11/01/14 - CRAIN'S EDITORIAL: This "market solution" only benefits Exelon

You know you've got a good thing going when profitability is only a bailout away. That's the kind of mojo that's working at Exelon Corp., which is signaling it will seek legislation next year to provide hundreds of millions of additional dollars to its fleet of Illinois nuclear plants, which the Chicago power company contends are struggling financially.

Exelon says three of its six plants in Illinois are in the red and will stay that way without policy changes in Springfield. Presumably the other three are profitable, but Exelon won't go into details. None of this would be much of an issue if Exelon weren't on the cusp of seeking a blanket fix for what could be a very specific problem. The company says it plans to pursue a “market solution” in Springfield that benefits all of its nukes in Illinois, even those in the black.

Exelon's Midwest fleet as a whole still is profitable by Crain's estimates.

Exelon says, “Looking at the regional fleet as a whole is not the right way to consider profitability.” Sorry, Exelon, but if you're going to ask for a fleetwide bailout, it's fair to ask how each of the plants in the fleet is doing. Would it be cheaper and smarter to shut down underperforming plants rather than continue to prop them up? We can't know because Exelon won't share the numbers.

Crain's Senior Reporter Steve Daniels walks readers through the numbers we do know in the Oct. 27 issue. He confirms Exelon's nuclear business indeed has taken a hit. Pretax profits at the Midwest operation plunged by almost three-quarters to an estimated $4.90 per megawatt-hour in 2013 from $17.38 in 2011. Midwest revenue fell 28 percent in the same period, undercut by cheap natural gas and unusually low “capacity” fees paid by all energy consumers to power plants to ensure electricity is available when demand soars.

Those declines are tough. Even so, Exelon's Midwest fleet as a whole still is profitable by Crain's estimates. And the pain will be alleviated in the coming year. A big increase in capacity prices paid to power plants—costs that caused the summer spike in most Chicago-area consumers' electricity rates—will boost Exelon's Illinois revenue by $388 million from June 1 to May 31, according to one estimate. Meanwhile, there's good news on the corporate earnings front: Exelon's third-quarter profit rose 35 percent to $993 million, powered by gains in its utility and generation units.

Bailouts for profitable enterprises? That's not the kind of juice that ratepayers should be shelling out for.

http://www.chicagobusiness.com/article/20141101/ISSUE07/311019979/this-market-solution-only-benefits-exelon