Contributors

'Absurd' nuclear subsidies muck up energy markets, harm consumers

Maria Korsnick was on her high horse. Recently named president and chief executive officer of the Nuclear Energy Institute, the nuclear industry's Washington-based lobbying arm, Korsnick warned there would be repercussions if the petroleum industry tries to block subsidies for financially-troubled nuclear plants.

Korsnick, speaking at a news conference recently, sharply criticized the American Petroleum Institute for opposing legislative efforts in Ohio to save the aging Davis-Besse and Perry nuclear plants that are unable to compete against cheap natural gas.

"They might say, 'Oh don't subsidize this,' But let me tell you, you open up the books and you might not call it a subsidy, but I tell you there's a lot of tax breaks that the American Petroleum Institute gets," Korsnick said. "If in fact that's the playing field that we're going to be set with, then you're going to hear more about comparisons of subsidies versus tax breaks in order to get all the information, if you will, out on the table."

What is Korsnick talking about anyhow? The oil and gas industry has been eligible for legitimate tax deductions for many years. The industry gets access to the same standard deductions that are available to all manufacturing and mining industries. Deductions help to recognize and account for the cost of business operations.

In sharp contrast, a subsidy is a direct payment from the taxpayers via government to businesses. Not only are consumers being victimized by subsidies for nuclear power, the economy gets far-greater returns from the roughly $3 billion a year in tax deductions that go to oil and gas companies.

The oil and gas industry pays $86 million in taxes daily to the U.S. Treasury. Over the past decade, tens of thousands of new jobs have been created in the oil and gas industry, while employment associated with nuclear power has declined.

In singling out the petroleum industry, Korsnick neglected to mention that opposition to the nuclear subsidy, which would cost Ohio ratepayers nearly $5 billion over the 16-year life of the plan, is not limited to oil and gas companies. It's shared by the Ohio Manufacturers Association, whose president, Eric Burkland, called an Ohio Senate bill authorizing the subsidy "nothing more than another attempt by utilities to force customers to pay above-market prices for electricity." Ohio already has the 17th-highest electric power rates in the nation.

Events of the past few weeks demonstrate that the Senate bill giving special treatment to nuclear power is also opposed by independent power marketers, the Ohio Environmental Council, the Natural Resources Defense Council, the Sierra Club, the Ohio Consumers Counsel and the National Association of Retired Persons.

These organizations believe that a bailout is not in the public interest and that it is time to move forward with the production of other more economically-viable energy sources.

On the face of it, the very idea of a nuclear subsidy is absurd. As proposed by FirstEnergy, owner of the money-losing nuclear plants, the plan would require ratepayers to pay an additional $300 million a year to keep the plants in operation. But inexpensive and abundant natural gas could be used in place of nuclear power. By denying electricity users the opportunity to participate in the shale-gas revolution, with all of its associated economic benefits, the bailout plan would inflate electric power costs for consumers.

Instead of trying to keep unprofitable nuclear plants going, the focus ought to be on reducing the cost of electricity for Ohio's residential and commercial consumers. The right way to achieve this is by investing in innovative energy technologies, including advanced nuclear plants that are more efficient than today's reactors and cost less to operate and maintain.

The wrong way is to interfere in the energy marketplace. Using government subsidies to keep virtually-useless and technologically-redundant plants in operation is absurd. It makes even less sense to minimize the value of oil and gas to the nation's economic and environmental well-being, as Korsnick has done.

Mark J. Perry is a scholar at The American Enterprise Institute and a professor of economics at the Flint campus of The University of Michigan.

The views expressed by contributors are their own and not the views of The Hill.

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