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Ohio coal subsidies’ benefits don’t outweigh costs, economists say

Coal subsidies passed in 2019 as part of a historically corrupt energy law are of no help to the state’s economy, the vast majority of a panel of academic economists said in a survey that was released Monday.

Of the 22 economists responding, 21 disagreed with the proposition that “subsidies for coal plants paid for through state-mandated rate increases such as those in (House Bill 6) have economic benefits that outweigh their costs,” according to Scioto Analysis, which conducted the survey. The remaining economist was uncertain.

House Bill 6 is a package of measures that included $1 billion to prop up nuclear power plants in Northern Ohio, a $102-million-a-year subsidy to Akron-based FirstEnergy, and rules that gutted renewable energy standards. It also included $233,000 a day in subsidies for two 66-year-old coal plants — including one that isn’t even in Ohio.

In the summer of 2020, federal agents arrested then-House Speaker Larry Householder, R-Glenford, and four associates on charges that they funneled $61 million from FirstEnergy through dark money groups and into an effort to elect lawmakers who would support Householder for speaker and pass HB 6. Two have pleaded guilty and a third died by suicide. Householder has pleaded not guilty.

Sam Randazzo, Gov. Mike DeWine’s appointee to chair the Public Utilities Commission of Ohio, was also forced to resign after it was revealed that he received a $4 million payment from FirstEnergy just as he was about to assume his post running the state’s utility regulator.

When he announced the indictments, U.S. Attorney David M. DeVillers said it was “likely the largest bribery and money-laundering scheme ever in the state of Ohio.”

Some of the major provisions in HB 6 are no longer effective. FirstEnergy successor company Energy Harbor, which owns the nuclear power plants, no longer wants those subsidies because of how they’re treated under federal rules. And early this year, FirstEnergy agreed to forego the huge subsidy it was receiving as part of the law.

But the coal subsidy, worth $153,000,000 so far to the companies that own the plants, is still on the books. That’s so even after the Capital Journal reported that the Randazzo-run PUCO censored an audit of the program, removing statements such as, “keeping the plants running does not seem to be in the best interests of the ratepayers.”

The economists participating in this week’s survey said the subsidy isn’t good for the Ohio economy, either.

“Subsidies would only be justified by positive externalities, but burning coal produces the opposite,” University of Bluffton economist Jonathan Andreas wrote in the comment section accompanying the survey. “If energy prices need to rise to encourage supply, then that would allow any producer to compete for business, but instead of letting markets work, politicians picked two winning power plants to award money upon. That smells of corruption. Half of the money is going to an out-of-state plant and most of the benefits probably go to out-of-state shareholders! Bad for Ohio.”

Maintaining the subsidy — and gutting the renewable energy standards — seem wildly out of step with an alarming report issued in August by the International Panel on Climate Change. Synthesizing 14,000 scientific papers, the committee reported there’s no longer any doubt that human activity is affecting the climate, that we’re going to see the effects for the next several decades no matter what we do, and that if we don’t address the problem urgently, the results will be catastrophic.

Many of the economists in the Ohio survey pointed out that those environmental harms amount to economic costs.

“Coal plants emit particles and produce coal ash ponds that are extremely hazardous for human health and the environment,” wrote Fadhel Kaboub of Denison University. “Not only do we need to eliminate the subsidies, but we also need to replace them with renewable energy sources, and transition their workers to local green jobs with equivalent pay and benefits packages.” 

One economist said that in addition to being dirtier than renewables, coal also costs more.

“Coal is now a more expensive source of energy than natural gas or renewable sources such as solar and wind AND coal is the most polluting source of energy,” wrote Kevin Egan of the University of Toledo. “Thus it is efficient to dramatically reduce our use of coal. Instead Ohio is propping it up with not efficient corporate subsidies. Complete 100% waste of taxpayer dollars.”