Chicagoans may pay twice to bail out the same nukes
State subsidies to keep open two nuclear power plants took effect in June, hiking electric bills for all homes and businesses. But the ripple effects from last year’s Future Energy Jobs Act may well lead to future increases on top of the new surcharges.
The organization that sets the rules for the wholesale power markets from northern Illinois east to Washington, D.C., is contemplating changes that would compensate the owners of unsubsidized power plants for the potential harm the subsidies pose to the competitive market.
For months, PJM Interconnection, the regional grid operator, has engaged the industry, consumer advocates and others to settle on a way to boost consumer payments to power generators for their promise to deliver each year when demand is at its peak. Those payments, which are set through a heavily regulated yearly auction three years in advance and already are rising, are embedded in the overall energy charges households and businesses see regardless of what company they use to supply power.
The initiative is in direct response to Illinois’ nuclear subsidies. PJM is charged first with ensuring there’s enough power to keep the lights on during peak demand and secondly with keeping the power markets competitive.
Last year, PJM opposed Illinois’ bid to keep Chicago-based Exelon’s Clinton and Quad Cities nukes from closing by funneling the revenue from a new “zero emissions” surcharge on electric bills to the facilities. PJM also supported thus-unsuccessful litigation by competing power companies to invalidate that part of the wide-ranging energy law.
Details still are in the works, but the various options on the table all seek to offset the “price suppression” effect of subsidies, whether in Illinois or other states that make up PJM’s territory.
PJM’s goal is to have a new system in place for the next annual power-generator auction in May to set capacity prices for the year beginning June 2020.
Effectively, Chicago-area ratepayers could be paying twice to keep the same plants open. That’s because the subsidies for Exelon are nearly certain to remain at the state-imposed annual limit of $235 million for the decade they’ll be in effect despite provisions in the law calling for the subsidies to decline when market revenues rise. At Exelon’s insistence, the Future Energy Jobs Act was written in such a way to keep the subsidies flowing in most foreseeable market conditions.
“With most of the proposals on the table, Illinois likely will get penalized for the state approving the subsidies to produce cleaner air,” says Greg Poulos, executive director of Columbus, Ohio-based Consumer Advocates of PJM States.
Exelon, rarely on the same page with consumer advocates, agrees.
In a statement, Exelon says it “supports state (nuclear and renewable power subsidies) that were designed to protect our communities by reducing air pollution and safeguarding public health, and we believe it makes no sense to undermine those programs with proposals that would pay carbon-emitting power generators higher capacity prices at the expense of consumers when the market is already flush with excess power generation capacity at low cost.”
Demanding action from PJM are Exelon competitors NRG Energy, based in Princeton, N.J., and Houston-based Dynegy. NRG operates coal- and gas-fired plants serving the Chicago market, and Dynegy is the second-largest generator in Illinois, running a mainly coal-fired fleet downstate.
Says an NRG spokesman, “The ratepayers are being punished by the (Exelon subsidies) across the board. We are simply participating in the PJM market in the way it’s intended to work.”
