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Hold off a bit, please

Friday, Apr 17, 2015

* Exelon’s corporate subsidy bill just took a big hit

One of the three Illinois nuclear plants that Exelon is threatening to close because they’re losing money will receive a windfall worth tens of millions beginning in June, courtesy of ratepayers downstate.

Energy prices are set to spike starting this summer for many Illinoisans outside of Commonwealth Edison’s territory in northern Illinois. The cost that consumers pay to generators to ensure that power plants are available to deliver electricity on the highest-demand days of the year will increase nearly ninefold in the year beginning June 1.

Those “capacity” charges—set according to an auction run by the independent grid operator that manages wholesale markets in downstate Illinois and all or parts of 14 other states—are embedded in the overall energy prices customers pay and are in addition to the cost of the juice itself. […]

The main beneficiaries include Chicago-based Exelon, which operates six nuclear plants in Illinois, including the Clinton plant downstate that will get the cash infusion. Also benefiting is Houston-based Dynegy, the second largest power generator in Illinois after Exelon and operator of a fleet of coal-fired plants downstate.

* More

Another generator, Exelon Corp., acknowledged that its 1,100 MW Clinton nuclear plant cleared the auction at $150, which analysts estimated could yield $40 million to $50 million in additional revenue for the 2015-2016 year.

Chicago-based Exelon has said for more than a year that three of its nuclear plants, including Clinton and two plants in PJM, are losing money because of competitive pressures from natural gas-fired generation and wind. The company is pushing legislation in Springfield that would create a low-carbon resource standard in Illinois that it says would level the playing field for its nuclear fleet and other non-carbon fuels like wind and solar energy (EnergyWire, Feb. 25).

In a research note, analysts at UBS Securities say the auction results “certainly help Clinton but could reduce the urgency for legislative reform in Illinois.”

An Exelon spokesman wouldn’t disclose how much additional revenue it might realize from the MISO auction, but said only that it wouldn’t be enough to materially improve the plant’s financial profile.

It wouldn’t be enough? Really? Exelon’s bill as currently written would net its nuclear fleet $300 million a year. The Citizens Utility Board estimates the Exelon bill - as written - would net the Clinton nuke plant somewhere between $27 million and $30 million a year. That’s significantly less than the plant made this week with that surprise auction result. And there’s no way that Exelon can pass its bill as written because it essentially locks out alternative energy suppliers. Add those suppliers to the mix and Clinton would receive a whole lot less money via passable state legislation.

Plus, by participating in that auction, didn’t Exelon just commit to providing power from that Clinton plant for the next year? Why yes, it did, according to the Citizens Utility Board. And yet it’s gotta have its bill passed right now?

What’s the freaking rush?

* Even so, something very weird happened with this auction

The capacity auction is administered by the Midcontinent Independent System Operator, or MISO, which runs the grid in parts of 15 states in the central United States. The auction determines what energy providers pay to power plant owners over the coming year to make sure they’re available to deliver power when demand is highest. Results were announced this week.

The huge jump came while prices for capacity in many other MISO states fell. In Missouri, for instance, prices fell from $16.75 to $3.48 a megawatt day. In fact, $3.48 was the highest capacity price in all the other states within MISO’s footprint, making Illinois’ $150 per megawatt day a glaring outlier.

That’s more than an outlier, it’s insane. I mean, for crying out loud Illinois is a net electricity exporter. What the heck was going on there?

* Like Exelon, Dynegy also made out like a bandit this week

It’s hard to know how many Ameren Illinois customers buy power under agreements that expose them to swings in the electricity market. About 500,000 customers buy power through Homefield Energy, the retail unit of Dynegy Inc. Dynegy operates nine downstate Illinois coal plants, including those formerly owned by Ameren. It committed 1,864 megawatts in the auction.

Spokesman Micah Hirschfield said all Dynegy’s Homefield retail customers are on fixed contracts.

However, some cities have contracts that expire soon.

Ameren Illinois, in a statement, said it was “extremely concerned and upset” about the capacity auction results and that it would work “to resolve this inequity to our customers.”

* In other news, the Citizens Utility Board has endorsed Sen. Don Harmon’s clean energy jobs proposal

CUB created three cost-benefit models for the Illinois Clean Jobs bill, based on electricity rates, past performance of efficiency programs and prudent assumptions about yearly increases in energy usage, key market costs and inflation. The consumer watchdog’s analysis compared those models with a “business as usual” scenario—if efficiency standards stayed at current levels. Estimated customer savings through the legislation ranged from about $1.1 billion to $2.2 billion. The “base case” model, based on mid-range assumptions, projected the following statewide benefits by 2030, if the bill were fully implemented:

    * Total cumulative residential savings: $1.61 billion
    * Average electric-bill reduction: 7.86 percent annually
    * Average residential savings: $98.38 a year

The Illinois Clean Jobs bill stands out as the most consumer-friendly among the major energy proposals in the General Assembly’s spring session. Most notably, Exelon Corp., ComEd’s parent company, is pushing for special legislation that could cost ComEd and Ameren customers an estimated $300 million a year—to boost revenue at its fleet of nuclear power plants.

* After that crazy MISO auction, which appears to have provided far more to Clinton than Exelon was asking from the state, and after CUB’s endorsement of the Harmon bill, maybe legislators ought to just hold off a bit and wait for the upcoming PJM auctions (the other grid in Illinois) for the rest of Exelon’s nuclear fleet before rushing in with yet another corporate bailout that raises rates for consumers.

