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Stop the Exelon Bail Out

[Last updated Dec. 22, 2016.]

Exelon Corporation, which owns ComEd, is lobbying in Springfield for legislation – called the Future Energy Jobs Bill (SB 2814) – that would bail out its unprofitable nuclear power plants. The plan would institute the largest electricity rate-hike in U.S. history, costing Illinois residents $16.4 billion through 2040. And according to independent economic modeling from IMPLAN, the bail-out would cost Illinois more than 43,000 jobs and destroy $14.4 billion in economic activity.

The Exelon bail-out won’t “save jobs” or protect the environment, but it would make electricity more expensive and less reliable. And that’s bad for everyone.

Here are some ways you can help stop the bail-out:

  • Look at the research, news, and commentary below to learn the facts about this important issue.
  • Contact Gov. Bruce Rauner's office and contact your state legislator. Tell them to stop the Exelon bail-out!
  • Sign the petition below, which The Heartland Institute will send to the Gov. Rauner and every state legislator in Illinois.
  • Talk to your neighbors and friends, ask them to visit this website and sign the petition, too. 

Petition Opposing SB 2814

To Gov. Bruce Rauner and members of the Illinois Assembly:

We, the undersigned, strongly oppose SB 2814 – the so-called Future Energy Jobs Bill – and urge the legislature to reject the bill and, if it is passed by the legislature, we urge Gov. Rauner to veto it.

Exelon claims it needs the legislation to avoid closing three of its nuclear power plants. It further claims such closures would cause 4,200 people to lose their jobs, eliminate $1.8 billion in economic activity, and result in $18 billion in “social cost of carbon” harms if nuclear power were replaced by conventional power sources.

In fact, objective scholarship shows SB 2814 would produce a subsidy to Exelon valued at $1.6 billion over the next five years, raising electricity costs by approximately $300 per household. This is a high and unbearable burden on the citizens of Illinois, who are already dealing with higher electricity prices and slower economic growth than most of our neighboring states.

The legislation would destroy at least as many jobs as it “saves” and reduce, not preserve, economic activity benefiting everyone in Illinois. Exelon’s claim that nuclear power is better for the environment than fossil fuels is false and based on biased political science, not real science.

For these reasons, we urge you to reject SB 2814 and any other similar legislation that mandates the use of expensive and unreliable renewable fuels.

Background Info from Heartland

Empire Center: Gov. Cuomo’s Green Energy CES Boondoggle Already Beginning to Collapse, Tim Lee (Dec 21, 2016)

Illinois energy bill: After race to the finish, what does it all mean?, Midwest Energy News (Dec 8, 2016)

Guest Column: Exelon bailout bill harmful to Illinois residents, economy, The State-Journal Register (Nov 30, 2016)

PRESS RELEASE: Heartland Institute Experts: Stop the Exelon Bailout in Illinois, Tim Benson, Matthew Glans, H. Sterling Burnett (Nov 30, 2016)

Research & Commentary: Newest Exelon Bailout Bill Would Harm Electricity Consumers, Matthew Glans and Timothy Benson (Nov 23, 2016)

New York Bails Out Nuclear Plants to Cut Carbon-Dioxide Emissions, H. Sterling Burnett (Aug 25, 2016)

Give Illinoisans, Not Exelon, a Rescue Plan, MaryAnn McCabe (Jun 9, 2016)

Research & Commentary: Exelon Renews LCPS Efforts, Matthew Glans (Apr 18, 2016)

Exelon Again Threatens to Close Nuclear Plant, Unless Taxpayers Subsidize Operations, H. Sterling Burnett (Apr 13, 2016)

Research & Commentary: The Exelon Bailout, Matthew Glans (Jun 26, 2015)

Does Power and Clout Enable Exelon to Extort Its Will On All of Us? Nancy J. Thorner (Jun 13, 2015)

Illinois Should not Subsidize Exelon’s Nuclear Plants Study Argues, H. Sterling Burnett (May 29, 2015)

Exelon Posts $2 Billion Profit, Seeks New Restrictions on Competitors, James M. Taylor (May 28, 2015)

Illinois Shouldn’t Bail Out Profitable Exelon’s Nuclear Plants, H. Sterling Burnett (May 26, 2015)

