UTILITIES

PJM auction may dictate fate of two Exelon nuclear plants

Next month's PJM Interconnection capacity auction for the 2018-19 planning year will go a long way to deciding the fate of two challenged Exelon nuclear reactors in Illinois, the company's chief executive said yesterday.

Exelon's Chris Crane made the remarks during the company's earnings conference call yesterday morning. It was the first call with analysts and investors since the Illinois legislative session wrapped up in May without action on a bill that would help preserve the Quad Cities and Byron plants (EnergyWire, June 2).

Chicago-based Exelon has said it must make a decision whether to shutter any nuclear units in PJM around September. The Illinois Legislature doesn't begin its veto session until later in the fall. Crane, who has already once pushed back the timetable for deciding the future of the two plants, was asked about possible catalysts that could keep them running.

"If the units clear the '18-'19 [PJM capacity] auction, that would show that they're financially viable," he said. "That is a long shot in our opinion, just because of the cost structure and how the forwards [power prices] have continued to collapse."

The 1,819-megawatt Quad Cities plant and 2,336 MW Byron plant failed to clear the last PJM auction for 2017-18.

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Analyst Paul Patterson of Glenrock Associates LLC said determining whether the plants would clear the next auction with new capacity performance rules and myriad other variables is difficult. What is clear is that the units are challenged.

"If they don't clear the capacity auction and they don't get legislation, these units are clearly in jeopardy unless the markets improve a lot," Patterson said.

The 2018-19 PJM capacity auction is set for Aug. 10, with results to be disclosed on Aug. 21, according to the grid operator.

'We need a market fix'

Crane suggested that Exelon faces a decision before the Illinois Legislature could take action on the company's proposed low carbon portfolio standard. It is unclear if Exelon would keep the units running if there were significant progress toward passage of a bill.

Changes to PJM's capacity auction won't be sufficient to keep Byron and Quad Cities operating, however, he said.

"We need a market fix in Illinois to stop the non-competitive nature of the market. And short of the legislation to fix that, we will have to make decisions on retiring assets that are not economically viable," Crane said.

Exelon must provide PJM 18 months' notice if it plans to retire units, and the company must also give the grid operator notice about the plants' availability for the 2019-20 auction.

There are also operational decisions, he told analysts.

"We have to order and design fuel cores that take a while," Crane said. "There's a long lead time there. Are we going to run for a year, or are we going to run for a longer period of time? And that's a very expensive decision to make."

Crane said the company has longer -- until early next year -- to decide the fate of a third Illinois nuclear plant that's losing money.

The 1,065 MW Clinton plant in the Midcontinent Independent System Operator's footprint lost $100 million last year, according to a company executive. But the timing of the MISO capacity auction doesn't require Exelon to provide notice at the same time it does in PJM.

Still, Crane said, the fate of Exelon's proposal in the fall veto session will "heavily weight our decision."

Twitter: @jefftomich Email: jtomich@eenews.net

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