Exelon Nuclear Plants Get Bailout in Sweeping Energy Bill
December 2, 2016
By Jeffrey Tomich
Years of sagging energy prices and eroding electricity demand pushed two Illinois nuclear plants to the brink of closure. A procedural assist in the final hours of the legislative calendar spared the plants from a knockout blow.
In the end, lawmakers approved the most significant rewrite of state energy policy in two decades. Among other things, it authorizes up to $2.4 billion in subsidies over the next decade to keep Exelon Corp.’s Clinton and Quad Cities nuclear plants running.
The bill, which will also trigger billions of dollars for wind, solar and energy efficiency, was helped by a last-minute maneuver removing the effective date. The seemingly innocuous change lowered the threshold for passage in the House, where it ultimately passed by just three votes.
The “Future Energy Jobs Bill” now goes to Gov. Bruce Rauner (R), who issued a statement late yesterday evening indicating he’ll sign it.
“This legislation will save thousands of jobs. It protects ratepayers, through guaranteed caps, from large rate increases in years to come. It also ensures taxpayers are not on the hook to keep the power plants open and online,” Rauner said in a statement.
The stakes in the battle over S.B. 2814 were high, especially for Chicago-based Exelon, the nation’s largest nuclear operator, which has been pushing for state aid for money-losing nuclear plants for the past two years (EnergyWire, June 3). The company threatened to take “irreversible” steps to shut down the plants if the Legislature didn’t pass the bill yesterday.
It’s also a win for clean energy advocates. The measure strengthens the state’s energy efficiency standard and includes a fix for Illinois’ long-broken renewable standard. Specifically, it requires development of enough new wind and solar energy to power 1 million homes by 2030.
Exelon went head-to-head with a coalition of wind and solar groups for much of the past two years over the future of Illinois’ energy mix (EnergyWire, Feb. 27, 2015). The state’s largest energy company and green groups finally reached a compromise last week.
“This forward-looking energy policy levels the playing field and values all carbon-free energy equally, positions Illinois as a national leader in advancing clean energy, and will provide a major boost to the Illinois economy,” Exelon’s chief executive, Chris Crane, said in a statement.
For opponents, including the state’s biggest energy users, the outcome is a setback.
Manufacturers, chemical plants and owners of Chicago skyscrapers repeatedly warned legislators that the bill will increase electric costs, undoing the benefits of competition that grew from deregulation in the late 1990s.
“Beware when you hear Exelon telling you what’s good for the customers,” an official from the Building Owners and Managers Association of Chicago told a Senate committee in a hearing Wednesday. “We’re the customers.”
Power plant owner Dynegy Inc., which has shut down 20 percent of the generating capacity in downstate Illinois in the past six months, also lobbied hard to kill the bill in the final days.
Dynegy supported it until last week, when the sponsor pulled a convoluted provision that would have generated millions of dollars in additional capacity payments for the Houston-based company’s coal plants (EnergyWire, Nov. 23).
A company spokesman didn’t respond to an email seeking comment last night.
Rates, Jobs at Issue
In the end, for legislators who voted on the bill yesterday evening, arguments centered on bill’s impact on electric rates and the state’s economy. And both sides came armed with conflicting data and studies as supporting evidence.
Rep. Bill Mitchell (R), whose district includes the 1,046-megawatt Clinton nuclear plant northeast of Springfield pleaded with lawmakers to spare jobs and taxes that are vital to the area.
Not only the 800 jobs at the plant but also those at nearby schools and businesses that depend on the plant were in jeopardy.
“The people of DeWitt County have been put through hell for the last six months wondering if they’ll have a job,” he said.
Opponents made equally passionate pleas to not ram through a massive, complex bill in the final hours while the state faces so many other pressing needs.
Rep. Mark Batinick (R) said the aid for Exelon was unnecessary because Illinois is a significant exporter of electricity.
“We’re going to subsidize a company so that it can sell its power out of state?” he said. “That’s supposed to be more important than a budget, than social services, than education?”
Bill supporters cited studies by Illinois agencies and another by Brattle Group consultants suggesting that Illinois electricity rates would go up if the nuclear plants shut down prematurely. Rauner pressed for rate caps for all classes of utility customers as a condition for his approval.
Including the energy savings from huge investments in energy efficiency that would be unleashed, consumers would actually see a net savings in energy costs in the long run, according to proponents including the Citizens Utility Board, a utility watchdog group.
St. Louis-based Ameren, a distribution utility that serves the southern half of Illinois, agreed and said its customers would save money even factoring in the cost of the nuclear subsidies.
Other consumer advocates, including Illinois Attorney General Lisa Madigan (D) and AARP, weren’t convinced. Both fought the bill until the end and raised questions about whether the last-minute rate caps would protect all customers equally.
“We want to gamble on 50-plus lobbyists who spend a lot of money who tell us if we don’t do something, the sky’s going to fall? The sky is not falling, and rates are not guaranteed to go up,” said state Sen. Kyle McCarter (R).
State Sen. Chapin Rose (R), the bill’s lead sponsor in the state Senate, asserted that allowing the Exelon plants to close was the bigger risk. “How would you define losing 20 percent of the power on your grid? That’s a gamble,” he said.
Renewables, Efficiency Score Wins
Almost overshadowed by the drama around Exelon’s nuclear plants was the effect the bill will have on renewable energy development and energy efficiency in Illinois.
Illinois’ 25 percent renewable standard has been broken for years because of an unintended conflict in state law. S.B. 2814 resolves the conflict so the standard can be funded. It also specifically requires development of 1,300 megawatts of new wind and 300 MW of solar — a mix of utility-scale, community and rooftop projects.
The bill also strengthens Illinois’ energy efficiency standard, requiring Chicago-based Commonwealth Edison to reduce electricity usage in its service area by 21.5 percent by 2030. Ameren will be required to cut usage in its mostly rural downstate territory by 13 percent.
“This legislation should reenergize Illinois’ solar energy and wind power development bringing investments and cleaner air and water,” said Howard Learner, executive director of the Chicago-based Environmental Law & Policy Center, in a statement.