API-Ohio Reacts to New Report Which Shows Ohio Nuclear Plants Are Profitable, HB 6 Bailout Unnecessary

COLUMBUS, May 28, 2019—API Ohio released a statement in reaction to a study published today by PJM Interconnection’s former Chief Economist, Paul Sotkiewicz, that looks at the financial position of the Davis-Besse and Perry nuclear plants currently seeking a taxpayer funded bailout through House Bill 6 (HB 6), scheduled to be voted on by the full House of Representatives tomorrow, Wednesday, May 29.

“This study is proof that the FirstEnergy Solutions nuclear plants are profitable and have no need for a financial bailout on the backs of Ohio taxpayers. Additionally, it finds that even if both plants retire CO2 emissions will continue to decrease due to continued coal plant retirements and their replacement by clean-burning natural gas,” said Chris Zeigler, executive director of API Ohio. “FirstEnergy has deliberately misled Ohioans in an attempt to secure a bailout from taxpayers, and legislators need to vote ‘No’ on HB 6 tomorrow to protect the hardworking families of Ohio.”

Key takeaways from the report include:

• Nuclear facilities in Ohio can easily cover their costs through 2028 and would not rationally be forced to retire: As single unit reactors, the costs for both Davis-Besse and Perry are lower by nearly 25 percent below the industry average, making these units among the best single unit performers in the U.S nuclear fleet. The results of this new report refute PJM’s previous profitability conclusions by using unit specific costs, whose relative accuracy has been verified by examining FirstEnergy financial statements in Securities and Exchange Commission (SEC) filings. In contrast the PJM IMM used industry average costs for single unit nuclear facilities that are much higher than the publicly available unit specific costs for Davis-Besse and Perry.
• Recent statements confirm the idea that nuclear facilities in Ohio are profitable and will not retire: As FirstEnergy Solutions emerges from bankruptcy proceedings, it will no longer have the debt service that it once had and has stated that the revised bankruptcy plan just announced April 21, “will significantly strengthen our financial position and allow FES to emerge as a fully integrated independent power producer.” The Ohio nuclear units have no intention of retiring if FES is aiming to emerge as an independent power producer.
• Out-of-market financial support to profitable Ohio nuclear plants only raises consumer rates and increases owner profits and does not lead to reduced emissions: The Ohio nuclear units are operating profitably and there is no rational economic reason for them to retire. Retiring would lead to losses if there are any sunk costs that have not yet been recovered through the market.
• Out of market financial support for Ohio nuclear facilities would wipe out the cost savings from participating in PJM’s markets: According to PJM, its markets save consumers in the PJM footprint about $2.3 billion annually. This translates to a savings of approximately $2.85/MWh with a PJM administrative cost of $0.32/MWh, for a cost benefit ratio of about 8.9-to-1 in 2018. But the equivalent of $2.18/MWh charge to load would nearly eliminate these benefits to Ohio consumers.

API Ohio is a division of API, which represents all segments of America’s oil and natural gas industry. Our more than 600 members produce, process and distribute most of the nation’s energy. The industry supports more than ten million U.S. jobs and is backed by a growing grassroots movement of millions of Americans. API was formed in 1919 as a standards-setting organization. In our first 100 years, API has developed more than 700 standards to enhance operational and environmental safety, efficiency and sustainability.