Dive Brief:
- FirstEnergy's Davis-Besse nuclear plant will soon close if Ohio lawmakers do not approve a plant subsidy bill currently languishing in a state Senate committee, a company executive said Thursday.
- While no closure date has been set, CFO James Pearson told The Toledo Blade that Davis-Besse's March refueling outage will likely be the last one for the plant if lawmakers do not approve generation supports. The leader of the Senate utilities committee, however, said separately he has no plans to move the bill.
- FirstEnergy issued a similar warning in March 2017 ahead of the unveiling of the subsidy bill, SB 128. The company is seeking an exit from the merchant generation business after a series of high-profile regulatory failures to gain higher payments for its plants.
Dive Insight:
Davis-Besse's financial struggles are familiar, as are FirstEnergy warnings of its impending closure.
In an interview with The Blade, Pearson the 908 MW plant cannot cover its costs in the PJM wholesale electricity market. Cheap natural gas and renewable energy have been undermining the plant and other large, inflexible generators in electricity markets, forcing the retirement of coal and nuclear plants.
The warning is nearly identical to the one the company's Chief Nuclear Officer Sam Belcher told The Blade back in March 2017, when the utility was preparing legislation to support the nuclear plant.
“The situation is real. It’s urgent,” Belcher told The Blade. “In the absence of something happening, we’re going to have to make some tough decisions.”
That time may be coming. This week, the Ohio Senate Public Utilities Committee held a hearing into SB 128, which would add fees to ratepayer bills to support Davis-Besse. Committee Chair Bill Seitz then told The Plain Dealer he had no plans to hold more hearings or a vote on the legislation.
Without that bill or action from regulators, Pearson said Davis-Besse's closure could come quickly. Employees at the plant reportedly think that its annual refueling outage in March will be the last one for the plant, and Pearson told The Blade that assumption is “entirely accurate.”
Failure of the subsidy bill would be the latest in a series of regulatory defeats for FirstEnergy as it attempts to smooth its exit from the merchant generation sector. This month, the Federal Energy Regulatory Commission rejected a plan supported by the company to lend cost recovery to coal and nuclear plants, instead starting a longer investigation into grid resilience.
Belcher on Thursday told The Plain Dealer that resilience proceeding will likely conclude too late to save Davis-Besse.
"Any federal or regional market action would likely be too late to assist Ohio," he said. "We believe the highest chance of success for a near-term solution is through state legislation."
FERC this month also blocked a FirstEnergy plan to sell a struggling merchant coal plant into cost recovery, and in 2016 rejected special power purchase agreements for Davis-Besse and other struggling plants, though FirstEnergy was able to secure other payments from Ohio regulators.
Winning subsidies or cost recovery would make Davis-Besse and other FirstEnergy plants more appealing to potential buyers as the company looks to shed its merchant assets. But without some support, Pearson told The Blade it would likely be "impossible" to find a buyer for the nuclear plant.
The FirstEnergy CTO said timing of the shutdown would likely depend on creditors and court decisions. The Blade notes FirstEnergy's merchant subsidiary faces a $100 million debt payment on April 2. The company this month secured $2.5 billion from private equity firms to ease its transition to the regulated utility sector.
