Exelon’s old magic isn’t working anymore

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Over decades, Commonwealth Edison’s corporate parent, Exelon, has been given ample reason to believe it can get what it wants out of Springfield, time and again winning assurances that ratepayers will guarantee the company the government-sanctioned rate of return it desires without regard to how well it runs its operations. The largesse the company has extended to its political benefactors over time once ensured the sorts of legislative outcomes that benefited Exelon and its shareholders, if not always its customers.

The question now is whether recent investigations and indictments surrounding the wielding of that largesse have changed the mathematics of influence for Exelon within the capital’s backrooms. The Chicago-based utility giant’s latest move signals it is testing the new limits on its political power.

As Crain’s Steve Daniels reported Aug. 27 on ChicagoBusiness.com, Exelon announced it’s closing two of the five nuclear stations that serve the Chicago area next year: the Dresden plant in Grundy County and the Byron station south of Rockford, warning that those plants would close unless the state delivers legislation to provide more revenue to them. Historically low wholesale power prices, combined with a glut of power supply, have put financial pressure on the nukes, which by their nature must operate at all hours whether they’re needed or not.

This is not the first time Exelon has threatened to shutter portions of its nuclear arsenal. A similar announcement helped the utility operator win ratepayer-funded subsidies amounting to roughly $235 million a year as part of the Future Energy Jobs Act of 2016.

What surprised some onlookers, however, was Exelon’s decision to include the Byron plant in its closure warning. While the situation at Dresden has been dire for a while now—it’s committed to provide power only until mid-2021—the Byron plant is committed, via power auctions held years in advance, to deliver electricity until at least mid-2022. And as Daniels explains in this week’s issue, Dresden’s future is clear-cut. It’s a far older plant than Byron, and its operating license runs only seven more years for one of its reactors and nine more years for the other. Byron’s licenses for its two reactors don’t expire until 2044 and 2046.

Did Exelon add Byron to the closure memo to boost the announcement’s shock value, so to speak, and perhaps work a little of the old magic that once led to such fruitful outcomes in the General Assembly? The company wouldn’t comment to Crain’s on any political motivations. But judging by the prompt and skeptical reaction of Gov. J.B. Pritzker and state Senate President Don Harmon to this latest overture, Exelon’s playbook may be in need of a rewrite. The two most important pols in determining the fate of the nukes immediately questioned the need for new subsidies—and even questioned the need for Exelon’s existing subsidies.

"While they couch their messaging in their desire for a clean-energy future, their primary purpose is to dramatically increase those subsidies on behalf of their shareholders," Pritzker spokeswoman Jordan Abudayyeh said of Exelon. "Any financial benefit to the nuclear plants must be right-sized and protect Illinois ratepayers." Harmon went further. Noting that "independent market monitors believe these plants can be profitable," he said he would consider legislation requiring Exelon to put the plants up for sale before being allowed to close them.

Pritzker and Harmon are right to push back hard on Exelon’s latest threat. They should continue to scrutinize Exelon’s actions and demand answers as to why Byron in particular should be mothballed—as well as how Exelon intends to cover the cost of its decommissioning. The back-and-forth also underscores the need for a comprehensive energy strategy in this state, something Pritzker began to put in motion earlier this month with a new set of much-needed principles aimed at jump-starting renewable power development while clamping down on utility abuses.

26-Delivered

via Crain’s Chicago Business

August 28, 2020 at 05:32PM

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