Inside Exelon’s last-minute push to save its nukes and remake the Illinois power sector

Posted by Laura Arnold  /   November 21, 2016  /   Posted in Net Metering, solar  /   No Comments

Inside Exelon's last-minute push to save its nukes and remake the Illinois power sector

The Illinois legislature has a week to decide on a far-reaching energy reform bill that includes something for everyone to hate

The fate of two nuclear plants in Illinois is coming down to the wire.

A bill introduced into the Illinois General Assembly this week would provide subsidies Exelon says are necessary to keep its Clinton and Quad City nuclear plants online.

When the legislature failed to pass a previous version of the bill, Exelon said it would close the 1,069-MW Clinton station on June 1, 2017, and the 1,871-MW Quad Cities plant in Cordova on June 1, 2018. At the time, Exelon said the plants had lost a combined $800 million over the past seven years.

Exelon faces a Dec. 1 deadline for notifying the Midcontinent ISO about whether or not it will close Clinton next year.

There is a lot riding on the bill. According to Exelon’s accounting, closing the nuclear facilities would result in the loss of $1.2 billion in economic activity annually.

But the bill, an amendment to SB 2814, goes beyond the fate of two nuclear plants. It is loaded with provisions that touch upon almost every aspect of the state power sector, from funding for utility based energy efficiency measures, community solar programs and microgrids to changes in rate structure such as the imposition of demand charges and the elimination of retail net metering for solar power. The bill also includes a last minute addition of capacity payment add-ons for coal-fired plants in the south of the state.

Working through the complexities of any one of those provisions would be enough of a challenge, but lawmakers are working under a tight deadline.

The bill was taken up in the General Assembly’s veto session, which has a short lifespan of less than a week. The final day of the session is Dec. 1, but it could roll over into a lame duck session that could extend to Jan. 11, 2017.

Exelon, of course, is also facing the Dec. 1 deadline for giving notice to MISO regarding the closure of the Clinton nuclear plant.

The lawmakers’ work could be eased somewhat by the fact that many of the provisions cover familiar ground. The Future Energy Jobs Bill, as it’s called, traces its history back to three bills that were eventually rolled into one. All three failed, but then failed bills were reworked into a single piece of legislation. But that bill, too, failed to make it through the assembly.

That bill was also reworked and revived for the current session and now includes $1 billion in funding for low-income program, a doubling of energy efficiency programs to produce $4 billion in energy savings, fixes for the state’s stalled renewable portfolio standard program, and funding of up to $220 million a year for renewable resources.

The bill was also recast at the last minute after Donald Trump won the presidential election to highlight its job saving or creating aspects. Prior to the election, the bill had assumed that the Clean Power Plan, the environmental regulations that would limit carbon dioxide emissions from coal plants and that is stalled by court challenges, would be put in place and provide an economic rationale for zero emission generation. But Trump has promised to dismantle those regulations.

The Future Energy Jobs Bill made it through the House Energy Committee Wednesday night, but many of the lawmakers who voted to move the bill cast a “yea” vote with the expectation that there would be substantial changes before the bill comes to the floor of the assembly.

The legislature is now faced with a single massive (446 pages) bill laden with provisions – what legislators call a “Christmas tree”– that has something for everyone. It also has something for everyone to dislike. The bill attracted vociferous criticism from a variety of constituents as soon as it landed.

“This is going to be the largest rate hike in U.S. history,” Dave Lundy, head of the BEST Coalition, a business group opposed to the bill, said at a press conference shortly after the bill was introduced.

Lundy argues that the capacity represented by the nuclear plants is not needed. Electricity demand is down 3% in the state, and Illinois generates 41% more power than it consumes, meaning that much of that output is exported out of state.

“These claims are blatantly false, failing to acknowledge or factor in any of the benefits of the legislation,” Exelon spokesman Paul Adams said in an emailed response. Adams cited the State of Illinois HR 1146 Report that shows that “the benefits of the nuclear energy legislation outweigh its costs by a factor of eight to one.”

Lundy takes issue with HR 1146, which provides much of the basis for the zero emission credits (ZEC) that the Future Energy Jobs Bill would confer on the nuclear stations. The report uses a $7.65/million British thermal unit price for natural gas when forward prices for gas are just a little over $2/million BTU, he told the House committee. “Market fundamentals have fundamentally shifted.”

Lundy called the bill “a $24 billion rate hike” and “a jobs killer.”

Exelon says closing the nuclear plants would result in “the loss of 4,200 jobs and increase electricity prices in the region by hundreds of millions of dollars,” as well as wipe out more than $1.2 billion in economic activity annually.

“When you look at the math on both sides of the cost-benefit equation, the Future Energy Jobs Bill creates a net savings for families and businesses,” Exelon’s Adams said.

Adams also noted that the bill would achieve “several critical goals – jobs, clean energy, energy savings and greater grid security – at a modest increase of about 25 cents a month for the average commonwealth Edison residential customer.”

What the FRAP

But nuclear subsidies are only one aspect of the Future Energy Jobs Bill. It also includes a Fixed Resource Adequacy Plan (FRAP) that would provide capacity payments for downstate plants, mostly coal-fired plants owned by Dynegy.

Some observers say the FRAP was included in the bill to garner downstate votes. Rep. Robert Rita (D), the bill’s sponsor, in an emailed response, said the FRAP was included “to make this a comprehensive energy bill to help multiple sectors and … preserve and create jobs where possible — in this case, preserving the jobs at the affected Dynegy plants.”

But the inclusion of the FRAP cost the support of environmental advocates such as the Sierra Club, and it also failed to win over more traditional allies such as the Illinois Coal Association (ICA).

Noting that the Dynegy plants burn Wyoming coal, ICA president Phillip Gonet, told the House committee the bill “does nothing for the Illinois coal industry,” and said, “We oppose the subsidy.”

Despite the fact that the bill includes funding for energy efficiency, community solar programs and provides what many see as needed changes to the state’s renewable portfolio standard, the bill has not won the support among large energy users nor among many in the renewable energy community.

Eric Robertson, general counsel of Illinois Industrial Energy Consumers, told the House committee his group opposes the legislation because the FRAP would increase commercial and industrial electric rates by $125 million a year.

SolarCity also opposes the legislation, not necessarily because of the FRAP, but because it would impose demand charges on retail customers and eliminate retail net metering in the state. Elimination of net metering would do away with a revenue stream that provide much of the incentive for rooftop solar, and demand charges would make electricity bills unpredictable, Elizabeth Pearlman, regulatory counsel and director of policy at SolarCity, told the committee.

“If you can’t do the math at the kitchen table, we can’t sell you solar,” she said. She called the bill’s proposed imposition of demand charges on customers’ bills, a “radical” and “unprecedented” change, one that is usually effected by regulatory commissions, not legislatures.

Both Shannon Fulton, president of the Illinois Solar Energy Association, and Amy Heart with The Alliance for Solar Choice cited the dual effect of the demand charge and net metering changes and said they also oppose passage of the bill.

With all the controversy, it seems clear that the Future Energy Jobs bill is still a work in progress and, if it does come to a vote, it will be on a revised version of the legislation.

In the committee meeting, Rita said there are “issues we have to work through,” and pledged that a revised bill would come “back through this committee.”

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