$500 million Pennsylvania nuclear rescue plan triggers fierce battle from rival power producers

After two years of preparation and months of speculation, supporters of Pennsylvania’s nuclear industry on Monday unveiled a proposed $500 million rescue package that they say would cost each state household about $1.77 a month in higher electric rates.

The bill, introduced by Rep. Tom Mehaffie (R., Dauphin), which would require utilities and other retail sellers of electricity to buy half their power from zero-emission nuclear power plants, immediately triggered a fierce debate over how much government should tinker with competitive energy markets.

With its introduction, Pennsylvania becomes the fifth state to take up a proposal to support nuclear power plants, which have struggled to compete in energy markets where low-cost natural gas has driven down the price of electricity.

A coalition of environmental groups denounced the bill and urged the state to focus on supporting renewable energy rather than nuclear power. Natural gas producers, whose market share would be constrained under the bill, called for competitive markets to prevail.

Gov. Tom Wolf was noncommittal, saying through a spokesperson that he empathized with nuclear-industry workers whose jobs are threatened, and recognized the “important" contribution nuclear power makes to reducing greenhouse gas emissions and air pollution. “At the same time, any solution to ensure the sustainability of nuclear facilities should have a fair cost-benefit ratio for consumers and be based on full transparency from operators seeking assistance,” the governor said in a statement.

Mehaffie pegged the bill’s costs at the lower end of the range that analysts were expecting — some estimated up to $900 million, or more than $5 a month for residential customers. Mehaffie’s district is next to Three Mile Island Unit 1, whose owner, Exelon Generation, has threatened to shut down the plant in September if there is no financial aid. First Energy Corp., which owns the twin-unit Beaver Valley Nuclear Power Station in western Pennsylvania, has announced the plant’s closure in 2021 if it cannot obtain a subsidy.

“While much discussion will occur in the coming months about costs, the cost of doing nothing is $4.6 billion, including $788 million annually in higher electricity costs to consumers, whereas the cost of this bill is approximately $500 million — that’s an 8-to-1 benefit-to-cost ratio,” Mehaffie said in a statement. He unveiled the bill Monday at an Ironworkers’ union hall in Harrisburg, along with labor and business leaders.

The bill, called the Keep Powering Pennsylvania Act, would amend the state’s 2004 Alternative Energy Portfolio Standards Act (AEPS), which mandates that 18 percent of power sold in the state be derived from alternative energy sources by 2021. The bill would add a category of zero-emission power reserved largely for nuclear producers that would supply 50 percent of the state’s electricity demand.

Advocates say the rescue plan would save high-paying nuclear jobs, preserve a diverse mix of electricity sources, and prevent an increase in emissions of carbon dioxide and other pollutants from natural-gas plants that would step in to replace retiring nuclear plants.

Opponents, including the natural gas industry, large industrial customers, and consumer groups such as AARP have derided the bill as a “bailout” that will increase costs, distort competitive energy markets, and fail to improve the reliability of the electric grid.

They say the subsidy would enrich most of the owners of the state’s five nuclear plants, led by Exelon Generation, which operates three of the plants — TMI Unit 1 in Dauphin County, Limerick Generating Station in Montgomery County, and Peach Bottom Atomic Power Station in York County. Critics maintain that most of the state’s plants are profitable without a subsidy.

Sen. Ryan Aument (R., Lancaster) is expected to introduce a similar version of the nuclear bill this week. Aument and Mehaffie are among the leaders of a bipartisan group of legislators that formed the Nuclear Caucus two years ago to lay the political groundwork for a nuclear rescue.

The bill’s authors say that by amending an existing law, they hope to limit the grounds of an expected legal challenge.

The bill differs from nuclear rescues approved in Illinois, New Jersey, New York, and Connecticut, which created a zero-emission credit specifically targeting nuclear energy. Federal courts have upheld the laws in Illinois and New York, and opponents have petitioned the U.S. Supreme Court to overturn them.

The New Jersey zero-emission credit, approved last year but not implemented, could provide the state’s three reactors with up to $300 million in subsidies, though under the law the plant’s operator, PSEG Nuclear, must prove that the plants are financially stressed. The New Jersey Division of Rate Counsel, the state’s consumer advocate, has challenged the process, saying PSEG has failed to meet its burden to show the plants need subsidies.

In Pennsylvania, the current AEPS rewards two tiers of power producers. The first tier reserves 8 percent of the market for emerging renewable producers, including wind, low-impact hydro, geothermal, and biogas, and includes a 0.5 percent market share for solar photovoltaic producers. A second tier sets aside 10 percent of the market for alternative power producers, including large-scale hydro, waste-coal generators, and power plants that burn solid waste.

Mehaffie’s bill would create a Tier III credit that would reward zero-emission power producers that are connected to the grid (individual solar and wind producers need not apply). The producers would need to demonstrate that Pennsylvania’s environment would be negatively impacted if the power plant shut down or failed to come into service.

Though out-of-state nuclear plants or even wind and solar producers could qualify for the credits, the Public Utility Commission would rank applicants, which would presumably favor Pennsylvania producers. Under the proposal, a qualifying power plant could not receive subsidies in other states. Solar and wind producers could qualify for either Tier III or Tier I credits, but not both.

The bill’s advocates say it would put nuclear energy on equal footing with other forms of zero-carbon power sources. But a coalition of environmental groups said the state should move on from nuclear power.

“This legislation does nothing to advance the deployment of renewable energy in Pennsylvania and further locks us into increasingly expensive nuclear power from old and outdated equipment,” said the green advocates, including the Sierra Club, Natural Resources Defense Council, Clean Air Council, PennFuture, PennEnvironment, Keystone Progress, Clean Water Action, Physicians for Social Responsibility Philadelphia/Pennsylvania, Conservation Voters of Pennsylvania, and Philadelphia Solar Energy Association.

Citizens Against Nuclear Bailouts, an opposition coalition that includes the powerful natural gas industry, denounced the bill as an anti-consumer measure.

“The Alternative Energy Portfolio Standard was intended to advance the development of new and innovative technology, not to bail out old technology developed in the 1960s that is leaving a generational legacy of nuclear waste,” the organization said Monday in a statement. “Furthermore, nuclear power relies largely on imported uranium from foreign interests, including Russia, Kazakhstan, and Uzbekistan.”