D.C. nuke bailout won’t save Illinois plants

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Some state lawmakers recently expressed hope that the proposed federal rescue might buy them more time to resolve a months-long impasse over broad energy legislation aimed at eliminating carbon emissions from Illinois power plants within 25 years.

Exelon popped that balloon.

“While we remain encouraged by growing support in Congress to preserve nuclear energy to help combat climate change, the provisions currently under consideration in the Senate infrastructure bill do not provide the policy and funding certainty we need and could take months or even years to come to fruition, if at all,” the company said in a statement. “Meanwhile, our Byron and Dresden nuclear plants must be refueled this fall—Byron in September and Dresden in November. If we refuel both stations to delay their retirement, we will be committed to running the plants for up to an additional two years, during which we could face revenue shortfalls in the hundreds of millions of dollars. We can’t risk taking those losses with no guarantee of a legislative solution.”
 
At the same time, a labor coalition turned up pressure on lawmakers to get more involved in resolving the outstanding issues. The coalition, which has been negotiating with environmental groups over details of how quickly the state bill would mandate Illinois’ power-generation decarbonize, sent a letter to Gov. J.B. Pritzker and legislative leaders today declaring the talks at a dead end.

“We sadly write to inform you today that as a result of the Illinois Clean Jobs Coalition’s failure to negotiate in good faith, we have reached what we believe is an impasse in reaching an agreed-upon clean energy bill due to seemingly intractable differences on the issues of decarbonization and prevailing wage standards,” the letter read.

“As our state’s leaders, we implore you to step in and work to find a way to get a deal done. There is too much on the line,” it added.

At the federal level, the nuke bailout language in the infrastructure bill would permit operators of unprofitable nukes to apply to the Energy Department for credits that would make up the revenue difference between being in the red and in the black. The measure authorizes $6 billion over four years.

One problem with that approach from Exelon’s viewpoint is that the money would be subject to yearly appropriations. Authorization of funding is one step; appropriators must act each year to actually provide the money. That creates too much uncertainty for the company, which must bid three years ahead of time with regional power-grid overseers to set the price ratepayers shell out each year for power generators’ promise to produce during high-demand days.

In addition, it would be well over a year before money under the program would flow because the Energy Department would have to write rules implementing it and then would have to collect and verify bids.

Instead, Exelon and other nuke operators want a production tax credit for at-risk nukes, which would establish a set price over multiple years. Pending in Washington would provide that and could be part of a larger tax bill Democrats are pursuing separately from the bipartisan infrastructure talks. Democrats in the House have made passage of the bipartisan Senate bill dependent on moving the costlier tax bill later this year.

The combination of a program Exelon believes unworkable with uncertainty over whether anything will emerge from Congress is enough for the company to go ahead with closing the two plants, it said.

For Illinois lawmakers, passage of a taxpayer-funded bailout in Washington would serve the dual purpose of preserving the nuclear plants, both of which together employ well over 1,000 union workers, and not relying on hiking electricity rates to do it. Language in the stalled state bill would provide Exelon an estimated $700 million-plus over five years to keep the plants open but would reduce the electric-bill surcharge—or even require partial rebates—if federal money comes to the rescue.

“The proposed Illinois clean energy legislation is the only solution that can pass in time to provide the certainty we need, while also protecting consumers by ensuring that any funds directed to nuclear from future federal legislation are passed through to customers,” Exelon said.

Exelon reports second-quarter earnings on Wednesday, and CEO Chris Crane likely will have more to say on the subject when he holds his quarterly conference call with analysts.

Update:

The union coalition’s letter touched off a firestorm, with responding letters not just from the Clean Jobs Coalition but from Gov. J.B. Pritzker as well. Senate President Don Harmon, D-Oak Park, provided a statement.

Perhaps most revealing was the below-the-radar tug of war between Pritzker and Harmon, which has helped keep the issue dragging on.

Pritzker in his lengthy letter essentially took the side of environmentalists, blaming the impasse on the unions. "The bottom line is that pointing fingers at the Clean Jobs Coalition, whose members have already made significant compromises on decarbonization and equity provisions, is unproductive, especially after Climate Jobs Illinois (the union group) has refused to send an additional written proposal that was promised to them for weeks," Pritzker wrote.

He echoed the enviros’ contention that the union groups are seeking to keep natural gas and coal-fired power plants "open in perpetuity."

"I have negotiated in good faith as pro-coal forces have shifted the goalposts throughout this process," he wrote. He called on the Legislature to pass his bill with the concessions his administration made at the end of May.

The Clean Jobs Coalition in its letter was blunt: "In June, the Illinois Clean Jobs Coalition received a proposal from labor that was a step backward. CJI’s proposal created unlimited carbon emission loopholes, allowing any polluting fossil fuel plant to stay open in the state as long as it wanted, and completely exempting gas plants from any pollution reductions for the next two decades."

Harmon in a statement said he was "disappointed" to learn that the two sides couldn’t agree. "Moving forward here, the Senate intends to keep discussions going with stakeholders in an effort to produce legislation that can get at least 36 votes in the Senate and 71 in the House in order to take effect in the immediate future," he said.

Harmon’s statement was far more terse than Pritzker’s, but the Senate president since late May has been far more sympathetic than the governor with organized labor’s arguments that shutting down gas plants too early could imperil reliability and needlessly cost jobs.

No talks between labor and the greens are scheduled. They’ve thrown the mess back to Harmon, Pritzker and House Speaker Chris Welch.

via Crain’s Chicago Business

August 2, 2021 at 05:12PM

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