By Ted Caddell

Lobbyists from Exelon Corp. have descended on Illinois lawmakers, warning that current energy prices and renewable energy subsidies could force them to shut down three nuclear stations in the state.

“If we do not see a long-term path to sustainable profitability for a particular unit, then we will consider all options available to us, including unit shutdowns,” reads a memo that is part of a presentation lobbyists are using. “We are looking for solutions, and we are talking about this now both to let you know what we are up against, and to avoid any surprises later.”

The presentation does not name any particular plants in Exelon Nuclear’s six-plant Illinois fleet, but one consultant in the state energy industry said the Exelon lobbyists are naming the Quad Cities, Clinton and Byron plants as those most at risk.

Taken together, the three stations generate 5,243 MW, employ 2,300, have an annual payroll of $193 million and pay more than $51 million in taxes.

That consultant, who asked not to be named, said Exelon was using industry-wide figures, and not plant-specific financials, in their briefings.

“It is not clear to me whether these plants are losing money, or just not making enough money,” he said.

All Illinois Plants Unprofitable?

According to an analysis by the Chicago Tribune, all six of the plants in Exelon’s Illinois nuclear fleet have been unprofitable over the past five years. The Tribune examined hourly power prices and plant production and concluded that all six plants failed to meet capital and operational costs since 2008.

Exelon spokesman Paul Adams last week confirmed that the company had held “informational” meetings with lawmakers but wouldn’t answer specific questions about plant profitability or discuss which legislators participated. “The company has not asked lawmakers for a fix,” he said.

In a prepared statement, Exelon said that while it hasn’t targeted any plants for closure, the prospect was not unthinkable.

“We have no current plans to close any of our nuclear units prior to the end of their federally licensed operating lives, with the exception of Oyster Creek [in New Jersey], which we’ve agreed to close in 2019,”  the company said. “That said, the combined effect of low wholesale power prices and the unintended consequences of current energy policies is challenging the economics of several of Exelon’s Illinois nuclear units.”

It added, “It is too soon to discuss specifics and the company has not asked Illinois officials to provide a state remedy for the current market conditions affecting nuclear plants.”

CEO Chris Crane told analysts in an earnings call in February that the company’s nuclear stations, especially in the Midwest, were getting squeezed by low energy prices, as well as competition from subsidized renewables and low-cost natural gas generation. (See Exelon May Close Nukes.)

Presentation

Exelon lobbyists are using a 20-page presentation outlining what they say are conditions that threaten the profitability of its nuclear generating stations in Illinois.

“Some of our plants, particularly in Illinois, face severe economic headwinds because of low power prices and the unintended consequences of current energy policies, and it is not certain that we will be able to run them much longer,” one part of the presentation reads. “We have one plant that leads the nation in virtually every operational, safety and reliability category. Yet it cannot consistently earn a profit.”

The presentation doesn’t identify that plant, but it seems to be a reference to the Byron Generating Station, a two-reactor, 2,346-MW plant that had a 96.2% capacity factor in 2013 — the highest among the Illinois plants and the second highest in its entire fleet. (Limerick Nuclear Generating Station, in Londonderry Township, Pa., came in first with 96.3%.) Byron’s net generation for the year was 19.5 million MWh, eclipsed only by the Braidwood station.

Clinton Generating Station’s 2013 capacity factor was the lowest in Exelon’s fleet, at 87.7%.

Exelon has asked the Nuclear Regulatory Commission to extend the licenses of the Byron plant — due to expire in 2024 and 2026 — by 20 years.

Grand Prairie

While Exelon is telling some lawmakers that Byron may be targeted for shut down, just three months ago sister company Commonwealth Edison filed a proposal with the Illinois Commerce Commission to build a 60-mile transmission line from Byron station to Wayne, Ill., just west of Chicago.

The 345 kV Grand Prairie Gateway Project, which has already won PJM’s approval, would provide a third west-to-east transmission line across ComEd’s territory, relieving transmission congestion across northern Illinois.

ComEd spokesman David O’Dowd said Friday that the Grand Prairie transmission line is still considered a high-priority project. Pending ICC approval, the project should be completed by 2017, the company said.

Analyst Reaction

In a presentation to PJM’s General Session in February, Julien Dumoulin-Smith, a utility analyst at UBS Securities LLC in New York, noted that Exelon’s Quad Cities plant went from running at zero hours of negative pricing in 2006 to 101 hours of negative pricing in 2013, with an average negative price of $15.35 per MWh. Quad Cities’ average LMP price plummeted from $41.02 in 2006 to $25.36 in 2013.

“I think Exelon is dead serious,” Dumoulin-Smith told Crain’s Chicago Business last week. “Their willingness to withstand losses is going to be tested if they don’t do something.”

According to the Tribune analysis, the Quad Cities and Byron plants experienced negative pricing 8% and 7%, respectively, of their operating hours during 2012.

Carbon Price

The presentation left with lawmakers cites the rising role of low-cost natural gas-fired generation, renewable subsidies and transmission constraints. It also cites the lack of a federal price on carbon, which would improve nuclear’s competitiveness against gas and coal.

“Renewables are important, however, the subsidies they receive are an unfair factor that make it difficult for Nuclear to be competitive in the same market place,” one slide says.

“Energy policy frameworks in the U.S. do not compensate nuclear energy either for its carbon-free output or its unrivaled reliability,” it goes on. “Unless we fix that gap, the U.S. is going to lose nuclear plants. We need more emission-free electricity in Illinois and the U.S., not less. Getting rid of the cheapest, most reliable source of electricity in America today makes no sense.”

The current lobbying push, according to the Illinois energy consultant, is conditioning.

“Right now, they are just laying the groundwork by telling everybody they have a problem,” he said. “It is like tenderizing meat. And then, we’ll see when the solution presents itself, or when the solution is presented by them.”