For a year now, Exelon has been complaining–loudly–that some of its Illinois reactors are uneconomic (though it hasn’t necessarily been consistent about which ones those are). And the nuclear giant has threatened to close some of these reactors if it can’t get some form of bailout (a word Exelon despises, but is nonetheless accurate). Of course, there are many who would feel much better if those threats were actually promises….
But Exelon hasn’t said what it wants Illinois to do about these threats. The utility has said it wants Illinois to institute a vague “market-based solution” to Exelon’s economic problems. Last year, Exelon floated the idea that it needs some $580 million/year in additional revenue to make up for its nuclear fleet’s losses. The utility did get the legislature last year to order state agencies to produce a report that Exelon hoped would provide backing for its position. But as we stated last week, the report didn’t exactly do what Exelon wanted. Instead, it found that Illinois could easily handle the threatened reactor shutdowns; that if they occurred, it might bolster clean energy development in the state; and that bailing out Exelon would be expensive.
Another report like that and Exelon might have to move out of Illinois entirely.
The time is rapidly coming when Exelon will have to make a concrete proposal, or get one of its backers in the legislature to do so. The legislature is in session; it’s time for Exelon to put up or shut up.
Why Exelon hasn’t done so yet is obvious: it knows that when it puts down real numbers for what it wants, then people will be able to figure out what a bailout may cost. Even the “market-based solution” Exelon wants, which is utility-speak for a means of hiding the costs, will have to have numbers attached to be meaningful.
Adding Exelon’s nukes to a Clean Energy Standard that rewards new carbon reduction projects? That would be one market-based solution. But how would giving a utility financial credit for power plants it already has lead to any new carbon reductions? Or, in Exelon’s view, should states simply reward any utility that threatens to close a nuclear reactor (or wind farm, or solar plant for that matter) regardless of whether it has provided actual numbers to show its losses–which Exelon hasn’t, or whether closing expensive power plants might actually be better for ratepayers?
Illinois could find some other way of getting Exelon its $580 million or so, assuming that’s still the utility’s goal. It could simply order rate increases, or it could pass a law saying that nuclear power is so valuable its power will be priced above other power sources. Hmmm, those options might not be very politically popular.
That’s especially so when the PJM grid already has taken some steps to reward Exelon for its threats. And even more so when the state agencies’ report, and some independent analyses, suggest that Exelon may have been crying wolf all along and that its nukes may not be losing the kind of money the utility has claimed.
If Exelon wanted the new Republican Governor of Illinois to make a proposal for it, that didn’t happen. As Crain’s Chicago Business reported Monday in a story titled Rauner’s energy policy ignores Exelon elephant in the room, new Governor Rauner’s transition team January 9 released a detailed report on major issues facing the state, including five pages of energy policy recommendations–and never once mentioned Exelon’s threat to close reactors. The report did, however, suggest overhauling the state’s renewable energy standard–though it did not adopt Exelon’s idea of including nuclear in it.
Meanwhile, Exelon doesn’t appear to be gaining any new friends. Even the Chicago Sun-Times editorialized on the issue, beginning its piece: “The people of Illinois got a bit of good news Wednesday when a report by several state agencies essentially said nobody should rush in with baskets of cash to rescue Exelon’s fleet of nuclear power plants.” The paper said the legislature should “be in no hurry to play along” with Exelon.
NRG Energy, one of Exelon’s major competitors in the state, was even less charitable, saying in a statement to Midwest Energy News,
These reports demonstrate that the economic situation for multiple nuclear facilities is more manageable than originally thought. The report finds that the retirements of the Illinois nuclear fleet won’t cause reliability problems with the state’s electric supply, except under extreme scenarios never before seen in US energy markets. In addition, short-term job losses could be replaced with increased investment in energy efficiency and renewable energy.
In any event, any subsidy to these plants, already paid for many times over, is unnecessary and could easily cost more than the rate increase costs of nuclear plant retirements. Allowing the market to work, which means no “subsidy legislation,” will save ratepayers more than $120 million per year and create almost 10,000 new Illinois jobs between now and 2020.
NRG is willing to invest in new energy projects in Illinois without additional ratepayer subsidies. Within the last 8 months, NRG has announced a Waukegan solar project; a fleet modernization plan with dramatic environmental improvements; an electric vehicle charging station network in Chicagoland; and is looking at opportunities to build additional clean generation. NRG made these investments with no direct assistance from Illinois taxpayers or ratepayers.
Exelon’s case seemed weak when it began its howling a year ago, and then went and spent an unknown amount of money creating the astroturf group Nuclear Matters to provide outside backing from a bunch of former politicians for the notion that nuclear reactors should apparently never close for any reason, no matter what the cost might be.
A year later–with still no actual proposal, no numbers to back its position, with its reactors another year older and closer to retirement anyway, and with a state agency report intended to support it but which undercut it instead–Exelon’s case appears even weaker.
Meanwhile, Exelon’s troubles in Illinois and New York (where it is trying desperately to keep its ancient Ginna reactor operating) are reverberating in Washington, DC and Maryland, where Exelon’s attempt to take over the local utility Pepco has run into a growing storm of public opposition and increased skepticism that Exelon can obtain the necessary approvals from the Public Service Commissions. Attention is increasingly being drawn to Exelon’s statements and machinations in Illinois, which are not the way utility business traditionally has been done in these parts. The idea that the point of the takeover would be for Pepco ratepayers to help bail out Exelon’s nuclear failures is beginning to take hold and proving quite unpopular.
Soon, unless Exelon decides to go the “shut up” route, the utility will have to propose something. Exelon’s problem is that any proposal it puts out is likely to make its position worse–either in Illinois or the mid-Atlantic–and quite possibly both.
January 15, 2015
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