PI Original Ellyn Fortino Monday November 10th, 2014, 2:56pm

Should The State Legislature Boost Exelon's 'Economically Stressed' Nuclear Plants?

Chicago-based nuclear giant Exelon Corp. insists several of its Illinois power plants are in dire financial straits, and the company appears poised to request a legislative fix from state lawmakers next year to avoid closing facilities. Progress Illinois takes a closer look at the issue.

Chicago-based nuclear giant Exelon Corp. insists several of its Illinois power plants are in dire financial straits, and the company appears poised to request a legislative fix from state lawmakers next year to avoid closing facilities. 

Over recent months, Exelon has indicated that three of its six Illinois nuclear power plants could shutter if measures are not put in place to help boost its supposedly unprofitable facilities. Exelon, the parent company of ComEd, claims its Byron, Clinton and Quad Cities plants are struggling financially in part because of competition from natural gas and subsidized renewables.

"Some Illinois nuclear facilities face a perfect storm of counterproductive federal energy policies, market-distorting subsidies, and other economic challenges that threaten their continued operation," reads Exelon's new pro-nuclear website designed to "educate Illinois policymakers and residents about the clear benefits that the state's six nuclear facilities provide to the Illinois economy, environment and our electric grid reliability."

Kathleen Barron, Exelon's senior vice president of federal regulatory affairs and wholesale market policy, told the Illinois Commerce Commission in September that the company requires an estimated $580 million more in revenue to stabilize its Illinois nuclear fleet, according to a Crain's report. Exelon has said a $6 per megawatt-hour increase in Illinois power prices "would offset a good deal of the economic stress on these units."

Notably, the energy producer has not guaranteed it will keep all six of its Illinois nuclear plants operating, even if the state legislature green lights what many have dubbed a "bailout," which could be pushed during the spring legislative session.

To justify possible intervention from the state legislature, Exelon maintains that its low-emission nuclear fleet will be central to Illinois' compliance with new carbon emission regulations proposed by the Environmental Protection Agency (EPA) in June. If Exelon's nuclear reactors shut down, the company argues that the state would have a hard time meeting its EPA target of reducing power-plant carbon emissions by 33 percent from 2012 levels by 2030. The state legislature is expected to move on legislation related to its carbon-rule compliance plan next year.

"If the units at risk of closing today -- representing 43 percent of the state's nuclear generation -- retire, they cannot be mothballed and later brought back online," Barron said in a September statement. "Together they represent more than 30 million metric tons of avoided carbon emissions, given that they will need to be replaced with fossil generation to provide the around-the-clock electricity needed to serve customers in the state."

Exelon says it won't make any decisions involving possible facility closures before June of next year, which is when the EPA is expected to issue its finalized carbon rule, called the Clean Power Plan. States would be required to turn in carbon-reduction implementation plans by June of 2016. The EPA is accepting public comment on the prosed regulations rule through December 1.

The nuclear utility contends it is not looking for a state bailout, but rather a "market-based solution" that propels Illinois to its carbon-reduction target and "properly values all energy sources in the state equitably, taking into account the clean energy and around-the-clock reliability they provide."

Thus far, the company has offered only a few general state policy changes it would like to see, including a nuclear power "clean energy" credit paid for by consumers and a carbon cap-and-trade system. In such a system, companies that emit carbon would essentially have to comply with emission limits or be required to buy or trade credits to release higher levels than the law allows. 

Nuclear energy opponents as well as environmentalists counter that nuclear power is far from "clean."

"What is clean about an energy resource producing 6,000 generations of deadly hazardous waste that have to be kept out of society and out of the environment," asked Dave Kraft, director of the Nuclear Energy Information Service, a Chicago-based non-profit focused on ending nuclear power. "If you can answer me that question, we'll close the shop here. It's clean only in the sense in that it doesn't release carbon atoms when it produces the electrons. Everything else about nuclear is pretty dirty." 

Meanwhile, Exelon said in a Crain's letter to the editor on Monday that the "suggestion that Exelon's opening bid in legislation is $580 million is simply not true."

"It is premature to speculate on the costs or benefits of any legislative solution to flaws in Illinois' energy market," William Von Hoene Jr., Exelon's senior executive vice president and chief strategy officer, wrote in the letter. "State agencies are evaluating the impact of plant shutdowns on jobs, energy prices, electric reliability, EPA greenhouse gas compliance and customer rates. That data are needed before any decision can be made on how best to incorporate nuclear energy into clean-air energy programs."

