Does Power and Clout Enable Exelon to Extort Its Will On All of Us?

Published June 13, 2015

Chicago Tribune headline of Wednesday, April, 20, 2015, “Study:  Exelon Aid Could Cost $1.6B”, told of an Exelon-backed bill, framed as supporting clean energy production, that could benefit Exelon’s nuclear plants, while costing ratepayers an additional $1.6 billion on their electric bills through 2021.  The bill was cited as “a corporate bailout” by critics.  

Although the article was of concern to me given my interest in nuclear energy as a clean, reliable source of energy, offering the biggest bang for the buck, it was put on the back burner, that is, until I read a related article by H. Sterling Burnett, published on May 26 at The Heartland Institute’s “Somewhat Reasonable” site, “Illinois Shouldn’t Bail Out Profitable Exelon’s Nuclear Plants.”  Burnett’s article goes on to say: 

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 some more money.

 But what really caught my attention was the following paragraph which pointed to Exelon’s perchance for secrecy.

In fairness, it’s hard to assess whether Exelon’s three plants are actually losing money since, though the company is asking for additional subsidies, it refuses to open its financial records to public scrutiny. Despite Exelon’s claimed financial woes, the energy company recorded a net profit of more than $2 billion in 2014. 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.  

Consider one of Exelon’s revenue-losing nuclear plants, its Clinton Plant, that Exelon is threatening to close.  As reported on Thursday, April 16, 2015, by Steve Daniels of Crain’s Chicago Business, Clinton was to receive a windfall worth $50 million resulting from a revenue increase from a spike in downstate Illinois electricity bills.  Although another article on April 22 by Daniels inCrain’s Chicago Business reduced the windfall to the Clinton nuclear plant to $13 million, an amount that wouldn’t solve Clinton financial problem, this still raises the question whether Illinois lawmakers should grand special favors to Exelon when it’s demonstrating success in persuading regional grid operators and their federal regulators to alter capacity markets in order to funnel more cash to nuclear plants and other generators.    

If Exelon is demanding taxpayers guarantee solid profits from ever individual component of it nuclear power plant fleet, shouldn’t taxpayers reasonably demand in return that Exelon not keep excessive profits from an individual  component of its fleet?  On the contrary, Exelon has not offered to return excessive profits from its other power plants.

Fate of Exelon-owned Dual Zion Nuclear Plant in Waukegan, IL

Exelon’s method of operation has not changed.  Secrecy is still present which results in the fleecing of rate payers.  Secrecy was also involved in the premature closing of the Exelon-owned Dual Zion Nuclear Plants in Waukegan, IL, in the mid-90’s for repairs, followed by a decision not to restart the units on February 13, 1998, with reasons at the time that did not meet the smell test 

In the 1990s, Commonwealth Edison, the monopoly electric utility that built and operated many of the nuclear plants that are now owned and operated by Exelon as a merchant plant operator, was having difficulty managing and maintaining its nuclear plants. They were achieving low capacity factors, appearing on Nuclear Regulatory Commission watch lists, and suffering from power struggles between labor unions and management.

Zion, like many of the other Commonwealth Edison units, had issues that culminated in a group of operators resisting management orders and taking off their shirts in the control room. There were some other complicating circumstances, but the bottom line was that the company shut down both units of the plant and decided to keep them shut down. The decision allowed the company to fire or reassign the recalcitrant union members and to establish a more powerful position over the behavior of employees. At the time, replacement power was cheap since natural gas was selling for less than $2.00 per million BTU and since the midwest was shedding much of its manufacturing base, reducing the overall electricity demand.

In other words, the Zion Nuclear Facility, which was entirely paid for in full by charges to ratepayers, had the appearance of being intentionally shut down by the owner and kept shut down by the owner to reduce the amount of low-cost supply of electricity into the market to jack up the market prices for Exelon’s remaining fleet of generation units.  As a taxpayer who helped pay to have the Zion plants built, and who would likely experience higher electric costs, this was a double whammy for me. Isn’t this type of market manipulation illegal under the Federal Power Act. 

It was in 2010 that Thorner’s involvement in the fate of Exelon-owned Dual Zion Nuclear Plants became a crusade. At the time Thorner implored Exelon to reconsider its1998 decision to shutter the Zion nuclear power stations, ensuring the reactors never again produced electricity. My attempts to convince Exelon that times had changed and that a 2,200 mWe emission-free nuclear power station would be worth fixing up, fell on deaf ears. 

Troubling was when on September 1, 2010, Exelon transferred the possession only license to ZionSolutions, LLC for a 10 year, one billion dollar decommissioning project. The $800 million decommissioning trust fund was likewise handed over to ZionSolutions, LLC to spend without the ability for any customer oversight to assure that if money were left after the decommissioning, it would be returned to ratepayers. Companies involved would simply inflate their bills, attribute unrelated expenses, and assert outsized profit margins that will combine to make the vanishing act seem legitimate.

I also hit a brick wall when communicating with members of the Illinois House and Senate, who seemed hesitate to tackle such a powerful and influential Chicago corporation which freely doles out campaign donations.  

Result of lawsuits filed to ascertain the spending of Zion’s decommissioning trust fund

A new tack was called for.  A lawsuit was filed on July 14, 2011 in the U.S. District Court for the Northern District by a Pennsylvania-based lawyer asking that a court-appointed third party manage the trust fund which Commonwealth Edison customers paid into from 1998 to 2006.  Thorner was one of four citizen plaintiffs in the lawsuit.  Following is a quote from an August 10, 2011 article by Julie Wernau of the Chicago Tribune titled, Lawsuit filed over Zion plant :                         :                                    :

“No qualified person or entity has been appointed to act as a trustee with respect to the trust funds to fully protect the rights of ComEd’s customers … or to review the withdrawals,” the suit asserts. 

The case could have been a significant one in determining how decommissioning costs are handled, therefore setting a precedent for other Illinois nuclear reactors that ultimately are mothballed. Each plant has a similar decommissioning fund that in total amounts to $4 billion—money paid by Illinois consumers.

For sake of brevity, the decision made by the district court judge was not favorable. This was followed by an appeal of the decision to the court of appeals at which time the group of judges affirmed the original court’s decision in a written opinion in late January of 2014.  A further request was made for the judges to “reconsider” their January decision because of errors, but they refused in a one phrase order which then ended the case.  The final decision:  The public had no right to know how the Zion decommissioning funds were being spent  

Will Exelon again be successful in extort increased subsidies from ratepayers? 

Although the Zion lawsuit might be in the past, it does give insight into Exelon’s mode of operation.  The real story that affects rate payers today is how Exelon is withholding power from two or three of its Illinois nukes, which have jacked up prices recently, yet is refusing to open its books to the public to show whether the plants can be run profitably.  At the same time Exelon Corp. wants electricity users to pay about $2 more a month to help fund what the company says are several struggling nuclear plants.  

As with the dual Zion reactors located in Waukegan, IL now undergoing decommissioning, secrecy remains prevalent at Exelon as the Corporation angles with other players for an edge in Illinois’ multi-billion-dollar electricity economy.  Will Exelon’s power, money and political influence result in the “corporate bailout” Exelon insists it needs, while ratepayers are left on the hook?

[Originally published at Illinois Review]