5/19/16 - CRAIN'S: Ratepayers could be on hook for $250 million for Exelon's nukes

By STEVE DANIELS May 19, 2016

Ratepayers across the state could collectively have to pony up an extra $250 million next year to keep Exelon from closing two money-losing nuclear plants under legislation pending in Springfield.

That figure is derived from statements made by Exelon executives and materials provided to state lawmakers.

The company isn't saying publicly how much its new bid to hike electric bills in order to keep open two ailing nukes would provide in additional revenue.

Privately, it's told lawmakers and others that the average would be around $170 million annually for the six years the subsidies would last, sources say. But the totals in specific years could be quite a bit higher or lower than that.

Representatives of Exelon and other interested parties will testify today on the legislation before a Senate committee.

And the charges likely would average more than $200 million in the first three years, when the market revenues the plants would fetch are more easily forecast. Exelon's lower six-year estimate appears to rely on assumptions in the last three years of the plan—a much harder market environment to predict.

In the first year, at least, the revenues the bill would generate seem to approach the generous $290 million in last year's bill, which foundered in the General Assembly.

The company won't confirm or deny how much in incremental revenue it would receive from surcharges applied to electric bills statewide if its bill became law.

But the $250 million estimate can be produced using materials Exelon has provided lawmakers and statements its executives have made to analysts.

Exelon's new plan sets a specific revenue figure the facilities would be guaranteed to receive thanks to commercial and residential ratepayers statewide.

The bill, introduced on the company's behalf earlier this month in the state Senate, would guarantee that Clinton and Quad Cities would collect $42 per megawatt-hour annually over the next four years.

The way the measure works, ratepayers make up the difference between what the plants will earn in the market and that $42 figure.

Exelon would furnish data to state utility regulators on expected costs and revenues, and then the state would approve a surcharge on bills to make up the difference. Yearly revenues from the surcharge are capped at $290 million.

Exelon Chief Financial Officer Jack Thayer told analysts on May 6 that the two plants combined stand to lose $140 million on a cash-flow basis in 2017. Ratepayers would have to absorb that under the legislation.

The bill also would ensure the plants make a profit.

In materials Exelon recently circulated in Springfield, it said that the Clinton plant's costs are about $40 per megawatt-hour and Quad Cities' are about $34 per megawatt-hour. At the bill's revenue guarantee of $42, Clinton would make a $2 profit and Quad Cities an $8 profit.

Based on the two plants' output last year, they would stand together to collect another $110 million on top of the $140 million loss they'd be recovering. That's total revenue of $250 million, not far from the $290 million last year's bill would have generated for all of Exelon's nukes.

In a statement, Exelon said, the $42 price is what's “required for both Quad Cities and Clinton to cover all costs and risks from 2017 to 2020. That includes all costs and risks associated with operating the plants, including capacity performance penalty risks for Quad Cities, cost inflation, return on working capital and other business risks that would be avoided if the plants were retired prematurely.”

“It's also important to recognize,” the company added, “that the $42/(megawatt) price compares favorably to other zero carbon power sources, and is five time less expensive that the prices the Illinois Power Agency received in a recent renewable procurement.”

“Exelon is a business, and like any business, it must sufficiently cover its costs and provide a return on capital investment that fully reflects business risks,” the company concluded.

Illinois Attorney General Lisa Madigan, in an email, called the legislation “a bailout for an already profitable company. While it's packaged slightly differently, Exelon's proposal still demands consumers pay more only to boost the company's profits. The state is in its 11th month without a budget, and the legislature should focus on that.”