ENERGY COMPANIES HAVE SPENT BILLIONS ON PROJECTS THAT GO NOWHERE
Ohio’s high-profile bailout of nuclear plants is just one of several questionable schemes between lawmakers and energy companies.
FEDERAL AGENTS ARRESTED Ohio State House Speaker Larry Householder last month on racketeering and bribery charges in a $60 million scheme involving a utility-funded political slush fund and a $1.3 billion bailout of two state nuclear power plants. Householder was charged, along with four others, in relation to controlling the slush fund and using it to fund campaigns for himself and his preferred candidates in return for passing the bailout bill, in what federal prosecutors called a quid pro quo. It’s the biggest corruption scandal in Ohio history.RelatedOhio Republicans Balked at a Nuclear Bailout, so the Industry Elected New Republicans — and Walked Away With $1.1 Billion
Similar scenarios have played out in at least six other states with major utility monopolies. Energy companies with strangleholds on state legislatures in South Carolina, New Mexico, West Virginia, Georgia, and Pennsylvania have pushed billions of dollars in bills onto ratepayers for coal and nuclear projects that have failed or fallen out of competition as public support for renewable energy investment continues to grow. In another energy-related case, the largest electric utility in Illinois was fined for trading contracts and payoffs in exchange for legislation that made it easier to increase electricity rates.
The thrust for nuclear energy as an alternative to fossil fuels in the U.S. has stopped and stalled for decades, losing most of its steam after the Three Mile Island accident in 1979. But investment picked back up after 2002, when President George W. Bush launched the “Nuclear Power 2010” program, which provided a government cost-sharing program and subsidies to help identify and develop new sites for nuclear development to meet projected energy needs by 2010. Investment and operating costs for nuclear run much higher than those of other renewable energy sources like wind and solar. That, plus the immense amount of water required to produce nuclear power, make it less efficient than other available sources of carbon-neutral energy. Most of the flagship nuclear plans introduced around that time have since stalled or been abandoned completely, a result of cost overruns and yearslong delays.
IN 2019, THE Ohio legislature approved a bailout for nuclear power plants in Oak Harbor and Perry, on opposite sides of Cleveland. According to the federal criminal complaint, that bill’s passage came after a number of dark-money groups — including one controlled by Householder — spent money in support of Householder and other candidates who supported the bailout. Generation Now, the 501(c)(4) nonprofit controlled by Householder, funneled money from FirstEnergy Corp., — an electric utility headquartered in Akron whose former subsidiary, FirstEnergy Solutions, now known as Energy Harbor, had filed for bankruptcy in 2018 and threatened to stop operating if it didn’t get a bailout — to support numerous candidates for state legislature, to help reelect Householder as speaker, and to defeat a referendum on their bailout bill.
Between March 2017 and March of this year, Generation Now received $60 million from FirstEnergy, referenced only as “Company A” in the federal complaint, filed July 16 in the U.S. District Court for the Southern District of Ohio. “In exchange for payments from Company A, Householder’s Enterprise helped pass House Bill 6 … a billion-dollar ‘bailout’ that saved from closure two failing nuclear power plants in Ohio,” affiliated with FirstEnergy. In 2019, Householder’s enterprise “then worked to corruptly ensure that HB 6 went into effect by defeating a ballot initiative,” the complaint reads. Join Our NewsletterOriginal reporting. Fearless journalism. Delivered to you.I’m in
Following Householder’s arrest last month, his colleagues in the state voted unanimously to remove him as speaker. Householder’s name will still appear on the ballot in the upcoming November 3 general election. He’s currently running unopposed, although it’s unclear whether he will stay in the race, as the investigation is still ongoing. So far, two write-in candidates have also filed to run in November.
After FirstEnergy’s role in the Ohio scandal came to light, West Virginia’s Democratic gubernatorial nominee is calling for an investigation into the company’s operations in West Virginia, where it’s one of the state’s two major energy utilities. FirstEnergy’s PAC gave thousands of dollars to Republican Gov. Jim Justice’s reelection campaign after meeting with his office about legislation to help the company avoid paying taxes for its major coal plant in Pleasants County.
Last July, around the same time lawmakers in Ohio were bailing out FirstEnergy, lawmakers in West Virginia overwhelmingly passed the bill, allowing the utility to avoid $12.5 million a year in taxes. The law passed 77 to 5 in the West Virginia state House and unanimously in the senate, the Charleston Gazette-Mail reported. It included a narrow definition for covered companies, which in effect applied only to FirstEnergy’s Pleasants Power Station. FirstEnergy applied to purchase the plant in 2017.
In Pennsylvania, a bill to bail out two nuclear plants, including one owned by FirstEnergy, has stalled in the state legislature following arrests in the company’s Ohio scandal. In March, Energy Harbor — what FirstEnergy changed its name to after emerging from bankruptcy in February — reversed plans to close its nuclear power in Beaver, citing the governor’s efforts to implement a new climate policy that would penalize energy companies that give off carbon emissions.
Democratic Gov. Tom Wolf announced last year that Pennsylvania would join the Regional Greenhouse Gas Initiative, a state-level program to reduce greenhouse gas emission by requiring fossil fuel plants to pay for emissions. Energy Harbor President and Chief Executive Officer John Judge said joining the RGGI would “help level the playing field” for nuclear plants, which don’t give off carbon emissions, by making polluters pay. Pennsylvania lawmakers have blocked the move several times, most recently in July. In June, Wolf extended to September 15 an earlier deadline for the state Department of Environmental Protection to develop rules to allow the state to join the initiative.
