2/24/15 - CRAIN'S: Exelon proposes surcharge on power bills; legislation expected soon

By STEVE DANIELS

Exelon will ask state lawmakers as soon as this week to approve a new surcharge on electric bills throughout the state to provide more revenue for low-carbon power-generation sources like its six Illinois nuclear plants.

The long-awaited legislation, for which Chicago-based Exelon has laid the groundwork for more than a year, would establish a “low-carbon portfolio standard” in Illinois. The proposal is modeled on a similar policy for renewable energy sources like wind and solar that the state established more than seven years ago, according to a fact sheet distributed by Exelon and obtained by Crain's.

Beginning next year, the bill would charge delivery customers of Commonwealth Edison and downstate utility Ameren Illinois extra to support low-carbon power sources, with a goal of ensuring at least 70 percent of the power they distribute is low-carbon. Like the renewables set-aside, it would limit the increase on rates to just over 2 percent.

The measure would sunset in five years, giving Illinois policymakers that amount of time to establish a market-based system to comply with proposed federal rules to reduce carbon emissions from power plants. It also would provide for rebates if wholesale power prices “exceed a specified level.”

In the fact sheet, Exelon emphasizes that other low-carbon power sources—not just its nukes—would be eligible for the new credits. They would include wind, solar, hydro and even “clean coal." The Illinois Power Agency, which procures power on behalf of utility customers statewide, would hold an auction to distribute the credits.

MATTER OF TIMING

The document doesn't specify eligibility standards for generators other than to say those benefiting from the state's renewable-power set-aside couldn't access the new funds, too. Observers expect the bill to be written in a way that ensures Exelon's nukes get the lion's share of the money, but for now, those details aren't available.

Sources have been told to expect the introduction of legislation later this week.

But in a statement, Exelon would only say, “We expect that legislation will be introduced in coming weeks, and we will have more to say when that occurs.”

The company reiterated familiar talking points about ensuring Illinois maintains its position as a leading producer of “clean energy” and that some of its nuclear plants here are in danger of closing without a revenue boost.

Exelon calls the proposal a “market-based solution.” Opponents have labeled it a bailout.

The new low-carbon credits would establish a revenue stream between $200 million and $300 million, or perhaps more, according to sources who have been briefed. That would aid operators of existing plants like Exelon's that are seeing revenues decline due to persistently low natural gas prices. Wholesale power prices correlate strongly to natural gas costs, particularly now with gas accounting for a greater percentage of power generation in the regional grid in which Exelon competes.

DISTRIBUTION COSTS INCLUDED

Utilities would be charged with collecting the surcharge for generators like Exelon on the portion of the electric bill that covers distribution costs. That would be a marked contrast with the set-aside for renewables, the cost of which is embedded in the part of the bill that covers the cost of energy itself.

That distinction has crippled the effectiveness of the renewable law. The Illinois Power Agency is supposed to ensure that increasing percentages of consumers' electricity come from clean sources. But with a majority of households getting their power from suppliers other than Commonwealth Edison or other utilities, the IPA has been unable to spend much on renewable purchases.

In recent years, renewable energy companies have pushed for a change in the law to have the money collected via distribution charges the same way Exelon is proposing to collect the new funds for low-carbon sources. But those bills died, largely due to opposition from politically potent Exelon and its Chicago utility, ComEd.

recently formed coalition of labor, clean-energy companies and environmental advocates, which also includes Chicago Mayor Rahm Emanuel, is promoting legislation that would boost the state's ultimate goal for renewable power from 25 percent to 30 percent of total supply. It also would establish a goal of reducing consumption by 20 percent.

Illinois lawmakers are expected to take up wide-ranging legislation that's likely to include elements of Exelon's proposal, as well as elements of the bill promoted by the Illinois Clean Jobs Coalition.