Dive Brief:

• Lawmakers in Ohio have introduced a bill that would provide payments to keep FirstEnergy’s Ohio nuclear plants operating.

• SB 128 would create a Zero Emission Nuclear Resource (ZEN) program to compensate the FirstEnergy’s nuclear plants for the “clean, reliable and secure power they generate.”

• A press release from Sen. John Eklund (R), the bill’s sponsor, said customers with a nuclear plant in their service territory would see a “small increase” in their monthly electric bills. 

Dive Insight:

Ohio is the latest state to catch ZEC fever. Zero emission credits are designed to aid nuclear plants at risk of early closure in the nation's wholesale markets by paying them for their zero-carbon generation.

But critics, ranging from consumer advocates to gas generators, have opposed them, saying they threaten price formation in organized power markets. 

In a recent filing, the PJM Interconnection’s market monitor wrote that “subsidies are contagious."

Connecticut late last month introduced legislation that would create a solicitation that could provide a power purchase agreement for the state’s sole nuclear plant, Dominion Energy’s Millstone station.

New Jersey is also considering a ZEC proposal. 

Prior to that, New York’s Public Service Commission and Illinois’ legislature passed ZECs aimed at keeping nuclear plants in their states operating. Both efforts are being contested.

The bill that is soon to be introduced in Ohio uses a different name, ZEN, but it is similar in many respects to the efforts in other states.

To qualify for the ZEN, a nuclear plant would have to be connected to the PJM Interconnection. SB 128 also would require all Ohio electric distribution companies with a nuclear plant in its service territory to participate in the program.

The bill further stipulates that “all electric distribution utilities in the same holding company system shall participate jointly and shall allocate costs across all classes of each participating utility's customers.”

FirstEnergy has two nuclear plants in Ohio, Davis-Besse and Perry, and one in Pennsylvania, the Beaver Valley station in Shippingport, which is served by Duquesne Power.

The bill also makes provisions for “all other nuclear energy resources” that provide “the same level of environmental benefits to the state as nuclear energy resources located within the state.”

The price of the ZENs would be set by the state’s Public Utilities Commission and start at $17 per credit. The program would run for successive two-year periods.

The PUC would set the maximum number of credits utilities would be required to purchase for each period, using as a base an amount equal to one-third of total end-user consumption in megawatt-hours over the prior two-year period.

Costs of purchasing ZENs would be recovered by the utilities through a non-bypasable rider capped at 5% of June 2015 rates.

Until disbursed, payments would be escrowed into a fund that is not part of the state’s treasury, but investment earnings would be transferred to the state’s general revenue fund.

The program would be subject to review in its six and eleventh years, and the program calls for employment levels to be maintained at 1990 levels.

“We strongly urge Ohio legislators and Governor Kasich to follow the recommendations of Senator John Eklund and Representative Anthony DeVitis and pass ZEN to build a better energy future for the people of Ohio,” Chuck Jones, president and CEO of FirstEnergy, said in a statement.

The spread of ZECs and other out-of-market power incentives has not gone unnoticed by federal regulators. FERC will hold a technical conference next month to discuss the around-market incentives with stakeholders from the nation's ISOs and RTOs.