Best Options for Potential Nuclear Power Plant Closings in Illinois, James M. Taylor and Taylor Smith, (May 26, 2015)

Research & Commentary: Illinois Low Carbon Portfolio Standard, John Nothdurft (Mar 6, 2015)

The Unintended Consequences of Energy Mandates and Subsidies on America’s Civil Nuclear Fleet, George David Banks (May 30, 2013)

America's Power Grid at the Limit: The Road to Electrical Blackouts, Steve Goreham (Apr 24, 2014)

Research & Commentary: Nuclear Power, Taylor Smith (Oct 13, 2014) 

New Jersey Residents Regret Closing of Nuclear Power Plant, Kenneth Artz, (Aug 1, 2011)

Eliminate UIRVDA, Steve Stanek (Jan 9, 2011)

Exelon Assailed for Dismantling Nuclear Power Plant, James M. Taylor, (Jan 3, 2011)

Testimony on the Future of Nuclear Power, Dr. Jay H. Lehr (Sep 16, 2008)

What Others are Saying ...

“Exelon and ComEd say it's only fair to give them ratepayer help to allow them to better compete with solar and wind, which get hefty taxpayer subsidies. Our view is that repeatedly putting the thumb of government on the scale to determine which energy industries win and lose is no way to run an economy. It distorts the marketplace, creates safe spaces where rivals should wrestle and tramples urgency. The best way to encourage innovation and efficiencies is to permit — to encourage — competition.”
               – Chicago Tribune editorial, Nov 28, 2016

“A bad bill in Springfield would raise our electricity bills to protect Exelon’s bottom line. The Legislature should either rewrite it significantly or flick the off switch altogether.”
               – Chicago Sun Times editorial, April 27, 2015

 “Consumers cannot afford to keep paying these unwarranted and excessive rate hikes. With Exelon seeking a $1.6 billion bailout, consumers need to speak up, take action, and urge their legislators to vote ‘NO!’ on this bill.”
              – Bob Gallo, AARP Illinois State Director, April 21, 2015

“Creating new regulations to rescue Exelon’s at-risk nuclear power plants in the name of advancing the cause of renewable resources is bad public policy and bad for consumers.”
              –  Dan Miller, Chairman, Illinois Commerce Commission (1994–1998)

“Business investments are often revealed by the market to be uneconomic, or rendered uneconomic by changing conditions in the market. Exelon’s situation is essentially no different than that faced by thousands of other businesses each year. Owners of these businesses must decide whether to shut down their uneconomic investments, or incur losses until changing conditions might render the investments profitable again.”
               –  Dan Sutter, Professor of Economics, Manuel H. Johnson Center for Political Economy, Troy University

“The Illinois legislature should allow market signals to work without government interference. Exelon may choose to close its uneconomic nuclear power plants, but that would likely benefit Illinois, resulting in lower electricity costs and a stronger economy.”
               –  James M. Taylor and Taylor Smith, The Heartland Institute, May 2015

Key Facts About the Controversy

Exelon Corporation, which owns ComEd, claims three of its nuclear power plants are uneconomical in light of low coal and natural gas prices and will be shut down in the near future unless the state legislature passes a law that favors nuclear power over other sources of energy.

Exelon wants the state to create a “Low Carbon Portfolio Standard” that would require electric utilities to purchase low-carbon energy credits to match 70 percent of electricity used on the distribution system from qualified sources, which include solar, wind, hydro, nuclear, tidal, wave, and clean coal. It has worked with its legislative allies in Springfield to draft bills introduced in the House and Senate as HB 3293  and SB 1585.

Environmentalists oppose nuclear power, and so oppose counting it as a renewable energy source. They want to expand the state’s current Renewable Power Standard to mandate 35 percent of energy consumed in Illinois be generated by renewable sources by 2030. The current standard calls for 25 percent by 2025. They want to continue to exclude energy produced from nuclear and clean coal from the standards.

Neither of these proposals would benefit consumers, workers, or the environment. Exelon’s proposals would cost ratepayers $1.6 billion over five years, or $300 per family. It would not “save jobs” or “protect the environment.” It’s just a bail-out of a highly profitable company that is already receiving hefty subsidies.

