1/07/16 - CRAIN'S: Exelon undercuts Ohio rival's bid to save its power plants

By STEVE DANIELS

Stymied so far in its bid to win power-plant subsidies in Illinois, Chicago-based Exelon is mounting an audacious campaign to upend a more successful subsidy effort by FirstEnergy in its home state of Ohio.

Last month, Exelon offered to undercut the eight-year power-purchase contract Ohio utility regulators appear poised to hand FirstEnergy to keep open two financially struggling power plants.

Exelon filed Dec. 30 with the Ohio Public Utilities Commission to provide the same 3,000 megawatts generated by FirstEnergy's Davis-Besse nuclear station on the Lake Erie shore and its massive W.H. Sammis coal-fired plant along the Ohio River at a cost that Exelon said would save Ohio ratepayers $2 billion over eight years.

Akron-based FirstEnergy didn't take kindly to the intervention by a peer company finding itself in the same straits thanks to rock-bottom wholesale power prices that are rendering some older, base-load plants unprofitable.

"Exelon lobbied for regulated rate recovery for its nuclear plants in Illinois," FirstEnergy spokesman Douglas Colafella wrote in an email. "This effort was unsuccessful, so now Exelon is trying to make its Illinois plants profitable at the expense of Ohio jobs."

“GROSSLY LOPSIDED'

Exelon pulls no punches in its filing. Calling FirstEnergy's deal "grossly lopsided," Exelon wrote that opening the eight-year contract to competitive bids would "wash away the stain of this affiliate backroom deal."

FirstEnergy, which reached a settlement with the staff of the Ohio PUC to endorse the contract, isn't disclosing the price ratepayers in northern Ohio, including Cleveland, would pay under the pact. But it has said the average household in its territory would pay $3.25 more per month in the first year of the pact. That's 3 percent more than the current average monthly bill of $103.

Of course, Exelon has been accused of using similar tactics in Illinois. The company last year pushed a legislative proposal that would have imposed a surcharge on electric bills statewide and funneled most of the $300 million in revenue generated to Exelon's six Illinois nuclear plants. Exelon said that measure would add about $2 per month to the typical household's bill.

The company said at the time that as many as three of the six plants were losing money. Now Exelon says five of the six are at least break-even thanks to a forthcoming revenue increase as Commonwealth Edison delivery customers pay more in “capacity” fees to ensure the plants are available during high-demand periods.

EXELON'S DISTINCTION

Exelon's legislation never saw state House or Senate floor action. The ongoing budget stalemate crowded out a wide range of energy issues before the Legislature.

In an interview, Exelon Executive Vice President Joseph Dominguez made a distinction between what Exelon is trying to do in Illinois and what FirstEnergy is doing in Ohio. Exelon's Illinois legislation allows certain producers of carbon-free power other than Exelon's nukes to bid for the credits its bill would create. (Opponents point out that the bill is crafted to limit competing bidders and would assure the lion's share of the credits would go to Exelon.) FirstEnergy's deal, by contrast, is a straightforward contract, granted without competitive bidding.

What Exelon is proposing is a competitive bidding process for the 3,000 megawatts in which Exelon would commit to bid the offer it's made.

"Competitive markets are under pressure," Dominguez said. "(Ohio) is an important data point. It's a state that historically supported markets."

Ohio represents the third-largest market, after Pennsylvania and Illinois, for Constellation, Exelon's large retail power supplier.

COULD USE ILLINOIS POWER

So where would the 3,000 megawatts Exelon is offering come from, given that Exelon owns no large power plants in Ohio? Some of it could come from Illinois, where Exelon generates more power than needed in the state, Dominguez allowed.

Exelon generates more than 20,000 megawatts in PJM Interconnection, the regional grid operator for all or part of 13 states, including Northern Illinois.

"Ohio already relies on out-of-state power for nearly 25 percent of the electricity we use to power our homes and businesses," FirstEnergy's Colafella said. "Exelon's proposal would unnecessarily increase Ohio's reliance on out-of-state power sources, limiting Ohio's control over electric prices and energy production jobs."

FirstEnergy's two plants employ more than 1,000.

The Ohio PUC is expected to rule on FirstEnergy's bailout package later this year.