10/28/2016 - CRAIN'S: Mammoth Energy Bill Emerges as Clock Ticks on Nuke Closures

By STEVE DANIELS

As do-or-die time approaches on whether two of Illinois' six nuclear plants will close, owner Exelon is back with a new proposal to hike electric bills statewide in order to save them.

The effort is part of a far-reaching energy bill that also would tap ratepayers to fund new wind farms, solar installations and programs to cut down on power consumption, among other things.

Representatives of the Chicago-based power giant and its subsidiary, Commonwealth Edison, have briefed staffers for state legislative leaders and Gov. Bruce Rauner in recent days on the state of negotiations to produce the most far-reaching energy policy changes since Illinois deregulated its power market in 1997, sources said. The goal is to pass a bill in the Legislature's upcoming fall veto session, which takes place next month.

Also in the meetings were representatives of Houston-based Dynegy, the state's second largest power generator and an owner of mainly coal-fired plants, as well as downstate utility Ameren Illinois, the Citizens Utility Board, the Sierra Club, Natural Resources Defense Council and the Environmental Defense Fund.

MORE: Why is nuke giant Exelon touting a subsidy for coal?

Without action, Exelon CEO Chris Crane has said, the company will shutter its downstate Clinton nuclear plant next year and its Quad Cities nuke on the Mississippi River the year after that. The two plants employ about 1,500 and furnish millions in property taxes each year to the jurisdictions that host them.

“We remain hopeful that we can reach a constructive solution that truly is in the best interests of our state and our fellow Illinois citizens,” Crane said Oct. 26 on Exelon's quarterly earnings call. “But absent action during the upcoming veto session, both facilities will close.”

A new draft version of the bill, obtained by Crain's, sets forth a different way to calculate subsidies for Exelon's two at-risk nukes than previous versions, incorporating a social cost of carbon pollution as the baseline for rewarding the nukes for their lack of emissions and then making adjustments based on market conditions. But, like a version from last spring, the subsidy would be capped at $265 million per year.

Sources differed on how much ratepayers would actually need to shell out in surcharges on their electric bills to keep the plants open, with some saying to expect $265 million annually for the foreseeable future and others saying the total might average $200 million a year. Exelon wouldn't comment on its expectations.

If at the higher end of the range, the average residential customer can expect to pay a little over $2 a month just to keep the two plants open.

WIND, SOLAR AND COAL

More additional ratepayer charges would support wind and solar energy development in Illinois, made possible by state-negotiated power purchase contracts. The measure calls for more than 4,000 megawatts of new wind and solar over the next 14 years, funded by a charge on the delivery portion of customers' electric bills. That charge would supplant the current system of requiring power suppliers to pay to meet required renewable energy usage and then passing those costs along to customers.

In addition, steeper charges on electric bills would support much more ambitious utility efforts to reduce power consumption. But, for the first time, utilities like ComEd would be allowed to earn a profit from their administration of these energy efficiency programs. Currently, utilities recoup their administrative costs from ratepayers, but aren't permitted to charge extra to earn a return.

Missing so far from the bill are provisions Dynegy is seeking to funnel more revenue to its struggling coal fleet in southern Illinois. Exelon and Dynegy have talked about having the state take over from the regional grid manager for downstate Illinois the responsibility of buying “capacity,” or the obligation to deliver when power demand is highest, from power generators. That would boost the revenue Dynegy's coal plants receive from downstate ratepayers and allow the company to keep open facilities it's announced it will close.

In a statement, Exelon said it is “continuing to evaluate ways to address the (downstate) market failures that threaten electric reliability for customers in southern Illinois.”

ENVIRONMENTALISTS' BIND

Ratepayer-funded help for Dynegy is likely to be added to win downstate votes for the package. But that will put environmentalists who've lobbied for the bill's clean energy and efficiency programs in the difficult position of endorsing actions to keep open polluting power plants that otherwise would close.

There's much more to the bill as well, particularly language overhauling how ComEd charges to deliver electricity to nearly 4 million customers in Northern Illinois. ComEd wants to charge households and small businesses based on their usage during peak times of the month rather than how much electricity they consume overall. Critics say this will make it hard for low-income households and senior citizens to control their electricity costs.

None of the parties who've been negotiating a compromise for months are formally signed on yet. There's little time to hash out a broad agreement with the election and veto session looming. And, if aid for coal interests is part of the package, that will undermine claims that this is an environmental bill and support criticism that it amounts to a grab-bag of ratepayer-funded benefits for as many interest groups as possible.

Here, for example, is how Exelon described the draft bill as it exists now: “We have made significant progress developing a proposal that will double energy efficiency programs, preserve the nuclear units that produce well over 90 percent of Illinois' zero-emission electricity, accelerate the growth of wind and solar energy, and provide $1 billion in funding for low-income programs, among other things.”

If this bill dies of its own weight, don't be surprised to see an 11th-hour stripped down version perhaps bailing out the nukes and beefing up energy efficiency programs. Ticktock.