Exelon Again Threatens to Close Nuclear Plant, Unless Taxpayers Subsidize Operations

Published April 13, 2016

Having failed to get cash-strapped Illinois to provide new state subsidies for three nuclear plants it claimed are losing money in 2015, Exelon, a utility with the largest fleet of nuclear plants in the United States, is once again seeking expanded taxpayer support from state legislators.

Crain’s Chicago Business news reports Exelon has informed Illinois Gov. Bruce Rauner (R) and Republican leaders in both chambers of Illinois’ legislature it will close its Southern Illinois Clinton nuclear plant if it does not receive new financial support from the state in 2016. Reinforcing this message, Exelon CEO Chris Crane met with House Speaker Michael Madigan (D-Chicago) and Senate President John Cullerton (D-Chicago) to personally warn of the closure.

In 2015, Exelon threatened to close three of its six nuclear power plants in the state unless Illinois agreed to enact a law that would have imposed a special surcharge on electric bills statewide, a move that would have provided as much as $300 million in additional revenue to the company. The bill failed to reach the floor in either chamber amidst the budget battles between Rauner and Democrats who run the state’s legislature.

Writing concerning Exelon’s strong-arm tactics in 2015, James Taylor, senior fellow at The Heartland Institute, noted it is hard to fairly assess whether Exelon’s three plants are actually losing money. Taylor said the problem was though the company asked for subsidies, it refused to open its financial records to public scrutiny. Additionally, despite Exelon’s claimed financial woes, the company recorded a net profit of more than $2 billion in 2014. Taylor noted even if these plants aren’t profitable at current electric prices, it doesn’t mean they won’t be if prices rise as expected in the future.

“Exelon threatens to shut down the three nuclear power plants if it does not receive its demanded taxpayer subsidies,” said Taylor. “Responding to Exelon’s threats by giving it protective regulation and subsidies that temporarily prop up uneconomical nuclear power plants would encourage rather than discourage Exelon from making similar threats in the future.”

Bailout Faces Hurdles

Taylor’s warning now seems prescient since Exelon backed off its threatened closures in late 2015, only to renew them in 2016. Exelon indicated it expects to propose a revised, less-generous version of the bill offered in 2015. The company is now only threatening to close the Clinton plant if its proposal is not adopted. 

Exelon’s bid for subsidies faces a number of challenges, the most important of which being the fact Rauner and the legislature are still at odds over the budget. As the article in Crain’s Chicago Business says, “The idea that lawmakers would agree to support a forced electricity rate hike to help a profitable Fortune 500 company while social service providers are laying off workers for lack of a budget is implausible.”

Exelon is not the only special interest seeking to shape the state’s energy future. Various interests—including fossil-fuel power plants, wind and solar power developers, and environmental lobbyists and consumer groups—have been in negotiations with the legislature for months to shape an energy bill, yet a deal remains out of reach because many of the groups support provisions harmful to the other groups. For instance, Houston-based Dynegy and Princeton, New Jersey-based NRG Energy, which operate coal-fired power plants in Illinois, face the same financial hardships as Exelon—low wholesale power prices—and oppose a special bailout for Exelon. 

In addition, Exelon is fighting proposals to make it easier for new wind farms to be developed in Illinois. Environmental groups and renewable energy developers are opposing funds being sent to Exelon until laws are changed that would make it easier to develop wind and solar farms in the state. 

Crain’s Chicago Business reports as long as legislators insist they’ll only adopt a bill that satisfies every interested party’s concerns, no bill is likely. 

Further muddying the waters, polling indicates the public does not want the legislature to bail out Exelon’s nuclear plants. The Citizens Utility Board survey asks respondents: “Exelon says keeping its nuclear plants open will fight climate change—and they need economic help. Opponents say Exelon just wants bigger profits. Should Illinois give unprofitable nuclear plants more money if it helps fight climate change?”

Of the 1,900 respondents to the survey, 1,584, approximately 84 percent, said “no,” compared to just 298 respondents, about 16 percent, who answered “yes.” 

Many Wall Street investors evidently doubt the legislature will act in 2016 to save the Exelon’s Clinton nuclear plant: “With the Legislature seemingly stalled in 2016 without a budget deal … we look towards 2017 for any resolution of the roadblock,” UBS Securities analyst Julien Dumoulin-Smith wrote in a March 4 report cited in Crain’s. “The question remains whether the ‘sacrifice’ of Clinton will catalyze a wider effort to push forward on any deal to save the balance of the portfolio with a ‘market-based’ carbon scheme in the state.”

H. Sterling Burnett, Ph.D. ([email protected]) is the managing editor of Environment & Climate News.