The Nuclear Energy Institute (NEI), a nuclear industry policy advocacy organization, released a report in October detailing the possible economic consequences of Exelon closing three of its facilities prematurely.

"In 2016 alone, the early retirement of the Byron, Clinton and Quad Cities nuclear energy facilities would result in a loss of nearly $4 billion of direct and indirect economic output in Illinois," NEI said in a news release. "The losses would increase each year thereafter and reach almost $5 billion in direct and secondary output by 2030. The number of direct and secondary jobs lost increases over a five-year period, peaking in the fifth year after the plants close, to more than 13,000 jobs lost in Illinois."

Kraft, however, questions the report's findings, noting that NEI's information primarily came from Exelon, among other concerns.

The Illinois Commerce Commission, the Illinois Environmental Protection Agency, the Illinois Power Agency and the state's Department of Commerce and Economic Opportunity are also looking into the potential impact of nuclear power plant closures, as requested in a resolution adopted by the state House in late May. The agencies are expected to issue their reports to state lawmakers sometime between November 15 and the end of the veto session.

Kraft said it is troubling that the resolution provides "no defined avenue" for public input on the reports, which "will then be used as a justification in the next spring session next year to bailout Exelon."

The "Nuclear Power Plant Closures" resolution, HR 1146, introduced by House Speaker Michael Madigan and co-sponsored by House Minority Leader Jim Durkin, came in response to the possibility of Exelon closing facilities. In addition to the reports from state agencies, the measure calls for the adoption of federal and local policies "to ensure the continued operation of nuclear power plants in Illinois." 

"We have this weird situation of: give us this bailout or we shoot the puppy -- that's essentially the game that's being played here, and the puppy this year was (thousands of) jobs in an election year that Madigan didn't want lost and didn't want to take responsibility for," Kraft said. "So we assume that's why he put in [HR] 1146 to placate both Exelon and the immediately affected unions that would be involved."

Kraft stressed that the state legislature should not prop up Exelon's uneconomic plants.

"The bottom line is: it is not the responsibility of the legislature to guarantee the profitability of a private corporation. That's the job of Exelon's CEO and Board," he said. "And Exelon's profitability should certainly not be guaranteed using the wallets of Illinois ratepayers. Exelon's anachronistic business model of being a 'nuclear electron retailer' has finally caught up with them, and needs quick and deep overhaul. It's Exelon's responsibility to do it, at their own expense, not ratepayers."

Image: AP/Robert Ray

Comments

The debate on this must not focus myopically on the impact of Exelon's reactors closing. This is really about the state's energy future, and the issues of economic justice, nuclear safety, and climate change that are bound up in it. The fact is, Exelon's reactors are in trouble because they are no longer economical - even after the billion-dollar bailouts from ratepayers in the 1990s. Should reactors close sooner rather than later - and they will close eventually, since all are approaching or past 40 years old - the state needs to plan for the impact on those communities. But overall, the closure of the plants is more an opportunity than a threat to Illinois. Exelon has made much of the fact that its nuclear fleet provides 6000 jobs and 46% of the state's electricity generation. But consider this: wind power in the midwest is producing power for less than the market price of energy, and renewable energy in Illinois is already employing 20,000 people while providing less than 5% of the state's electricity. Closing the most uneconomical reactors is only going to create more and better opportunities for:

  • Expanding renewable energy and efficiency in Illinois
  • Creating many times more jobs than the closed reactors provide
  • Making energy more affordable
  • And setting the state on a path to energy democracy and climate resilience

One major sign of the bias built into Exelon/NEI's report is the fact that there is not a single mention of what happens after a nuclear plant closes: decommissioning. Exelon currently holds hundreds of millions of ratepayer dollars in trust funds to pay for the dismantlement of each of its reactors. Done right, as it was at the Rancho Seco reactor in California and hopefully will be at the Vermont Yankee reactor, decommissioning can keep a large portion of the workforce employed for a decade or longer. So we are not talking about 6000 Illinois jobs being lost (because Exelon is only considering closure of 5 of its 11 reactors), but more like 1,200. That is no small tragedy for the workers and local communities involved, but it would cost the state (and ratepayers) a lot less than the $580 million per year Exelon is demanding to help those workers find good jobs than it would to prop up the uneconomical reactors. In fact, the latter would set a precedent for a responsible and socially just climate action policy, to mitigate the impact on affected communities of phasing out nuclear and fossil fuels.

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