Environmentalists are putting their anti-nuclear bias ahead of their concern for ratepayers and even the environment. Nuclear energy is virtually zero-emission and by many measures is cleaner and less expensive than wind or solar. But more importantly, none of these sources of energy ought to be favored over fossil fuels, which are less expensive, more reliable, and pose no greater threat to the environment.

The Heartland Institute’s favored solution is to let Exelon close its nuclear power plants if they are no longer economical, and soften or even eliminate the state’s existing Renewable Power Standard. The existing RPS unnecessarily raises energy prices, hurting consumers and Illinois’ business climate. It discourages investment in the most efficient sources of fuel, which today and for the foreseeable future are clean coal and natural gas. Utilities should compete to provide electricity without government assistance or restraint.

Background

Here is a write up that lays out the various sides of the debate.
http://capitolfax.com/2015/02/26/dueling-press-releases-3/

Exelon has threatened to shut down three of its six Illinois nuclear power plants because they are unprofitable without government assistance. In May 2014, the Illinois House of Representatives passed a resolution asking the Illinois Commerce Commission, Illinois Power Agency, Illinois Environmental Protection Agency, and Illinois Department of Commerce and Economic Opportunity to study and prepare a report on these potential closings.

The policy option Exelon and some lawmakers support is establishment of a “low-carbon portfolio standard” (LCPS) that would require 70 percent of the electricity distributed to Illinois consumers by utility companies be of a qualified low-carbon variety. Utilities that fall short of the 70 percent mark must buy credits to make up the difference. The proposal also would place a price increase cap of 2.015 percent per year compared to 2009 rates.

Energy sources that would qualify toward the mandate would be nuclear, wind, solar, hydropower, and coal-fueled plants that capture and sequester greenhouse gas emissions. Illinois already has a renewable portfolio standard (RPS) mandating 25 percent of power distribution be composed of renewable energy (not including nuclear) by 2025. Exelon claims Illinois will lose thousands of jobs without such a mandate and that the LCPS would create additional jobs.

None of the agency reports compare the modest net increase in future retail electricity prices resulting from a shutdown of Exelon’s unprofitable nuclear power plants to the cost of subsidizing the plants or imposing regulatory interventions that would keep the plants afloat. The cost of government subsidies or other market interventions might exceed any consumer benefits linked to lower electricity prices.

Forcing electricity consumers or taxpayers to pay artificially elevated prices to keep power plants in operation may appear to “save jobs,” but this ignores the alternative: Employers could create more jobs if electricity costs were lower. According to a Beacon Hill Institute study, by 2026 Illinois’ existing RPS will “lower employment by a likely 8,000 jobs, reduce real disposable income by $793 million, and increase the average household electricity bill by $36 per year; commercial businesses by an expected $364 per year; and industrial businesses by an expected $36,125.”

Imposing “low-carbon energy” mandates on top of those already in place will raise electricity prices, hurting consumers. The only free-market-based policy option mentioned in the agency reports is to “rely upon external forces and initiatives.” An alternative not mentioned by the agencies would be to soften or eliminate the state’s existing renewable portfolio mandate, thereby reducing energy prices and encouraging investment in the most efficient sources of fuel, which today and for the foreseeable future are clean coal and natural gas. Utilities should compete to provide electricity without government assistance or restraint.

Best Research

The best available research on this issue includes:

James M. Taylor and Taylor Smith, “Best Options for Potential Nuclear Power Plant Closings in Illinois.” Heartland Policy Brief, May 2015. It analyzes the issues and concludes the best option for Illinois taxpayers and electricity consumers is to allow uneconomical power plants to close and allow the most economical power options to replace them under free competition.

The Better Energy for Tomorrow (BEST) Coalition, “Fact Check #1: Exelon Does Not Need a Bailout,” one page of well-documented points countering Exelon’s claim that it needs a bail-out.

Kestler Energy Consulting, LLC, “A Cost Impact Analysis of Illinois’ Proposed Low Carbon Portfolio Standard,” commissioned by the BEST Coalition, April 21, 2015. The authors find the proposed low-carbon portfolio standard would increase electricity costs by approximately $1.6 billion over the statutory contract period of five years and five months.

Rod Adams, “One Woman’s Crusade – Nancy Thorner is Asking Exelon to Please Operate a Large Nuclear Energy Facility Located in Her Backyard,” Atomic Insights [website], November 2, 2010. The remarkable story of Nancy Thorner’s efforts to get Exelon to explain why it shut down the Zion Nuclear Power Station in 1998.