IN 2017, SOUTH CAROLINA abandoned plans to expand a nuclear power plant in Jenkinsville, some 30 miles northwest of Columbia, and stuck ratepayers with the billion-dollar bill. The former chief operating officer of the state’s major utility company pleaded guilty last month to defrauding customers. RelatedSouth Carolina Spent $9 Billion to Dig a Hole in the Ground and Then Fill It Back In
The failed plan to expand nuclear reactors at the V.C. Summer Nuclear Station ended up costing more than $9 billion in total. The energy company announced delays on the project before it was even slated to begin and, soon after its projected start date, announced $1.2 billion in cost increases. After a principal contractor filed for bankruptcy years into the project, the companies officially scrapped it before completion. The Department of Justice and the Securities and Exchange Commission filed separate investigations into the failed project in 2017. And at least 19 lawsuits — including class-action suits by ratepayers and shareholders, and a lawsuit by the South Carolina Public Service Commission, which had approved the plan — were filed against the main company involved, South Carolina Electric and Gas. Executives at the utility concealed information about delays, project flaws, and financing issues as estimated project costs steadily increased, the Post and Courier reported.
Corporate executives persuaded lawmakers to adjust regulatory measures that would allow them to increase utility rates to pay for the project as costs soared. Ratepayers are currently responsible for at least $2.3 billion over the next 20 years. A judge ruled last June in a class-action lawsuit that the utility’s customers would get up to $146 million in refunds.
Last month in Chicago, federal prosecutors charged Commonwealth Edison, which holds a virtual electric monopoly in the city, with bribery and a $200 million fine. The high-profile investigation has ensnared Illinois House Speaker Michael Madigan, who is facing multiple subpoenas probing his relationships with a number of other companies including AT&T and Walgreens, along with other political operatives and lobbyists, WBEZ reported.
ComEd, the largest electric utility in the state, paid at least $1.3 million in contracts, jobs, and other payments to associates of Madigan, and in return received $150 million in benefits resulting from legislation that relaxed oversight of the utility.
Public Service Company of New Mexico, the state’s largest provider of electricity, is slated to close a coal plant in Northwest Mexico in 2022. PNM announced the plan in 2017 after an analysis found the plant would not be economically viable after that point. An energy transition law enacted in 2019 allows covered utility companies, like PNM, to sell off bonds to recover project investments. As a result, PNM’s customers are paying to recover those costs.
The Energy Transition Act requires the state to transition to non-carbon electricity by 2045. Gov. Michelle Lujan Grisham and Navajo Nation President Jonathan Nez petitioned the New Mexico Supreme Court in December to apply the Energy Transition Act to allow PNM to retire the coal plant and to recover its investments, given that the company had announced plans to close the plant before the law passed. The court ruled in their favor in January, in a decision applauded by environmental groups, including the regional Sierra Club chapter and the Western Environmental Law Center.
“These are utilities with a ton of money,” said Mariel Nanasi, attorney and executive director of New Energy Economy, an advocacy group that’s been organizing against PNM’s energy monopoly for years. “In these states over and over again, is this barrier to renewable advancement,” Nanasi said. “It’s been regulatory capture.” PNM has spent more than $155 million between 2015 and June 2019 on the coal plant to prop it up, she added. “PNM rate payers are paying all of that money. And PNM is paying nothing. Zero.”
Nanasi was frustrated with the environmental groups that sided with lawmakers and PNM on the deal. “Around 40 percent of PNM rate payers are poor or financially insecure, she said, “and these green groups sided with the utility and foisted all these hundreds of millions of dollars onto these poor people and other PNM rate payers in exchange for an increase in the renewable portfolio standard,” she said, referring to a measure in the ETA.
The ETA refers to a “carbon-free standard,” a term broad enough to encompass nuclear energy, which takes up a significant portion of the portfolios of both PNM and El Paso Electric. Nanasi described this change from the previous wording, which had described the standard as “renewable,” as “Orwellian.” “This is all about propping up utilities that in essence, no longer need to be in business,” she said.
PNM contributes a significant amount to state and federal campaigns, and its parent company spent $440,000 in a 2018 race to elect members of the commission that oversees it; the utility wholly funded a PAC protecting two incumbents and attacking their challengers.
The only nuclear reactors currently under construction in the U.S. is in Georgia, where work on two nuclear reactors has stalled amid the ongoing pandemic. The project at Georgia’s Plant Vogtle — jointly owned by Georgia Power, a subsidiary of Southern Company; Oglethorpe Power Corporation; and the Municipal Electric Authority of Georgia — has already cost more than $28 billion, including more than $12 billion in federally backed loans. That’s more than double its initial estimated cost at $14.1 billion. The plant is more than five years behind schedule, and is the largest jobs-producing construction project in the state, according to Georgia Power.
After construction had already fallen months behind schedule, two construction contractors sued the utility companies involved in the project over changes to planned construction. Earlier, inspectors reported that parts of the plant had been improperly installed. One of the contractors, Westinghouse, filed for bankruptcy five years later, at which point the project’s cost overruns topped $755 million.
Georgia’s Department of Energy continued to approve billions of dollars in loans to plant owners, while independent monitors reported that one of the construction contractors, the Shaw Group, “lacked experience in the nuclear power industry and was not prepared for the rigor and attention to detail required to successfully manufacture nuclear component.”
The plant, which original contracts guaranteed would be completed between April 2016 and 2017, has still not begun operating. Vogtle completed one of several testing phases last month, and is currently scheduled to start service in 2021 for one unit, and 2022 for another. In a May press release after the plant installed a device that operators will use to monitor nuclear reaction, the company said, “This milestone brings the unit another step closer to loading nuclear fuel inside the reactor.”