Industrial consumers oppose evolving Pennsylvania nuclear subsidy proposal

Dive Brief:

Industrial energy consumers in Pennsylvania are lining up to oppose an evolving proposal to support the state's nuclear plants set to be released soon in the state's General Assembly.
In a letter to lawmakers, the Industrial Energy Consumers of Pennsylvania said the bill in development by state Sen. Ryan Aumet, R, would increase electricity prices, pushing them to cut jobs. A draft version of the bill was leaked last week.
The draft bill would create a new tier under Pennsylvania's Alternative Energy Portfolio to direct utilities to purchase power from the state's nine nuclear plants. RTO Insider reports the bill could be introduced as early as this week, but Aumet's office told Utility Dive its release date is not yet set.

Dive Insight:

Pennsylvania is the latest front in the public policy battle over retiring nuclear plants, which are threatened by lower priced natural gas generators and renewable energy in wholesale power markets.

In recent years, the nuclear industry has secured subsidies from policies in New York, Illinois and New Jersey that direct utilities to purchase power from the carbon-free generators.

The Pennsylvania bill would follow a similar model, according to the draft language. The proposal would create a new "Tier III" of the state's alternative portfolio standard that includes nuclear energy along with wind, solar and other zero-carbon resources.

By 2021, utilities would have to source 50% of their power from those sources. The state currently gets 42% of its power from nuclear energy.

The credits paid to nuclear plants would be determined by the Public Utilities Commission using a formula based on the expected future price of renewable energy credits in Pennsylvania. Like subsidy programs in other states, it would not link the price to wholesale electricity markets in an attempt to avoid jurisdiction of the Federal Energy Regulatory Commission (FERC).

Though some details remain unresolved, the University of Pennsylvania's Kleinman Center for Energy Policy estimates yearly payments to the plants could amount to $981 million. That estimate does not include a provision in the draft bill that would allow Tier III resources to be paid for their capacity even if they opt out of the PJM Interconnection's capacity market using changes to the Fixed Resource Requirement rules currently pending at FERC.

The industrial energy customers seize on that estimate in their letter, writing that "any electricity cost increase from another nuclear bailout will likely be offset by a reduction in employment."

Proponents of the bill see the issue differently. Early this month, Aumet and allies circulated a memo to state lawmakers arguing that closing all the state's nuclear plants would cost Pennsylvania $788 million annually in electricity cost increases and $2 billion annually in state GDP.

Legislators will have to move quickly to preserve the state's nuclear generation. If they do not pass a support package by June 1, operator Exelon has threatened to begin shutdown procedures at its Three Mile Island plant.