State Policy Actions
While primary oversight of nuclear facilities falls to the Nuclear Regulatory Commission (NRC) and wholesale market operations are regulated by the Federal Energy Regulatory Commission (FERC), state legislatures play a significant role in developing policies that can affect the viability of nuclear power. Bills may urge federal and state agencies to act in a particular way, create finance mechanisms that may help utilities recover operating costs, enable the construction of new nuclear plants and engage the public and raise awareness of a particular nuclear issue. In addition, there are measures in opposition to the continued use or expansion of nuclear power within states.
In 2016, Illinois and New York adopted policies that will support at-risk nuclear plants, while a number of other states are considering similar support measures.
The following policies offer specific examples of actions being considered in state legislatures.
Zero Emissions Credits
Illinois and New York approved policies that employ zero emissions credits (ZECs), which are similar to the renewable energy credits that wind and solar generators receive. These credits would be given to nuclear plants based on megawatt-hours of carbon-free electricity generated and sent to the grid.
On Aug. 1, 2016, the New York Public Service Commission approved a proposal for a Clean Energy Standard. The proposal applies a policy framework to several aspects of New York’s electric system and includes a goal to generate 50 percent of the state’s electricity from renewable resources by 2030. The plan also contains the nuclear-specific ZECs program.
Under this 12-year plan, nuclear plants will receive ZECs based on the number of megawatt-hours of electricity generated. The ZECs compensation rate will be recalculated every two years, based on several factors, including the social cost of carbon and market conditions. During the first two years of the program, plants will receive ZECs at a rate of $17.48 per megawatt-hour (MWh). If electricity prices fall, ZECs could rise to $29.15 per MWh in 10 years, according to the proposal. If electricity prices rise to a specified level, ZECs would drop correspondingly.
The Public Service Commission described ZECs as an "environmental attributes purchase program," designed to value the environmental and carbon-reduction benefits that nuclear plants in the state represent. According to the commission, the state's nuclear plants represent the avoidance of over 15 million tons of carbon dioxide annually. The commission has also said that ZECs represented the "least cost mechanism" for achieving the state's goals of reducing carbon emissions, projecting that it would cost more to rapidly deploy new renewables at the necessary scale than to retain existing nuclear.
Ratepayers will cover the cost of the ZECs program through charges on their monthly electricity bills. Over the first two years, the program is expected to cost $965 million, with the average residential customer expected to pay an additional $2 per month, according to the Public Service Commission. Over its 12-year life, ZECs are estimated to cost around $7.6 billion, based on current market projections.
On Dec. 1, 2016, the Illinois General Assembly took a similar approach when it passed Senate Bill 2814, known as the Future Jobs Energy Bill. The legislation represented an all-encompassing energy reform package that included changes to the state renewable portfolio standard and financial support for struggling power plants, among many other provisions. Initially, the bill included financial support not only for nuclear plants, but for struggling coal plants. Due to opposition from environmentalists, subsidies for coal plants were removed.
However, the bill retained subsidies for the two most at-risk nuclear plants in the state, Clinton and Quad Cities, through a Zero Emission Standard that relied on ZECs. Ultimately, after adopting one final change to include ratepayer protections for businesses and residential customers, the 500-page bill passed both chambers. It was signed by the governor on Dec. 7.
The Future Energy Jobs Bill will offer around $235 million per year in ratepayer subsidies to the Clinton and Quad Cities nuclear plants through ZECs. Similar to New York, ZECs will be purchased from the two plants based on the number of megawatt-hours of electricity generated. ZECs in Illinois will be calculated, in part, based on the social cost of carbon, but will be reduced if the price of electricity rises in order to benefit ratepayers. The contract for purchasing ZECs will run 10 years.
Energy Portfolio Standards
Twenty-nine states and the District of Columbia have mandatory renewable portfolio standards (RPS) which outline carbon-free or low-carbon mandates. These policies require that a certain percentage of a utility’s retail electricity sales come from renewable resources. In doing so, states are incentivizing resources which exhibit certain qualities—in this case, their carbon-reduction qualities.
With this in mind, some states have proposed similar mandates for nuclear power. While most states do not include nuclear energy in their RPS, state legislatures have attempted to modify existing RPS laws to account for nuclear generation.
In 2015, Arizona considered Senate Bill 1134 to change the definition of renewable energy to include certain types of nuclear reactors alongside other technologies, such as wind, solar and hydroelectric. The bill reached the Senate floor but did not pass.
In 2016, the New Jersey Legislature considered a measure that would have included aneutronic fusion as a type of Class I renewable technology, while the Washington Legislature considered a bill that would have amended the state RPS to include small modular reactors. Neither bill passed.