Kevin Borgia and Lesley McCain, “Exelon's nuke bailout bill only helps Exelon—but here's an alternative,” “Your View,” Crain’s Chicago Business, March 11, 2015. The nuclear giant has been painting its “low-carbon portfolio standard” as a market-based solution to climate change, claiming that clean energy sources like wind, solar, hydro and even “clean coal” can compete under the policy. However, under the bill, none of those other sources could actually participate in this market.

H. Sterling Burnett, Illinois Shouldn’t Bail Out Profitable Exelon’s Nuclear PlantsHeartlander, The Heartland Institute, May 26, 2015. Exelon, a huge utility with the largest fleet of nuclear plants in the U.S. is trying to extort increased subsidies from ratepayers and taxpayers in Illinois, threatening to close three under-performing nuclear power plants serving the state if the state government doesn’t throw it some more money.

Steve Daniels, “Exelon nuke-rescue bill lands at last. But is it a market-based solution?” Crain’s Chicago Business,February 26, 2015. Critics label the measure a bailout for a company that used to preach the virtues of the market but now is resorting to captive ratepayers to appease Wall Street.

More About Renewable Energy Mandates

[The following is from “Policy Tip Sheet No. 11: Illinois Renewable Energy Mandate,” published in January 2012 by The Heartland Institute.]

In August 2007, Illinois enacted legislation (Public Act 095-0481) that led to the creation of a renewable energy portfolio mandate. The legislation required Ameren and ComEd to procure 25 percent of their electricity generation from qualified renewable sources by 2025. The measure was extended in 2009 to alternative retail electric suppliers and electric utilities that sell outside of their service territories. (1)

Within the 25 percent requirement, 75 percent must be produced from wind and 6 percent (starting in compliance year 2015–16) must be produced from solar photovoltaics. Under the compliance schedule, Illinois should have had 5 percent compliance in 2010, but data from the Energy Information Administration suggest at most 2.4 percent of electric generation qualified under the mandate. (2)

Rates are allowed to increase at a rate “no more than the greater of 2.015 % of the amount paid per kilowatt hour by [eligible retail customers] during the year ending May 31, 2007 or the incremental amount per kilowatt hour paid for these resources in 2011.” According to a report by the Illinois Commerce Commission, a 2 percent rate increase would cost more than $100 million per year and would be the “equivalent of about a 1% increase in state income taxes, or about a 1.4% increase in state sales taxes, but without any corresponding increase in government services.” (3)

As of June 1, 2011, utilities are, under certain circumstances, allowed to meet their renewable requirements through procurement of energy resources based in neighboring states. If no “cost-effective” resources are available in Illinois or its neighboring states, they can be purchased elsewhere to meet the mandate.

Problem

Illinois cannot meet its mandate and should be honest with consumers about the bill of goods they are actually receiving. The Renewable Energy Mandate:

• Increases costs to consumers, because the mandated renewable energy sources are more expensive and less dependable.

• Is much more restrictive than programs in other states. By setting specific percentage requirements, the standard does not even allow renewables to compete with one another on a level playing field.

• Drives down Illinois living standards and hurts economic competitiveness with other states. The average retail price of electricity in Illinois is 20 percent higher than in Indiana, 24 percent higher than in Iowa, and 25 percent higher than in Missouri. Illinois residents and businesses pay $2.1 billion per year more for electricity than they would at Indiana prices and $2.5 billion more than they would at Iowa or Missouri prices. That amounts to an extra $442 to $526 per Illinois household per year. [Citation: U.S. Energy Information Administration State Electricity Profiles: http://www.eia.gov/cneaf/electricity/st_profiles/e_profiles_sum.html] (4)

• Illinois is not especially well positioned to produce renewable energy compared to other states. Illinois has minimal wind generation potential relative to its Great Plains neighbors and little to no solar potential.

Solution

Optimally there would be an outright repeal of this standard. At minimum the state should reform the standard in a way that makes the mandates more realistic and the market more competitive. These outcomes could be attained through:

- Broadening the standard to include all next-generation energy technologies including nuclear, combined cycle natural gas, geothermal, etc.

