COLUMBUS– At a time when many coal-fired plantsare closing, Ohioans are paying fortwo coal plants on their electric bills, and one isn't even located in the state.
The reasons why Ohioans are subsidizing thePiketon-basedOhio Valley Electric Corp.(OVEC) plantsare complicatedand, of course, political. The plants were built to power America's push for nuclear weapons during the Cold War. But that role was short-lived, and opponents say the plantshave outlived their usefulness.
The OVEC plants became a bargaining chip in the heated House Bill 6 fight to bail out two nuclear plants in northern Ohio then owned by FirstEnergy Solutions. With much of the attention on the $1 billion nuclear bailout, lawmakers extended monthly fees on Ohioans' electric bills for the two coal plants through 2030.
While much of House Bill 6 focused on helping Akron-based FirstEnergy and FirstEnergy Solutions, the OVEC fees benefited Ohio's three remaining utilities,which all have a stake in the coal plants. The law took effect in October 2019 after a costly ballot battle to block it failed.
Months after the bill became law, federal investigators arrested former Ohio House Speaker Larry Householder and four others in connection with a nearly $61 million bribery scheme to pass and defend House Bill 6.
The arrests sparked a push to repeal or repeal and replace the bill.In March, Ohio lawmakers axed the nuclear subsidies with the apparent blessing of the nuclear plant owners, but the OVEC fees remained.
The political calculus was simple: Anything tied to FirstEnergy had to go.
“The stuff that’s already been repealed had to do with the wounded utility whereas OVEC has to do with three relatively healthy utilities,” said Sen. Mark Romanchuk, R-Ontario. “So, politically, it’s much harder to get done.”
A patriotic history
Thanks toHouse Bill 6, Ohioans will pay for the OVECplants withtheir monthly electric bills through 2030 – an up to$1.50 monthly charge for residential customers and up to $1,500 for commercial and industrial ones.
Customers could pay $700 million in fees over the decade, according to an Ohio Manufacturers' Association review. The Ohio Consumers' Counsel puts the cost to Ohio ratepayers at$232,718 a day. However, an exact figure is difficult to nail down because energy prices are difficult to predict.
One of the subsidized plants isn'tlocated in Ohio. The1,304-megawatt Clifty Creek Power Plant is located in Madison, Indiana, about 75 miles southwest of Cincinnati. Its sister plant, the1,086-megawatt Kyger Creek Power Plant, is located inGallia County along the Ohio River near the West Virginia border.
However, repealing OVEC fees has beendifficultbecause of the plants' history: a patriotic story of businesses answering the call to serve their country during the Cold War.
In the 1950s, America needed new ways to make nuclear weapons. The former Atomic Energy Commission approved a new uranium enrichment plant in southern Ohio: thePortsmouth Gaseous Diffusion Plant in Piketon.
To power that plant, two coal-fired plants were constructed: Kyger Creek and Clifty Creek. Several investor-owned electrical utilities joined together to form OVEC and its wholly-owned subsidiary, the Indiana-Kentucky Electric Corporation (IKEC), which owned the plants. Today, AEP Ohio, Duke Energy andAES Ohio, previously called Dayton Power and Light, all have a stake in OVEC.
In 1952, OVEC entered into a contract to fuel the uranium enrichment plant, which later shifted from making weapons to powering commercial nuclear power plants. Thecontract was extended until the U.S. Department of Energy canceled it in 2003. DOEpaid OVEC$97.5 million when it ended the deal.
A bad business decision?
After the federal contract ended, OVEC started sellingpower on the regional wholesale electric market, called the PJM Interconnection, and to its own utility members. In 2011, utilities extended their OVEC agreementthroughJune 30, 2040.
Around that time, a boom in natural gas started to drive down the price of energy, and OVEC saddled itself with new debt. Between 2011 and 2013, OVEC spent$1 billion in upgrades toremovesulfur dioxide fromexhaust flue gases to meet environmental standards.
"The three Ohio utilities had a chance to exit the contract in 2011 and they chose to make a business decision to enter back into this supply agreement,"said Romanchuk, who has proposed Senate Bill 117to eliminate the fees. "They just made a business decision that hasn't worked out for them, so they want the ratepayers to help them out."
Shortly after signing thatnew contract, utilities asked the Public Utilities Commission of Ohio, which regulates energy generators and providers, to let them charge customers for OVEC expenses. They pitched the ideaas a hedge:if OVEC's revenue exceeded its costs, ratepayers would receive a credit.
But in practice, customers are beingchargedrather than refunded.
The PUCO-approved charges lastedthrough October 2023 for AES Ohio, previously called Dayton Power and Light, and May 2024 for AEP and Duke Energy. But Ohio lawmakers extended them throughDec. 31, 2030, and some deferred costs could be collected after that date.
Opponents of the OVEC fees argue they bail out aging, uneconomical coal plants. For example,an audit of AEP'sOVECfees found the plants cost more than they earn.
"AEP Ohio customers could be locked into paying a premium for energy and capacity from the OVEC plants for up to another 20 years," according to theaudit, published in September 2020."Though market prices could change in the future, and the premium could become a discount."
In bankruptcy filings,FirstEnergy Solutions reported losing $12 million a year because of a4.85% share in OVEC. The company estimated it would lose $268 million over the remaining two decades of the OVEC deal.
AnOhio Legislative Service Commission analysisestimated that OVEC members could have saved$94.3 million in 2018 by buying energy on the PJM market instead of from OVEC in 2018.
Sen. Hearcel Craig, D-Columbus, said it's important that the utilities,not Ohio ratepayers, foot the bill for those losses.
"Certainly we respect the economic viability of the utilities, but we must also be clearly concerned and clearly emphasize the importance of protecting the interest of the ratepayers," he said.
In defense of OVEC
Supporters of OVEC say the plants are operating at a high level, particularly for their age.
"These plants are workhorses that operate efficiently and perform strongly when called upon by the grid operator," a Duke Energy Ohio spokesman said of the plants. "Even though times change, the OVEC assets are continuing to support their original mission – to support our country’s long-term health and security."
Coal should remain a part of Ohio's energy mix,said Rep. Bill Seitz, R-Green Township."In the interest of fuel diversity, it is important to have some coal around, and I believe in coal."
Proponents also say the fees in HouseBill 6 were already approved by the PUCO and upheld by courts.Lawmakers simply extended them and added protections for customers: capping charges on Ohioans' electric bills, preventing utilities from making a profit off the fees and requiring a PUCO review of utilities' actions every three years.
The fees had another benefit:The consistent flow of money will allow OVEC to pay down nearly all of its debt, about $1.1 billion,by 2030, Seitz told lawmakers in March. "If we want the three Ohio investor-owned utilities to be able to extract themselves from OVEC, it is very important that the debt that OVEC incurred be retired."
While lawmakers debate the fees' fate, utility regulators are launching a review of how utilities are spending that money – a requirement under House Bill 6. The audit could help answer the lingering question: Are these fees a good idea?
