Back-to-back bribery scandals involving utility giants in Ohio and Illinois over the past week have given a black eye to efforts to prop up struggling U.S. nuclear plants.
On Tuesday, federal officials arrested the speaker of the Ohio House of Representatives on racketeering charges tied to a bailout of two nuclear plants owned by Energy Harbor Corp., a former FirstEnergy Corp. subsidiary. Four days earlier, Exelon Corp.’s Commonwealth Edison unit agreed to pay $200 million to resolve a lobbying probe in Illinois, where nuclear plants also receive aid.
The fallout in Ohio has been swift, with Democratic and Republican lawmakers calling on Wednesday for the nuclear bailout law to be repealed immediately. Shares of FirstEnergy, which received subpoenas related to the investigation, plunged 21% Wednesday, the most on record. Taken together, the two scandals could undermine future efforts by utilities to seek support from lawmakers.
“Fairly or not, these events add a level of regulatory risk,” said Karl Rabago, founder of consulting firm Rabago Energy and a former regulator on the Public Utility Commission of Texas. “That is, more questions, more time, more cynicism, more covering one’s exposure.”
The charges come as reactor owners have lobbied for state subsidies to help them compete with natural gas plants, wind and solar farms. Aside from Ohio and Illinois, they’ve won them in New York and New Jersey, where lawmakers see the massive plants as crucial employers and, since they don’t emit greenhouse gases, key to fighting global warming.
The Ohio nuclear bailout law, which Ohio House Speaker Larry Householder championed, was enacted in 2019 and carved out $150 million annually for the Davis-Besse and Perry plants, which the company had said it would close without aid.
FirstEnergy no longer owns the reactors and isn’t named in the affidavit filed by federal authorities. In the charging document, prosecutors said an Ohio-based utility owner — identified only as “Company A” — steered almost $61 million over three years to Householder, a Republican, and others.
The law is controversial and deeply unpopular with environmentalists. The arrests are apt to make debate over repealing it a top issue in the 2021 Ohio legislative session, Height Securities analyst Josh Price said in research note.
Ohio Gov. Mike DeWine, a Republican, said Wednesday that he still supports the legislation despite the allegations. In the meantime, FirstEnergy’s reputation among policy makers has taken a hit.
“They are going to have a credibility deficit with folks in Ohio,” Katie Bays, an energy analyst and managing director at FiscalNote Markets, said in an interview.
FirstEnergy declined to comment Wednesday. Energy Harbor, which now owns the reactors, said it was cooperating with the probe. The company was formerly named FirstEnergy Solutions and changed its name when it emerged from Chapter 11 earlier this year.
Illinois enacted a $235 million-a-year lifeline in 2016 for reactors owned by Exelon. In a statement July 17, prosecutors said employees of its Commonwealth Edison unit tried to gain influence by arranging jobs and payments from 2011 to 2019 for the benefit of “Public Official A.” Prosecutors said the official was the speaker of the Illinois House of Representatives but did not identify current House Speaker Mike Madigan, a Democrat, by name.
The statement also didn’t specify that the influence was for the nuclear subsidies but rather for “legislation concerning ComEd and its business.” Still, the probe made it more difficult for the utility to lobby for pending clean energy legislation in Illinois that would benefit the company’s nuclear plants, Bays said.
Exelon said that the matter only relates to its ComEd utility, and its deferred prosecution agreement didn’t involve any alleged misconduct by Exelon or Exelon Generation, which owns the company’s nuclear power plants in Illinois.