- Adjusting the compliance schedule to provide greater flexibility through altering deadlines or percentage targets.

- Making the program voluntary and waiving all noncompliance penalties. 

All of these solutions would allow utilities, and thereby consumers, to better adapt to next-generation energy technologies.

Policy Message

Point 1: Government should not be in the business of choosing winners and losers in the energy arena.

Point 2: It is impossible to know which energy technologies will be superior in the future, and policymakers should avoid pushing technologies to market before they are ready.

Point 3: Renewable energy is much more expensive per kilowatt hour than conventional fossil fuels and will continue to be so in the future. Those higher costs are being passed on to ratepayers. (5)

References

1. “Incentives/Policies for Renewables & Efficiency - Illinois,” Database of State Incentives for Renewables & Efficiency (DSIRE) http://programs.dsireusa.org/system/program?state=IL&.

2. “Illinois Energy Facts,” Institute for Energy Research http://www.instituteforenergyresearch.org/states/illinois/.

3. “Report to the Illinois General Assembly Concerning Spending Limits on Renewable Energy Resource Procurement,” Illinois Commerce Commission http://www.icc.illinois.gov/reports/.

4. “U.S. Energy Information Administration State Electricity Profiles”http://www.eia.gov/cneaf/electricity/st_profiles/e_profiles_sum.html.

5. Metcalf, Gilbert E. “Federal Tax Policy towards Energy,” May 2007 http://www.nber.org/chapters/c0049.pdf?new_window=1.

The following documents provide additional information about renewable portfolio standards.

Study: Illinois’s Renewable Energy Standard No Help to State’s Economy 
http://heartland.org/policy-documents/study-illinoiss-renewable-energy-standard-no-help-states-economy
The Beacon Hill Institute at Suffolk University finds Illinois’ renewable portfolio standard will increase the cost of electricity to consumers and reduce business opportunities and job creation.

The Status of Renewable Electricity Mandates in the States 
http://heartland.org/policy-documents/status-renewable-electricity-mandates-states 
The Institute for Energy Research finds states with renewable electricity mandates have on average 40 percent higher electricity rates than those without such mandates.

Policy Tip Sheet No. 11: Illinois Renewable Energy Mandate 
http://heartland.org/policy-documents/policy-tip-sheet-no-11-illinois-renewable-energy-mandate 
This Heartland Institute Policy Tip Sheet outlines the fundamental problems of renewable energy mandates in Illinois and recommends an alternative.

Study of the Effects on Employment of Public Aid to Renewable Energy Sources 
http://heartland.org/policy-documents/study-effects-employment-public-aid-renewable-energy-sources 
Researchers at King Juan Carlos University in Spain found each “green job” created in Spain cost about $750,000. Electricity rates would have to be increased by 31 percent to account for the additional costs of renewables.

Study: Consumers Unwilling to Pay More for Renewable Energy  
http://news.heartland.org/newspaper-article/2013/07/21/study-consumers-unwilling-pay-more-renewable-energy 
Relatively few consumers are willing to pay extra for renewable energy offered under voluntary “green” pricing programs, according to a report from the Institute for Energy Research.

Why Is Renewable Energy So Expensive?
http://www.economist.com/blogs/economist-explains/2014/01/economist-explains-0 
This brief but useful essay in a January 2014 blog post for The Economist states countries with the most renewable power generation also have the highest electricity prices, and government efforts to alleviate this problem have been unsuccessful.

Model Legislation: The Market-Power Renewables Act
http://www.alec.org/model-legislation/market-power-renewables-act/
The American Legislative Exchange Council (ALEC), the largest voluntary membership organization of state legislators in the U.S., has been very critical of renewable power standards, arguing the unnecessarily raise energy prices and do nothing to protect the environment. In 2013, ALEC’s members approved model legislation replacing RPSs with a voluntary renewable energy credit market.


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The Heartland Institute is “the world’s most prominent think tank promoting skepticism about man-made climate change” [The Economist, May 26, 2012]. Heartland is a 33-year-old national think tank based in Arlington Heights, Illinois. We address a wide range of topics (not just global warming or energy issues) from a free-market perspective. Our work is supported by more than 5,000 donors. Interested in becoming a contributor? Visit the homepage of our website or go to our donor page