An Exelon Corp. executive told Illinois legislators yesterday that the fate of three unprofitable nuclear plants in the state will be decided later this summer and that action on a bill to help them survive must be passed before the General Assembly adjourns a month from now.
The comments followed criticism of the bill to create a low-carbon portfolio standard by the Illinois attorney general’s office, which categorized the bill as an unnecessary bailout that would benefit a single company at the expense of consumers across the state.
At the very least, Cara Hendrickson of the AG’s office said, the Legislature should wait until after this summer’s PJM Interconnection capacity auction to see whether two of the at-risk nuclear plants located in PJM’s footprint clear and how much in additional revenue they bring in.
"At the end of the day, the choice is whether to save the plants or not," said Joe Dominguez, Exelon’s executive vice president of governmental and regulatory affairs and public policy.
Dominguez said Exelon is willing to "roll up our sleeves" and make any necessary changes to the bill to assuage lawmaker concerns, including putting in writing that the company won’t shut any of the plants over the next five years.
But punting the issue until the November veto session, when it would take a supermajority to pass legislation, or until 2016 is not an option.
The month of September represents decision day for Exelon, Dominguez said. It’s when the company must notify PJM that the Byron and Quad Cities plants won’t be available for the 2016 capacity auction. The company also faces refueling decisions.
"What we can’t commit to is a path forward of uncertainty," he said. "We have to have an answer."
Testimony from Dominguez and the Illinois attorney general’s office was part of a three-hour hearing on the Exelon-backed bill (H.B. 3293/S.B. 1585). The measure, one of three broad energy bills filed in the last two months, would require retail electricity customers in areas served by Commonwealth Edison and Ameren to get 70 percent of their energy from low-carbon sources such as nuclear and renewables (EnergyWire, Feb. 27).
Capacity auction back in spotlight
The first half of yesterday’s hearing covered the recent capacity auction conducted by the Midcontinent Independent System Operator (MISO), the grid operator for 15 central states from the Gulf Coast to Canada (EnergyWire, April 17).
Results of the MISO auction have prompted questions and criticism from the Illinois attorney general, consumer groups and Illinois’ congressional delegation because the $150-per-megawatt-day clearing price for generation in the southern half of Illinois is almost nine times the price a year ago and almost 50 times higher than the price for the rest of MISO’s sprawling footprint.
It also raised questions among state legislators, some of whom asked whether rising capacity prices in MISO and PJM’s capacity auction this summer might provide enough of a financial lift for Exelon’s struggling nuclear plants, making the proposed legislation unnecessary. (The Federal Energy Regulatory Commission on Friday approved delaying a PJM auction scheduled for May.)
Not so, according to Exelon. The MISO auction will deliver about $13 million in additional revenue for its 1,100 MW Clinton plant, executives have said.
While Clinton is committed to providing generation to MISO through the end of May 2016, the plant could be shut down after that subject to approval by the grid operator, which could keep the plant running if it’s needed to ensure reliability.
Exelon’s other two struggling nuclear plants are in PJM and are committed to run through mid-2017. But neither cleared the grid operator’s auction last spring and have no such requirements for the 2017-2018 planning year. Likewise, PJM would have to perform an analysis to make sure electric reliability is maintained if Exelon sought to close a plant.
Dominguez said the company doesn’t think this summer’s PJM auction covering the 2018-2019 planning year will meaningfully change the economics of the Byron and Quad Cities stations even if FERC adopts rule changes that would benefit Exelon’s fleet.
"We don’t think we will be in a different situation," he said.
Bill decried as Exelon bailout
The sponsor of H.B. 3293, Lawrence Walsh (D) of Joliet, testified before the committee along with the mayor of Clinton, Ill., and other municipalities where the troubled reactors are located. They said the closure of any of the plants would be devastating in terms of jobs and taxes.
Opponents of the bill also appeared before the committee, including the associate state director of the AARP, who called on Exelon to open its books to an independent auditor and the Illinois Commerce Commission to prove its financial situation is as dire as the company has said.
Also testifying was Chris Armstrong, CEO of Keystone Steel and Wire, which operates a scrap mill on 1,500 acres along the Illinois River near Peoria, Ill.
Armstrong said the Exelon-backed bill would raise electricity costs for the mill and an associated plant in Chicago by $2.2 million a year and put the company at a disadvantage to competitors in neighboring states and overseas.
"We are forced with the threat of being priced out of our markets," he said.
But the strongest criticism came from the attorney general’s office.
Exelon was happy to embrace risk when wholesale power prices were on the rise and profits from its generation business were flowing, Hendrickson said. Only now, in a market where nuclear power is under pressure from relatively inexpensive natural gas and wind, is the company asking for help in the form of a $300-million-a-year subsidy.
"What this bill does is disrupt that market. It puts a thumb on the scales," she said. "Basically, it’s ‘Heads up, Exelon wins. Tails up, Exelon wins.’ That’s not a free market. It’s a bailout."