Those nuclear plants are supremely important to the state’s economy. But is the federal government just gonna allow all that electricity to be taken off the grid right away? It seems doubtful, particularly after this week’s MISO auction. There’s time to think and do it right.

And in the meantime, the attorney general needs to follow up on her pledge she made elsewhere this week to look into what just happened with that bizarre MISO auction.

- Posted by Rich Miller        

11 Comments
  1. - Demoralized - Friday, Apr 17, 15 @ 1:21 pm:

    ==making Illinois’ $150 per megawatt day a glaring outlier==

    Maybe somebody forgot a decimal point.


  2. - Judgment Day - Friday, Apr 17, 15 @ 1:50 pm:

    Pay attention to this:

    http://www.bloomberg.com/news/articles/2015-04-14/gates-pritzkers-take-on-musk-in-5-billion-race-for-new-battery

    IF this battery technology comes true (and it’s still a big “IF”), then now you are looking at a whole new potential game for these nuclear generating units.

    Here’s why….

    You could see a huge amount of power microgrids (not power generating, but power storage based on new battery technology) being established all over, where the nuclear plants do nothing but generate and push power to the microgrid storage facilities.

    That could be unbelievably cost efficient from a power generator standpoint. They don’t have to worry about distribution down to the retail level. Just get the power down to the microgrid storage facilities.

    Just doing this could also clean up a lot of issues with accounting issues of only wanting to buy ‘clean’ power, etc.

    This could get really interesting, and solve a lot of issues for everybody. Something to think about.

    That’s IF the technology works……


  3. - Qui Tam - Friday, Apr 17, 15 @ 2:30 pm:

    Springfield CWLP has been wheeling and dealing in regional wholesale power taking big losses, marketing their “risk free excess power”. Maybe they could sell some to the grid on the spot market.


  4. - Huckleberry Finn - Friday, Apr 17, 15 @ 2:31 pm:

    You sound like the voice of reason Rich. Why would legislators take a bad vote on a rate hike when there’s so much unknown information? If its all knowable within the next six months, why rush? Methinks Exelon knows (or has a darn good idea) and they’re scared the other auction is going to give them another big payoff so why would they need a 3rd big payoff from the legislature? Sounds like a bad deal to me.


  5. - Going nuclear - Friday, Apr 17, 15 @ 2:33 pm:

    The legislature would be wise to slow down the Exelon gravy train. The word on the street is that PJM’s May capacity auction is likely to produce more revenue for the company’s nuclear fleet.

    I think nuclear will play a role in transitioning to a low carbon energy future, but it shouldn’t come at the expense of propping up older, less efficient plants like the Clinton and Quad Cities units.

    Exelon wanted a competitive marketplace, but now it wants to change the rules of the game to favor it nuclear plants. The long-term answer to company’s problems is a more diversified, resilient generation portfolio.

    The power sector is entering a new age. The business community is sinking more and more dollars into solar and efficiency technologies, with energy storage just around the corner.


  6. - Blue Dog - Friday, Apr 17, 15 @ 3:14 pm:

    Qui Tamm - do you have any evidence of this wheeling & dealing? Also - could you direct us to the “spot market”?

    MISO is not a spot market. It is a system set up in direct response to the unregulated freewheeling that you comment about. It is a ridiculously complicated market system that looks for the cheapest available generation for needed load on a daily basis.

    You have to have the generation capacity physically available in order to bid into the system.

    Www.misoenergy.org for anyone that wants to start looking at the system.


  7. - BEST Dave - Friday, Apr 17, 15 @ 3:56 pm:

    Blue Dog, not sure what wheeling and dealing Qui Tamm is referring to, but eyebrows were raised when Exelon withheld Quad Cities and Byron from last year’s auction and wound up making more money.

    http://www.rtoinsider.com/exelon-pjm-capacity-mkt/


  8. - Qui Tam - Friday, Apr 17, 15 @ 3:59 pm:

    @ Blue Dog 3:14pm. Short answer is yes. In the 1990’s CWLP lost big speculating in the wholesale power markets with what they characterized as “risk free excess power sales”.
    In 2003, CWLP over built excess power capacity to “market excess power”. Since then, CWLP has a whole bunch of debt leveraged capacity intended for the wholesale market and has been skating on “technical default”. It’s been fairly widely reported down here in Springpatch.
    As far as I know, that (baseload) capacity is still available.
    I don’t recall saying MISO is a spot market, though some might call day-ahead as much. If CWLP can’t sell to the big utilities as you suggest, that could be part of the problem, but that doesn’t make sense. I would think the weak wholesale pricing issues would be a regional thing, and that doesn’t comport with CWLP’s excuses, but again, you may know something that they don’t.(?)


  9. - Anon221 - Friday, Apr 17, 15 @ 4:11 pm:

    Today on DeWitt Daily News(and listen to all the audio):

    http://dewittdailynews.com/mobile/news/details.cfm?clientid=22&id=171592#.VTF2vIm9Kc2


  10. - Anon221 - Friday, Apr 17, 15 @ 4:12 pm:

    From Forbes: http://www.forbes.com/sites/peterjreilly/2015/03/30/exelon-subsidiary-denied-tax-breaks-on-three-mile-island-purchase/


  11. - Christopher Ball - Friday, Apr 17, 15 @ 4:52 pm:

    Blue Dog: so the problem within zone 4 is that there was too little capacity not already contractually committed outside the zone available for in-zone surges?

    Re PMJ in 2014, Exelon did not “withhold” plants from the auction — that’s illegal — it offered the highest price that it was allowed to under PMJ regs and that priced those plants too high to clear, maximizing its revenue under the auction rules.


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