States have also considered establishing a separate standard to support nuclear facilities. In 2015, the Illinois General Assembly introduced two bills, known as the Illinois Low Carbon Portfolio Standard, which would have required utilities to buy 70 percent of their power from low-carbon sources, including nuclear. The bills also included several protections for ratepayers, however, they failed to reach the floor of either chamber before the legislature adjourned. In 2016, the focus in Illinois turned largely to ZECs as the preferred nuclear support mechanism.
New York also considered a Low Carbon Portfolio Standard before turning to ZECs. In 2016, a proposed bill would have replaced the state RPS with a Low Carbon Portfolio Standard, which would have included a mandate for 17 percent nuclear power. Additionally, the New York Department of Public Service suggested the creation of a nuclear-specific mandate within the state's RPS. Under the proposal, utilities would have been required to purchase a set amount of energy from upstate nuclear facilities, while also making nuclear plants eligible for ZECs. In the end, the New York Public Service Commission decided to leave the nuclear mandate behind and focus solely on the ZECs program.
In the same way that Illinois and New York have adopted Clean Energy Standards, policymakers are considering how to frame new and modified standards, including using the following terms:
- Nuclear Energy Standard
- Alternative Energy Standard
- Sustainable Energy Standard
- Zero Emission Standard
- Clean Energy Standard
- Advanced Energy Standard
- Reliable Energy Standard
- Electric Diversity Standard
Expressions of Legislative Support
States have demonstrated their openness to nuclear power generation by declaring support for certain facilities or projects through resolutions, while also signaling that the state might be inclined to consider related legislation.
In 2016, the New Mexico Legislature adopted measures (House Memorial 40 and Senate Memorial 34) that support the development of a consolidated interim storage site in the southeastern part of the state. The legislature also supported a specific interim storage project that is co-owned by local governments. In 2014, New Mexico adopted House Memorial 57, which directs the state’s Department of Energy, Mineral and Natural Resources to include—as part of the development of a state energy plan—an evaluation of the feasibility and economic benefits of constructing and operating a small modular reactor.
In addition, states may pass resolutions urging the federal government to take some particular action. In 2015, Tennessee adopted Senate Joint Resolution 92, which encourages the Nuclear Regulatory Commission to support the license application of the Tennessee Valley Authority’s Watts Bar Unit 2.
Several other states have proposed legislation requiring that nuclear power be included as states consider ways to meet the U.S. Environmental Protection Agency (EPA)’s Clean Power Plan. However, no measures have been introduced since the U.S. Supreme Court stayed EPA’s implementation of the program pending the resolution of legal challenges.
Repealing Moratoriums on New Nuclear Generation
Fifteen states have restrictions on the construction of new nuclear power plants. In 2016, Illinois, Kentucky, Minnesota and Wisconsin introduced legislation that would have ended moratoriums on new nuclear construction, though Wisconsin's measure was the only bill enacted.
Wisconsin repealed its 33-year moratorium on the construction of new nuclear energy facilities in 2016. While there are no pending projects in the state, the legislation amends state policy to include nuclear among conservation, efficiency, and non-emitting technologies in meeting energy demand.
Advanced Cost Recovery
In addition to policy considerations for the retention of existing nuclear facilities, legislators have considered support for new reactor development. To help regulated utilities with the financing for new nuclear power plants, Florida, Georgia and South Carolina have policies permitting or directing a utility to collect costs from customers during construction. Advanced Cost Recovery—also referred to as Construction Work in Progress (CWIP)—allows a utility to collect financing costs for a project before plant construction is completed. CWIP reduces the overall amount needed to finance a project and may reduce the total project costs that are eventually included in the customer rate base.
In 2006, Florida passed legislation to promote the development of nuclear electricity generation, which provided for the recovery of costs incurred in the siting, design, licensing and construction of new nuclear plants. The statute was amended in 2008 to include “uprate” projects that increase the generating capacity of existing nuclear plants and expanded or relocated electrical transmission lines.
Some consumer advocates contend that the mechanisms place too much risk on the consumer. In Florida, legislators considered this risk in 2015 House Bill 67, which would have repealed the CWIP statute, but the bill died in committee. Similar measures were introduced in the state in prior years, but none passed.
House Bill 931, introduced in the Georgia General Assembly in 2016, called for an end to the Nuclear Construction Cost Recovery surcharge on Georgia Power electric bills after March 2017. The bill was never debated and failed when the legislature adjourned.
