Exelon could be forced to shut down its Illinois nuclear power plants if state law is not passed to bolster their eroded financial outlook. But Commonwealth utility branch Edison’s involvement in a corruption scandal has complicated that and other key political efforts in her home state.
CEO Chris Crane described these challenges during the Chicago utility’s second quarter earnings conference call on Tuesday. Last month ComEd accepted pay a fine of $ 200 million as part of a deferred prosecution agreement with federal prosecutors to avoid criminal liability in an alleged bribery scheme involving Illinois Speaker of the House, Michael Madigan.
Crane apologized for the company’s failure to prevent activities outlined in the agreement, including arranging jobs, contracts and payments for Madigan associates in return for help with the legislation favorable to public service. “We have taken strong action to address these [issues]”Crane said.” These new policies and surveillance will ensure this doesn’t happen again. ”
At the same time, Crane noted that the company was “trying to implement a legislative strategy in Illinois” that would offer its state nuclear power plants another avenue to generate market revenue from. capacity, seen as an essential element of their future financial viability.
Exelon has the country’s largest nuclear generation fleet and other generation assets; it operates utilities in Illinois, Maryland, Delaware and Washington, DC
Exelon on Tuesday reported second-quarter profit of $ 521 million, or 53 cents per share on a GAAP basis, beating its previous forecast despite costs related to storms and disruption related to the COVID-19 pandemic.
Exelon’s nuclear power plants are at stake
A December decision of the Federal Energy Regulatory Commission requires the mid-Atlantic grid operator, PJM, to impose minimum prices on a wide range of state-supported grid resources. That rule should include Exelon’s Clinton and Quad Cities nuclear power plants, which receive hundreds of millions of dollars a year in zero-emission credits created by Illinois. Future Energy Uses Act.
Exelon is looking to extend zero-emission credits to its nuclear power plants in Braidwood, Byron and Dresden, which failed to complete PJM’s last capacity auction in 2018 and could face early retirement without further financial support .
Although FERC has not approved PJM’s plan to comply with its order, and PJM has yet to set a date to resume its long-delayed capacity auctions, “there is a strong feeling….” Some are not profitable right now, and others may. to become.”
Exelon wants Illinois to create a new structure, known as the “fixed resource requirement,” which could allow these factories to be paid for their capacity values outside of the PJM market. This mechanism is part of the Clean Energy Jobs Act, a bill that combines a mandate for 100% renewable energy by 2050 with other policies relating to carbon reduction, electric transport and job creation.
But the corruption scandal has driven a wedge between public service and state lawmakers, while the COVID-19 pandemic has forced lawmakers to cut much of their work this spring and focus on responses to the public health crisis. The Clean Energy Jobs Act failed to move forward during an emergency session in May, as did an alternative, less ambitious clean energy bill called the Path to 100.
Illinois Governor JB Pritzker suspended the energy task force involved in drafting the Clean Energy Jobs Act after the deferred prosecution agreement was announced, said through a spokesperson that future legislation “will not be not written by utility companies “.
In the absence of a legislative solution to the challenges of Exelon’s nuclear power plants in Illinois, Crane said, “If we can’t find… a path to profitability, we’ll have to shut them down. This would be “a sad turn of events that will affect the state’s carbon reduction targets” given that nuclear power provides about 90% of Illinois’ carbon-free power “and will seriously affect communities ”which depend on power plants for jobs and economic activity.
But Exelon “will not allow the balance sheet to be further deteriorated by the exploitation of non-economic assets,” he said. Exelon has successfully won zero carbon credits in New York and New Jersey, but also plans to shut down its Three Mile Island nuclear power plant in pennsylvania if this state does not create similar supports.
Formula tariff extension and Chicago grid takeover both remain uncertain
ComEd also faces an uphill battle in its efforts to win an extension of a plan in place since 2011 that allows it to file its capital expansion plans as part of formula rate updates, rather than through through a traditional rate setting process with the Illinois Commerce Commission. A bill that would have extended the structure of calculated rates beyond its expiration in 2022 was not passed by the legislature this year.
ComEd CEO Joe Dominguez said during Tuesday’s earnings call that the formula’s pricing structure has allowed the utility to make significant improvements in customer service and system reliability, while reducing customer rates over the past decade. But the utility $ 9.53 billion capital plan for 2020 to 2023, which will come into effect under the calculated rate structure, will add more than $ 5 billion to its capital rate base and lead to price increases for customers in the years to come.
The new capital plan includes replacing aging power lines and poles and updating underground power cables, as well as hundreds of millions of dollars in networked LED street lights, distribution network automation and d ‘other improvements to his multibillion dollar smart grid investments allowed by the law of 2011 which introduced the structure of formula rates.
ComEd will continue these programs whether or not Illinois lawmakers extend those formula rates, but it is pushing for their continuation, Dominguez said. “We believe that good regulatory and political results are driven by good operational performance. ”
Exelon also faces the potential threat of having its Chicago power grid taken over by the city, even if this effort seems to be running out of steam in the face of the high costs it would impose on the city’s budget. Proponents of Chicago’s grid municipalization say it could cut costs and allow for more ambitious renewable energy targets.
But the costs of the operation could range from $ 5 billion to $ 11 billion, according to preliminary estimates pending fuller details from an ongoing study. Crane said ComEd is working with Chicago Mayor Lori Lightfoot and City Council on an agreement to extend its franchise agreement to supply the city’s power for a year while the study is nearing completion. .