Let Markets Work for Consumers in Ohio

Mark Green
Posted May 10, 2017

As a few states consider subsidizing nuclear power generation, it’s important to stress again that market-distorting proposals too often end up costing consumers.

Ohio lawmakers are discussing a proposal to establish zero-emission credits for nuclear plants, giving them an advantage against other energy sources. Instead of government picking winners and losers, the marketplace should determine an energy source’s viability – based on affordability, efficiency and other factors – letting the market work for consumers.

API Ohio Executive Director Chris Zeigler and API Chief Economist Erica Bowman discussed these issues during a conference call with reporters. Zeigler:

“Ohio has abundant reserves of clean-burning natural gas that has provided consumers and businesses in the state with affordable electricity and provided Ohio workers with countless jobs without government subsidies. In fact, more than 255,000 jobs in the state are supported by the natural gas and oil industry, and wholesale electricity prices in the state have dropped nearly 50 percent since 2008, thanks to competition in the electricity markets.”

Zeigler said the nuclear subsidy proposal in Ohio would benefit power plants that have become “uncompetitive under current market conditions.” Zeigler:

“Instead of providing bailouts to uneconomic nuclear power plants, we should let the energy markets work to protect consumers. Despite what you hear from supporters of this legislation, and thanks to clean-burning natural gas, Ohio is experiencing cleaner air and historic reductions in emissions.”

Subsidy legislation would raise significant costs for consumers throughout the state, he said. This contrasts with saving benefits nationwide from the U.S. energy renaissance – with the average American household saving up to $1,337 due to lower utility bills and other energy-related savings in 2015 and U.S. drivers saving on average as much as $550, according to AAA.

A side note: Don’t confuse nuclear subsidy proposals in Ohio and other states with the tax deductions that our industry – and every other U.S. manufacturing industry – receives for specific operating expenses, deductions that help support new investment in drilling, production and U.S. jobs. A subsidy is a direct financial handout by government, and the receiving entity gets funding that goes into its profit margin. Our industry pays into federal, state and local government treasuries. It doesn’t withdraw funds.

Bowman, who gave testimony to the Ohio House Public Utilities Committee, said more than 10,000 megawatts of natural gas power plants are under development in Ohio. Once these modern, highly efficient plants come online, they’re expected to use about 2 billion cubic feet (Bcf) of natural gas per day, a little less than half of the state’s daily natural gas output of 4.2 Bcf. Bowman:

“These plants would use nearly half of today’s production levels, driving up demand for natural gas and increasing direct and indirect job creation.  We do not need to subsidize uneconomical nuclear generation facilities to support job creation in Ohio.  In fact, by mandating such subsidies we could diminish job-creating investment in Ohio’s natural gas resources and drive away manufacturing as well, which is making a resurgence in the state due to low-cost energy.”

Bowman said subsidy legislation calls for $300 million per year in subsidies, funded by ratepayers, for 16 years for a total cost of $4.8 billion. The subsidy would be in addition to more than $200 million in rate increases per year that the state’s public utilities commission allowed nuclear power plant owner FirstEnergy to levy on state residents, she said. Bowman:

“When do we say enough is enough? It’s time to put Ohio consumers first and reject bailouts for nuclear power companies. H.B. 178 would skew the energy markets by propping up uncompetitive nuclear generation, increase costs for ratepayers including consumers and businesses and deny Ohioans the economic and environmental benefits of natural gas.”