State Carbon Tax or Cap and Trade Program
Some nuclear advocates argue that a state tax on carbon emissions could serve to even the playing field for nuclear power by forcing generation technologies to account for their environmental costs. Nuclear generators must account for a plant’s decommissioning and handling of spent nuclear fuel in the price at which they sell electricity, unlike other energy resources which are not required to account for many of their environmental impacts. A carbon tax would require fossil fuel generators to include the cost of carbon emissions in their electricity prices, which could make nuclear more competitive.
While two Canadian provinces—British Columbia and Alberta—have enacted carbon taxes, no U.S. state has done so. In November 2016, voters in Washington rejected a ballot measure that would have imposed a carbon tax in the state through higher prices for gasoline and fossil fuel-fired electricity. The initiative received only about 40 percent support. However, there currently are several other state carbon tax initiatives. Massachusetts, New York, Oregon, Rhode Island and Vermont have either ballot initiatives or legislators who are pushing for some version of a carbon tax.
In addition, a number of states have established cap-and-trade programs. California and the nine states in the Northeast that make up the Regional Greenhouse Gas Initiative have established a carbon price to increase the cost of carbon emissions and reward low-carbon power producers, potentially including nuclear energy. However, the price is currently far too low to close the revenue gap to the extent that would be required to help nuclear compete.
In New York, Entergy has called for a technology-neutral “clean energy credit” to compensate any clean generation that avoids carbon emissions per megawatt-hour. This would function differently from either a carbon tax or cap and trade, instead compensating zero- and low-emission generators for offsetting carbon emissions.
The New York State Senate is currently considering Senate Bill 7937, which would take up to $100 million of the proceeds from the state auction of carbon dioxide allowances to provide expedited financial assistance to struggling nuclear facilities in the state.
Power purchase agreements (PPAs) can offer long-term stability to power plants by offering the ability to hedge against market fluctuations. PPAs generally commit a utility to purchasing a set amount of electricity from a power plant, with certain restrictions on price over a particular timeframe. Utilities in vertically integrated states are generally able to enter into a PPA upon approval by the state public utilities commission. In restructured markets though, these mechanisms are rare and can be difficult to enact given their regulatory structure.
Legislators in Connecticut, a restructured state, considered a possible solution to certain restrictions through Senate Bill 344. The bill would have allowed the state’s lone nuclear plant to bypass the competitive wholesale market and enter into PPAs for up to 50 percent of its capacity, while the other 50 percent would still participate in wholesale markets. The bill also recommended similar concessions to other energy sources—like Class I renewables and large-scale hydropower—with oversight from a state commissioner, the state attorney general and the Office of Consumer Counsel.
Proposals would be evaluated based on the best interest of ratepayers, the reliability of the system and the forecasted price of energy. If approved, the state commissioner could direct electric distribution companies to enter into agreements for energy, capacity or any environmental attributes for a period of up to 10 years.
Senate Bill 344 passed the Senate in April but was tabled in the House shortly before the legislature adjourned. It is likely that a similar measure will be considered during the 2017 legislative session.
The Energy Policy Act of 2005 provides production tax credits for new nuclear power plants and an authorization for a loan guarantee program administered through the U.S. Department of Energy to support financing and commercial deployment of innovative technologies that reduce emissions. The tax credit is available for the first 6,000 megawatts of new nuclear generating capacity and lasts for the first eight years of operation. To qualify for the credit, a new nuclear power plant must be in service on or before Dec. 31, 2020.
In 2009, Utah enacted a similar approach at the state level through House Bill 430—the Renewable Energy Development Act—to provide incentives to develop renewable energy projects that include nuclear generation facilities.
State Acts as “Caretaker” Owner
Under certain circumstances, a state may be inclined to purchase a nuclear generating facility rather than allow it to shut down. This step was considered in New York in order to retain the FitzPatrick nuclear plant, which was scheduled to shut down in 2017. The plant’s owner, Entergy, was seen as unwilling to reverse its decision, regardless of the state’s policy considerations. For several months, the state anticipated that it would need to find another buyer for the plant in order to keep it operating. This type of buyer has been referred to as a “caretaker owner,” who is willing to incur near-term financial losses with the expectation that it would receive policy support from the state and become financially viable in the future.
Citing the public good that the nuclear plant brings to the state through reliable, carbon-free energy and high-paying jobs, Senate Bill 8032 was introduced in the New York State Senate, which would have directed the New York State Power Authority to purchase the FitzPatrick plant as caretaker owner and retain the plant long term. However, it quickly became unnecessary, as the Public Service Commission’s approval of the ZECs program for nuclear facilities in the state prompted Exelon to purchase the FitzPatrick plant and continue operations. The bill was never voted on and ultimately failed due to adjournment.