennsylvanians,” he said.
The American Petroleum Institute (API), which has an affiliate in Pennsylvania, opposes bailouts or subsidies of any kind for the nuclear industry.
“We would like the energy markets to do the work they’ve been doing to protect consumers,” API spokesman Michael Tadeo told Watchdog.org.
Although no legislative proposal to help the nuclear industry in Pennsylvania has surfaced so far, Tadeo said such discussions have become common in statehouses. A similar effort is under way in Ohio, but recent polling showed 79 percent of that state’s residents oppose bailing out the nuclear industry, he said.
Although leaders of Pennsylvania’s Nuclear Energy Caucus did not respond to Watchdog.org’s request for comment, their past statements mirror many of the arguments of the nuclear industry.
“The nuclear power sector is generating much more than electricity,” said Rep. Rob Matzie, D-Allegheny, in a prepared statement in March. “It is producing economic growth through employment at the plants, indirect employment through vendors and contracted labor, as well as civil and philanthropic engagement and the taxes paid by the industry’s workforce and businesses.”
PJM Interconnection, which operates the regional energy grid running from the East Coast through the Midwest and oversees wholesale energy markets, doesn’t take a position on what states should do relating to nuclear energy. But PJM has previously expressed concerns that state subsidies can interfere with the design of wholesale energy markets.
“Our position is not whether a state should or shouldn’t do whatever it is they want to do,” PJM spokeswoman Paula DuPont said in an email to Watchdog.org, “but it is PJM’s responsibility to make sure the regional market remains competitive.”
One way to do this would be for states to work together to create regional carbon markets that place a value on zero-emission energy generation or a value on fuel security, DuPont said.
“These alternatives could be implemented within the next few years with support from policy makers and regulators at the state and federal level,” she said.
