By John Stang
As it faces a federal investigation over its lobbying practices, power company Exelon said Thursday it might close four nuclear power plants in Illinois if that state’s legislature does not pass legislation in 2020 to help keep them afloat.
President and CEO Chris Crane said Exelon needs zero-emission credits for four plants in the state: LaSalle, Byron, Braidwood, and Dresden. LaSalle was new to the list, while the other potential closures were disclosed in February.
The facilities – each with two reactors – are not covered by the zero-emission credit program established under the state’s 2016 Future Energy Jobs Act that already provide ratepayer subsidies to Exelon’s Clinton and Quad Cities plants, Crane indicated in a quarterly conference call with financial analysts.
“I can’t stress how important the spring legislative session will be for the future of the four sites that are not covered under the ZEC program,” Crane said. If state lawmakers don’t step in with additional support, “From what we see in the market today, these plants will shut down,” he said.
Zero-emissions credit programs provide payments for power sources that do not emit greenhouse gases, including nuclear plants.
The Chicago-based power company and other nuclear utilities have cited similar market challenges in closing money-losing facilities in recent years, particularly the low price of natural gas for energy production. State zero-emission credit programs have been one means for offsetting the trend.
However, changes in federal rules make it difficult to extend the Illinois credits beyond the two Exelon facilities that have already received them, a company spokesperson said Friday.
Exelon owns 22 reactors at 13 sites in Illinois, Maryland, New York, and Pennsylvania under its Exelon Generation subsidiary. In September, it retired its reactor at the Three Mile Island plant near Harrisburg, Pa. In July, Exelon completed the sale of the Oyster Creek Nuclear Generating Station in New Jersey to energy technology company Holtec International for decommissioning.
The New York Supreme Court during the quarter dismissed legal challenges to that state’s zero-emission credit program, Crane said. That program, plus a similar effort in New Jersey, strengthened Exelon Generation’s numbers for the three-month period.
Crane also acknowledged Thursday that the U.S. Securities and Exchange Commission is investigating the lobbying activities of Exelon and subsidiary utility Commonwealth Edison. The probe was noted in Exelon’s quarterly 10-Q report Thursday with the SEC.
“Exelon and ComEd received a grand jury subpoena in the second quarter of 2019 from the U.S. Attorney’s Office for the Northern District of Illinois requiring production of information concerning their lobbying activities in the State of Illinois,” according to the filing. “On October 4, 2019, Exelon and ComEd received a second grand jury subpoena from the U.S. Attorney’s Office for the Northern District of Illinois requiring production of records of any communications with certain individuals and entities. On October 22, 2019, the SEC notified Exelon and ComEd that it has also opened an investigation into their lobbying activities.”
The case involves the company’s relationship with Illinois state Sen. Martin Sandoval (D), the Chicago Sun Times reported. The FBI raided Sandoval’s home and office in September, according to the newspaper.
Crane said Exelon is fully cooperating with all of the federal probes, adding he cannot predict how long they will last. He declined to discuss the details, including whether Exelon operations outside of Illinois could be affected.
“The company’s outside lawyers are undertaking an exhaustive investigation of the facts relevant to the subpoenas, a special committee of the Board represented by its own outside counsel has also been informed and is being briefed on the investigation,” the CEO said. “Exelon’s outside lawyers are sharing the results of the investigation with the government on an ongoing basis.”
While the probes were in motion, Exelon Utilities CEO Anne Pramaggiore unexpectedly retired from her post in mid-October, and later resigned as chairwoman of the Federal Reserve Bank of Chicago, according to Illinois news reports. Part of the purpose of the September federal raid was to secure “items related to ComEd, Exelon” and staffers, including four specific but unidentified company officials, the Sun Times reported.
Illinois news reports also noted that the state legislature is skittish about granting extra financial aid to Exelon in the wake of the federal corruption investigations.
On Thursday, Crane stressed that Exelon believes action by the Federal Energy Regulatory Commission (FERC) is needed before the Illinois legislature can tackle an expanded zero-emissions credit program. He contended that FERC needs to nail down proposed changes on how the transmission clearinghouse PJM Interconnection establishes prices to consumers when electricity demands peak on extremely hot and cold days. Those PJM cost figures are passed on to consumers in their electric bills. PJM’s transmission systems cover all or parts of 13 states and Washington, D.C. These include Chicago and a chunk of northern Illinois.
Exelon reported $8.92 billion in revenue for the third quarter for 2019 for pre-tax income of $1.102 billion. For the same period in 2018, Exelon reported $9.4 billion revenue for pre-tax income of $947 million.
For the first nine months of 2019, the corporation reported revenue of $26.096 billion in revenue with a net income of $3.028 billion For the same period in 2018, it reported $27.17 billion in revenue and an income of $2.263 billion.
Exelon Generation boosted its third-quarter net income from $234 million in 2018 to $257 million this year, with adjusted operating earnings rising from $318 million to $352 million. Management attributed the boost to higher revenue from zero-emission credit programs in New York and New Jersey, a lower number of nuclear outage days, and reduced operating and maintenance costs. Those savings were partly undercut by a drop in capacity prices and “lower realized energy prices,” the company said.
Company-wide, Exelon tightened its full-year earnings guidance to $3.05-$3.20 per share from the previous $3 to $3.30 per share.
Entergy Earnings
Separately, New Orleans-based power provider Entergy said Thursday its operating income has increased so far from 2018 to 2019.
For the first nine months of 2019, Entergy earned $1.14 billion in operating income on $8.4 billion in revenue, for a diluted share of stock at $4.24. The numbers for the first nine months of 2018 were $924.9 million in operating income on $8.5 billion in revenue for a diluted share figure of $5.01.
For the third quarter ended Sept. 30, Entergy’s operating income was $19.9 million on $3.1 billion in revenue for a diluted share figure of $1.82. The corresponding 2018 figures were $271 million in operating income on $3.1 billion in revenue for a diluted share of stock figure of $2.92.
Like Exelon, Entergy is closing and divesting nuclear power plants. In early 2019 it closed the sale of the retired Vermont Yankee plant to New York demolition NorthStar Group Services.
A new NorthStar subsidiary, NorthStar Vermont Yankee, is in charge of decommissioning, site restoration, and spent fuel management. NorthStar says it can complete decommissioning and site restoration as early as 2026, and no later than 2030, compared to the prior Entergy cleanup schedule that stretched on as late as 2068.
Entergy also in August sold its Pilgrim Nuclear Power Station in Massachusetts to Holtec for decommissioning, though that transaction is the target of a lawsuit from the commonwealth.
Further down the line, the company plans to sell to Holtec its Indian Point Energy Center in New York and Palisades Power Plant in Michigan. That would close out the company’s merchant nuclear business, Chairman and CEO Leo Denault noted during Entergy’s quarterly conference call on Wednesday.
