4/17/15 - CAPITOL FAX: Hold off a bit, please

By RICH MILLER

* Exelon’s corporate subsidy bill just took a big hit

One of the three Illinois nuclear plants that Exelon is threatening to close because they’re losing money will receive a windfall worth tens of millions beginning in June, courtesy of ratepayers downstate.

Energy prices are set to spike starting this summer for many Illinoisans outside of Commonwealth Edison’s territory in northern Illinois. The cost that consumers pay to generators to ensure that power plants are available to deliver electricity on the highest-demand days of the year will increase nearly ninefold in the year beginning June 1.

Those “capacity” charges—set according to an auction run by the independent grid operator that manages wholesale markets in downstate Illinois and all or parts of 14 other states—are embedded in the overall energy prices customers pay and are in addition to the cost of the juice itself. […]

The main beneficiaries include Chicago-based Exelon, which operates six nuclear plants in Illinois, including the Clinton plant downstate that will get the cash infusion. Also benefiting is Houston-based Dynegy, the second largest power generator in Illinois after Exelon and operator of a fleet of coal-fired plants downstate.

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Another generator, Exelon Corp., acknowledged that its 1,100 MW Clinton nuclear plant cleared the auction at $150, which analysts estimated could yield $40 million to $50 million in additional revenue for the 2015-2016 year.

Chicago-based Exelon has said for more than a year that three of its nuclear plants, including Clinton and two plants in PJM, are losing money because of competitive pressures from natural gas-fired generation and wind. The company is pushing legislation in Springfield that would create a low-carbon resource standard in Illinois that it says would level the playing field for its nuclear fleet and other non-carbon fuels like wind and solar energy (EnergyWire, Feb. 25).

In a research note, analysts at UBS Securities say the auction results “certainly help Clinton but could reduce the urgency for legislative reform in Illinois.”

An Exelon spokesman wouldn’t disclose how much additional revenue it might realize from the MISO auction, but said only that it wouldn’t be enough to materially improve the plant’s financial profile.

It wouldn’t be enough? Really? Exelon’s bill as currently written would net its nuclear fleet $300 million a year. The Citizens Utility Board estimates the Exelon bill - as written - would net the Clinton nuke plant somewhere between $27 million and $30 million a year. That’s significantly less than the plant made this week with that surprise auction result. And there’s no way that Exelon can pass its bill as written because it essentially locks out alternative energy suppliers. Add those suppliers to the mix and Clinton would receive a whole lot less money via passable state legislation.

Plus, by participating in that auction, didn’t Exelon just commit to providing power from that Clinton plant for the next year? Why yes, it did, according to the Citizens Utility Board. And yet it’s gotta have its bill passed right now?

What’s the freaking rush?

* Even so, something very weird happened with this auction

The capacity auction is administered by the Midcontinent Independent System Operator, or MISO, which runs the grid in parts of 15 states in the central United States. The auction determines what energy providers pay to power plant owners over the coming year to make sure they’re available to deliver power when demand is highest. Results were announced this week.

The huge jump came while prices for capacity in many other MISO states fell. In Missouri, for instance, prices fell from $16.75 to $3.48 a megawatt day. In fact, $3.48 was the highest capacity price in all the other states within MISO’s footprint, making Illinois’ $150 per megawatt day a glaring outlier.

That’s more than an outlier, it’s insane. I mean, for crying out loud Illinois is a net electricity exporter. What the heck was going on there?

* Like Exelon, Dynegy also made out like a bandit this week

It’s hard to know how many Ameren Illinois customers buy power under agreements that expose them to swings in the electricity market. About 500,000 customers buy power through Homefield Energy, the retail unit of Dynegy Inc. Dynegy operates nine downstate Illinois coal plants, including those formerly owned by Ameren. It committed 1,864 megawatts in the auction.

Spokesman Micah Hirschfield said all Dynegy’s Homefield retail customers are on fixed contracts.

However, some cities have contracts that expire soon.

Ameren Illinois, in a statement, said it was “extremely concerned and upset” about the capacity auction results and that it would work “to resolve this inequity to our customers.”

* In other news, the Citizens Utility Board has endorsed Sen. Don Harmon’s clean energy jobs proposal

CUB created three cost-benefit models for the Illinois Clean Jobs bill, based on electricity rates, past performance of efficiency programs and prudent assumptions about yearly increases in energy usage, key market costs and inflation. The consumer watchdog’s analysis compared those models with a “business as usual” scenario—if efficiency standards stayed at current levels. Estimated customer savings through the legislation ranged from about $1.1 billion to $2.2 billion. The “base case” model, based on mid-range assumptions, projected the following statewide benefits by 2030, if the bill were fully implemented:

* Total cumulative residential savings: $1.61 billion
* Average electric-bill reduction: 7.86 percent annually
* Average residential savings: $98.38 a year

The Illinois Clean Jobs bill stands out as the most consumer-friendly among the major energy proposals in the General Assembly’s spring session. Most notably, Exelon Corp., ComEd’s parent company, is pushing for special legislation that could cost ComEd and Ameren customers an estimated $300 million a year—to boost revenue at its fleet of nuclear power plants.

* After that crazy MISO auction, which appears to have provided far more to Clinton than Exelon was asking from the state, and after CUB’s endorsement of the Harmon bill, maybe legislators ought to just hold off a bit and wait for upcoming MISO auctions for the rest of Exelon’s nuclear fleet before rushing in with yet another corporate bailout that raises rates for consumers.

Those nuclear plants are supremely important to the state’s economy. But is the federal government just gonna allow all that electricity to be taken off the grid right away? It seems doubtful, particularly after this week’s MISO auction. There’s time to think and do it right.

And in the meantime, the attorney general needs to follow up on her pledge she made elsewhere this week to look into what just happened with that bizarre MISO auction.