Exelon (NYSE:EXC) President and CEO Chris Crane used a May 6 earnings call to elaborate on the potential closing of two of the company’s struggling nuclear plants over the next two years unless Illinois passes a legislative fix promptly.
Hours earlier, the company announced plans to retire the economically challenged Clinton and Quad Cities nuclear plants in Illinois on June 1, 2017 and June 1, 2018, respectively, without passage of adequate legislation in the current spring legislative session and Quad Cities clearing in the 2019-20 RPM capacity auction.
On the positive side, things do look better in the State of New York for the company’s Ginna, Nine Mile Point nuclear plants, Crane said.
“We need to make tough decisions,” Crane said during the earnings call with analysts. “The board has given me authority” to close the plants absent the necessary changes, Crane said.
So far, Exelon has failed “to find a path to profitability for these distressed assets,” Crane said.
Contributing factors include:
•Illinois legislation aimed at leveling the playing field for zero carbon resources has failed to advance in the past two legislative sessions.
•PJM power prices hit a 15-year record low in March.
•Illinois forward energy prices have declined by roughly 10% in the last year.
•From 2009 to 2015, Quad Cities and Clinton have sustained more than $800m in cash flow losses on a pre-tax basis.
Exelon hasn’t given up on legislation. On May 5, the company endorsed the Next Generation Energy Plan, should help preserve the endangered nuclear plants while increasing Illinois support for solar power and energy efficiency.
The May 5 Illinois legislation is not a PPA or a “contract for differences,” Exelon officials said. All nuclear plants in Illinois can apply but only money-losing Clinton and Quad Cities would likely quality, according to the standards. Only nuclear plants that qualify as distressed under the legislation qualify, Exelon officials said.
The 1,069-MW Clinton plant is licensed to operate until 2026 and the 1,403-MW Quad Cities plant is licensed to run until 2032. They are only committed to run through May 2017 and May 2018 respectively. The two plants together employ a staff of 1,500 people.
According to independent analyses by PJM and MISO, there would be a significant increase in electricity prices for Illinois residents and businesses, according to Exelon’s earnings material.
Overall, Exelon officials said the company enjoyed a good first quarter. The Pepco Holdings merger took longer than expected, but has been completed, Crane said.
Exelon’s nuclear fleet ran better than at 95% during the quarter. Solar and wind resources did better than expected, officials said.
During the first quarter, the average Exelon nuclear refueling outage duration of 24 days was better industry average refueling outage duration of 36 days, officials said.