Dive Brief:

• American Electric Power, FirstEnergy and other electric utility companies could own nuclear power plants in Ohio — a state that generally bars utilities from owning generation — under a bill introduced earlier this month in the Ohio House.
• Generally, H.B. 862 requires the costs of a nuclear power plant to only be paid for by a customer or group of customers that have agreed to buy the plant’s output under a long-term contract.
• Referring to the FirstEnergy bribery scandal involving nuclear power subsidies, the Ohio Manufacturers’ Association on May 13 said the bill revives “the House Bill 6 playbook by giving monopoly utilities a new path back into generation ownership and putting the financial risk on customers’ electric bills.”

Dive Insight:

The bill comes as Columbus, Ohio-based AEP is exploring developing small modular nuclear projects in Indiana and Virginia — areas with significant data center development.

“We are actively reviewing several potential sites and interconnection locations as we assess how nuclear can play a meaningful role in the future to support load growth,” William Fehrman, AEP chairman, president and CEO, said May 5 during an earnings conference call. “Any nuclear investment will require strong capital protection, disciplined balance sheet safeguards and significant regulatory and governmental engagement, such as loan guarantees and long lead-time equipment support.”

The Ohio legislation, which has two Republican sponsors, provides a regulatory framework that could bolster AEP’s plans.

Under the bill, a nuclear project must receive “financing” and “ratemaking” orders from the Public Utilities Commission of Ohio. The project must be backed by at least one retail participation agreement between the utility and a customer or group of customers, with a minimum 20-year term and a renewal option.

To issue the orders, the PUC would have to determine that the planned nuclear projects are needed to help Ohio become more energy independent and to ensure a utility has enough power supplies to meet its load forecasts.

Under the ratemaking order, a utility would receive “construction work in progress” cost recovery. Also, the project would be added to the utility’s rate base. However, all the project’s costs would only be recovered from the customers that are buying the nuclear facility’s power, according to the bill.

When the offtake contract expires, the nuclear plant will remain in the utility’s rate base if power from the plant is no more expensive than the market price of electricity. The existing customers would pay any remaining costs associated with the facility, including development, decommissioning and retirements costs, according to the bill. If the cost of electricity from the plant is higher than market rates, customers would pay the market rate.

The bill gives the PUC 360 days to review an application. The application will be deemed approved if the PUC misses the deadline.

The bill gives the Ohio power siting board 150 days to approve a construction permit application for nuclear projects that have federal or state financial backing and would be built on a brownfield site or a former coal mine. The deadline can be extended by 150 days if the applicant agrees to the extension. If the board doesn’t meet the deadline, the application will be deemed to be approved.

Ohio is also supporting nuclear development through a $100 million program announced in October. Funding under the five-year JobsOhio initiative can be used for SMR siting, incentives for attracting SMR manufacturing and production, and gas-fired generation.

The Ohio Manufacturers’ Association opposes the bill.

“This bill is not a nuclear development strategy. It is a utility ownership strategy,” Ryan Augsburger, OMA president, said in a press release. “It takes Ohio backward toward the same customer-funded monopoly model utilities have been trying to revive since the H.B. 6 era.”

Augsburger said the proposal echoes a “master plan” between AEP and FirstEnergy that was outlined in an email included with H.B. 6-related documents.

The bill allows utilities to use their load forecasts to justify construction backed by customer bills, according to the trade group.

“Utilities should not be allowed to turn their own forecasts into permission slips to build on customers’ dime,” Augsburger said. “If projections are inflated, speculative or shaped by utility incentives, customers can be locked into paying for infrastructure the market may not need.”

AEP Ohio is reviewing the bill, according to Scott Blake, a utility spokesman. A shortage of electricity generation has increased electricity bills for AEP Ohio’s customers by about $50 a month over the last five years, with generation now making up about $100 of a 1,000-kWh bill, he said in an email.

“Allowing companies like AEP Ohio to help address growing energy needs by building new power plants in our state would create jobs and demonstrate to other industries that we are ready to meet their needs,” Blake said.