LS Power will not expand Ohio gas plant if state subsidizes nuclear power

(Reuters) - U.S. electric generator LS Power said on Monday it would be forced to terminate development of an expansion of its Troy gas-fired power plant in Ohio if the state passes legislation to subsidize nuclear energy.

There are two nuclear reactors in Ohio - Davis Besse and Perry. The plants’ owner, FirstEnergy Solutions, said it would shut the money-losing reactors in 2020 and 2021 unless the state provides some financial assistance to keep them operating.

FirstEnergy Solutions is a bankrupt unit of Ohio power company FirstEnergy Corp.

The problems facing FirstEnergy Solutions’ reactors are not unique to Ohio. In recent years, Illinois, New York, New Jersey and Connecticut have subsidized their reactors to keep them operating because they provide large amounts of carbon-free energy, thousands of jobs and taxes.

Growing supplies of cheap gas from shale fields like the Marcellus and Utica in Ohio have depressed electricity prices in competitive markets nationwide over the past several years, making it uneconomical for generators to keep operating some nuclear- and coal-fired plants.

“Handouts to nuclear plants jeopardize the economics of the other already economic generators, including the Troy facility, which could chill investment and lead to the unintended consequence of reduced reliability for Ohio’s electric generation fleet,” LS Power said in a release.

LS Power estimated it would spend over $500 million to add about 500 megawatts to the Troy plant, creating hundreds of construction jobs and around 20 permanent positions.

The Ohio Senate Energy and Public Utilities Committee is scheduled to meet on Monday to resume debate on the nuclear subsidy bill, House Bill 6, which passed the State House of Representatives in May.

The House version would provide an overall reduction in consumer power rates by weakening the state’s renewable and energy efficiency goals even though FirstEnergy Solutions would receive an estimated $150 million a year from 2020-2026 to keep its reactors in service.

Officials at FirstEnergy Solutions were not immediately available for comment.

On July 1, FirstEnergy Solutions said it would work with the state to keep the reactors in service even though its June 30 deadline to purchase fuel for Davis Besse elapsed without passage of a bill.

The company said it wants a nuclear bill by July 17 when the full Senate is scheduled to be in session. Analysts at Height Capital Markets in Washington, D.C., however, said that was likely just a tactic to keep pressure on the legislature.

FirstEnergy Solutions has warned that shutting the reactors could result in the loss of 4,300 jobs.

Reporting by Scott DiSavino; Editing by Steve Orlofsky