The troubled economics of nuclear energy in the US have come into glaring focus after a top Ohio lawmaker was charged in connection with $60m in alleged payments to orchestrate a $1bn bailout of two struggling power plants on the Lake Erie shore.
Ohio last year became the fifth US state — following Connecticut, Illinois, New Jersey, and New York — to approve aid to nuclear power plants facing low-cost competition from natural gas, solar and wind energy. Its governor, Mike DeWine, signed a bill providing up to $150m a year, funded by a surcharge on electricity customers.
Intense lobbying preceded the bill’s passage. A campaign to overturn it through referendum failed last autumn. Yet the machinations that led to the bailout ran far deeper than the public knew, federal prosecutors said on Tuesday.
For three years ending in March, $60m poured into an advocacy organisation called Generation Now, controlled by the Republican state house speaker, Larry Householder, according to the US justice department. Prosecutors said the funds financed a “racketeering conspiracy” led by Mr Householder, who was charged along with his campaign strategist, three lobbyists and Generation Now.
The companies that supplied the money were not named in the indictment, but the details matched Ohio utility FirstEnergy and one of its subsidiaries. The alleged co-conspirators called the company “the bank”, given its seemingly unlimited war chest, according to an affidavit filed with the criminal complaint.
The alleged conspiracy used the money to help more than 20 state candidates who supported the bailout propping up the two power plants, including Mr Householder, in the 2018 election. More than $1m was spent on adverts attacking opponents of the measure, according to the US attorney for the southern district of Ohio.
Republican state house speaker Larry Householder leaves the federal courthouse © AP
Some funds were used to improperly pay for Mr Householder’s campaign staff, while he used more than $400,000 on personal expenses — including a home in Florida — prosecutors alleged. Mr Householder could not be reached for comment.
After legislators passed the bailout last July, the funds were used to derail a public ballot initiative meant to repeal the law by bribing people who were collecting signatures endorsing the effort, the complaint said. Besides the nuclear subsidies, the law also eliminated energy efficiency requirements, pared back mandates for wind and solar power and authorised a fee on customers to support ailing coal-fired power plants.
“When the corruption is alleged to reach some of the highest levels of our state government, the citizens of Ohio should be shocked and appalled,” said Chris Hoffman, special agent in charge at the FBI’s Cincinnati office.
FirstEnergy owned the two nuclear stations — among the largest power plants in the state with a combined capacity of 2,100 megawatts — that benefited from the bailout. In Ohio, where customers have a choice of electricity supplier, generators are generally not able to raise rates to recover their costs, putting them in jeopardy as wholesale power prices decline, the Energy Information Administration said.
FirstEnergy transferred the plants to subsidiary First Energy Solutions in November 2016. That subsidiary filed for bankruptcy protection, emerging in February as an independent company under the new name of Energy Harbor. Both companies supported the bailout legislation, arguing that nuclear plants offered a stable source of power and local jobs.
FirstEnergy said it received subpoenas on Tuesday afternoon in connection with the investigation, and declined to discuss the allegations against Mr Householder. Both FirstEnergy and Energy Harbor said they would co-operate with the probe. They have not been charged with any wrongdoing.
Shares of FirstEnergy were down 24 per cent at $25.90 early Wednesday, while Energy Harbor was off 27 per cent at $20.50.
The case “really shows the incredible lengths some of these very wealthy and powerful utilities and energy companies will go to to try and get a subsidy through legislation to protect their assets and enrich themselves and their political allies,” said Ben Inskeep, principal energy policy analyst at EQ Research, which tracks utility policy.
It has also highlighted political efforts to backstop certain energy sources at a time of upheaval in power markets. Nuclear, which emits no greenhouse gases, has won supporters in some state capitals as a reliable complement to renewable energy sources.
The Nuclear Energy Institute, a national trade group, said it had testified in favour of the bailout bill “because we believe the preservation of nuclear power plants is critical if we are going to meet our nation’s carbon reduction goals.”
But the Electric Power Supply Association, which represents independent power producers, urged its repeal, calling it the outcome of a “corrupt legislative process”.
“Rather than let the market provide the best outcomes for energy customers — and against the warnings and complaints from almost all corners — money and political influence won the day,” said Todd Snitchler, EPSA chief executive and former chairman of the Ohio Public Utilities Commission.
With the referendum having failed, the Ohio law is likely to stand, according to ClearView Energy Partners, a research group: “Only the state legislature can terminate the programme at this point, and we do not think the arrests could be enough to galvanise lawmakers to reverse course.”