The stage is set for an energy policy showdown in Illinois after lawmakers from both parties introduced a bill aimed at aiding three Exelon Corp. nuclear plants that have struggled in recent years in the face of increasing competition from wind energy and natural-gas-fired generation.
The legislation filed in the House and Senate would replace the Illinois renewable energy standard with a low-carbon portfolio standard requiring 70 percent of electricity used in areas served by large investor-owned utilities to come from low-carbon sources of generation.
"This legislation will help clean the air, it will help ensure a robust low-carbon economy, it will ensure that tens of thousands of jobs stay in Illinois," said Joe Dominguez, senior vice president for public policy at Exelon, during a morning news conference yesterday in Springfield.
The proposal intensifies an energy policy debate that’s been brewing in Illinois for more than a year. The debate encompasses politically powerful Exelon, the nation’s largest nuclear operator, power producers Dynegy Inc. and NRG Energy Inc., and a coalition of clean energy advocates pushing a rival bill that would significantly expand the use of renewable energy and energy efficiency.
A bill introduced last week by the recently formed Clean Jobs Coalition also calls for creation of a cap-and-invest program to help the state reduce carbon dioxide emissions as would be required by U.S. EPA’s Clean Power Plan. It is a policy that, if implemented, should also benefit Exelon’s nuclear fleet (EnergyWire, Feb. 20).
Both legislative proposals focus on a desire to create or save jobs. Citing a report issued by state agencies last month, sponsors of legislation filed yesterday said at stake are 8,000 jobs directly and indirectly supported by Exelon’s Illinois nuclear fleet, which supplies about half the power used in the state.
"It’s a jobs bill," state Rep. Larry Walsh (D) said as he introduced the bill at the news conference.
Chris Crane, Exelon’s CEO, has threatened to close one or more of the company’s Illinois nuclear plants unless the company sees "a path to sustainable profits" (EnergyWire, Feb. 7, 2014).
Chicago-based Exelon has said three of its six nuclear plants in Illinois — Byron, Quad Cities and Clinton — have sustained losses in recent years. Beyond that, though, the company has provided few details, citing a policy not to break out financial performance of specific units.
Dominguez, however, offered anecdotal evidence yesterday, saying the 1,065-megawatt Clinton plant lost $100 million last year.
Financial performance of specific plants varies depending on whether units are shut down for refueling, he said. But the overall trend isn’t favorable.
"Year over year, what we’ve observed with regard to these three plants is that we’re suffering losses and we’re not able to cover our cash costs, much less make a profit," Dominguez said.
Exelon executives have pushed hard on the issue across Illinois and in Washington, D.C. The company’s nuclear fleet offers unparalleled reliability and the same low-carbon attributes as wind and solar energy, they say. But reactors face a competitive disadvantage under current tax policies and don’t have the same support under state renewable portfolio standards (EnergyWire, Sept. 24, 2014).
The regional transmission organization PJM Interconnection’s proposed capacity performance proposal will benefit Exelon’s nuclear fleet but won’t by itself rescue any of the plants in jeopardy. Likewise, EPA’s proposal to reduce carbon emissions at existing fossil fuel plants doesn’t offer nuclear plants much of a lifeline.
"The most important commodity in this country today is zero-carbon electricity," Dominguez said. But without policy changes, the attributes of nuclear generation aren’t being appropriately recognized.
Supporters of the legislation include the Illinois AFL-CIO and Clinton, Ill., Mayor Carolyn Peters, who said closure of the 27-year-old plant would be a crushing economic blow to the city and DeWitt County, where Exelon is the largest taxpayer and most of the plant’s 700 employees live.
Just as Dominion Resources Inc. shut the Kewaunee nuclear plant in northeast Wisconsin in 2013 and Entergy Nuclear shuttered the Vermont Yankee plant late last year because of economic pressures, Peters is convinced Exelon isn’t bluffing when it says it may shut down some of its reactors.
"I believe this is not just idle talk," Peters said.
Bill’s singular benefits criticized
Consumer advocates and business groups, however, quickly questioned the need for legislation that would benefit a single company.
"This bill rewrites Illinois energy policy to increase costs for public and private entities statewide and benefits only Exelon," said Steve Davis of the Illinois Association of Wastewater Agencies, part of a coalition of business and consumer interests opposing the bill.
The coalition also includes the Illinois Industrial Energy Consumers and is working with the AARP.
David Kolata, executive director of the Chicago-based Citizens Utility Board, a ratepayer-funded consumer advocate and member of the Clean Jobs Coalition, said the proposal would raise utility bills an estimated $300 million a year.
Exelon’s nuclear plants have been paid for "several times over" from when they were owned by Commonwealth Edison, Kolata said. The nuclear plants were spun off into Exelon’s generating subsidiary after Illinois’ retail electric market was restructured.
"The solution to Illinois’ energy issues requires a much more comprehensive and long-term plan than Exelon’s proposal," he said, specifically citing the benefits of energy efficiency and distributed energy.
While Exelon said the low-carbon portfolio standard would let nuclear reactors compete on a level playing field with renewables, green power advocates, too, have concerns.
They cite a 2021 sunset provision in the bill and see it further stifling development of large wind and large solar projects that depend on power purchase agreements with terms much longer than five years to get financing. Also, Exelon’s 91.5 million megawatt-hours of generation from its Illinois nuclear fleet by itself represents about 70 percent of the 130 million MWh of electricity delivered by utilities Ameren and ComEd. That suggests Exelon’s nuclear fleet could crowd out wind and solar in the low-carbon procurement.
Coal producers are also skeptical.
Rival power producer Dynegy, which doubled down on its Illinois coal fleet in 2013 with the purchase of five plants owned by Ameren Corp., also spoke out against the proposal.
The company said any energy policy should ensure reliability and jobs and benefit the entire state, including northern Illinois, where Exelon’s nuclear units are located, and downstate Illinois, where most of its plants are located and coal is the dominant energy source.
"Citizens in Illinois should not be expected to finance a bailout of generating units, whether nuclear powered or coal-fired, that have already been paid for and will cause new concerns for the remaining areas of Illinois," the Houston-based company said in a statement.
Swapping renewable credits for low-carbon credits
A low-carbon portfolio standard was one of five policy options listed in a January report from state agencies examining the impact of the premature closure of one or more Exelon nuclear plants. The report, ordered by House Resolution 1146 last spring, did not make any recommendations.
The January report cited potential for almost 8,000 job losses associated with the three troubled Exelon plants and the loss of $1.8 billion in economic activity. But it also said the losses would be offset by almost 10,000 new jobs in renewable energy by the end of the decade (EnergyWire, Jan. 8).
The legislation introduced yesterday would require the Illinois Power Agency to conduct an annual competitive procurement for low-carbon energy credits in the same way it purchases renewable energy resources.
Customers in areas of the state served by ComEd and Ameren Illinois would fund the procurement through a special surcharge. Small investor-owned utilities, electric cooperatives and municipal utilities would be exempt.
Like the renewable standard, the low-carbon portfolio requirement would include a 2 percent rate cap. It would also have a rebate provision to provide a bill credit to consumers if energy prices rise beyond a certain level.
And the low-carbon standard would expire at the end of 2021 or when Illinois implements a market-based plan to reduce carbon emissions under the Clean Power Plan.
Exelon and its political supporters said the proposal is an extension of an all-of-the-above energy strategy.
Dominguez said, "This bill takes that common-sense approach and puts it into policy action."