MidAmerican, Exelon not in agreement about Quad Cities nuclear shutdown

MidAmerican Energy said in its Aug. 5 quarterly Form 10-Q report that is disagrees with an Exelon Corp. (NYSE: EXC) subsidiary about plans to shut the co-owned Quad Cities nuclear plant in Illinois.

The Form 10-Q was a combined report from various subsidiaries of Berkshire Hathaway, including regulated utility MidAmerican Energy.

Said the Form 10-Q filing: “Exelon Generation Company, LLC (‘Exelon Generation’), the operator of Quad Cities Generating Station Units 1 and 2 (‘Quad Cities Station’) of which MidAmerican Energy has a 25% ownership interest, announced on June 2, 2016, its intention to shut down Quad Cities Station on June 1, 2018, as a result of Illinois not passing adequate legislation and Quad Cities Station not clearing the 2019-2020 PJM Interconnection, L.L.C. capacity auction.

“MidAmerican Energy has expressed to Exelon Generation its desire for the continued operation of the facility through the end of its operating license in 2032 and continues to work with Exelon Generation for solutions to that end. An early shutdown of Quad Cities Station before the end of its operating license would require an evaluation of MidAmerican Energy’s legal rights pursuant to the Quad Cities Station agreements with Exelon Generation. In addition, the carrying value and classification of assets and liabilities related to Quad Cities Station on MidAmerican Energy’s balance sheets would need to be evaluated, and a determination made of the sufficiency of the nuclear decommissioning trust fund to fund decommissioning costs at an earlier retirement date. If the trust fund is determined to be deficient, MidAmerican Energy may be required to contribute additional assets to the trust fund or directly pay certain decommissioning costs.”

Exelon has reported that in 2015, Exelon Generation identified the Quad Cities, Clinton and Ginna nuclear plants as having the greatest risk of early retirement based on economic valuation and other factors. At that time, Exelon and Exelon Generation deferred retirement decisions on Clinton and Quad Cities until 2016 in order to participate in the 2016-2017 Midcontinent ISO primary reliability auction and the 2019-2020 PJM capacity auctions held in April and May 2016, respectively, as well as to provide Illinois policy makers with additional time to consider needed reforms and for MISO to consider market design changes to ensure long-term power system reliability in southern Illinois.

In April 2016, Clinton cleared the MISO primary reliability auction as a price taker for the 2016-2017 planning year. The resulting capacity price is insufficient to cover cash operating costs and a risk-adjusted rate of return to shareholders. In May 2016, Quad Cities did not clear in the PJM capacity auction for the 2019-2020 planning year and will not receive capacity revenue for that period.

Based on these capacity auction results, and given the lack of progress on Illinois energy legislation and MISO market reforms, on June 2, Exelon Generation announced it will move forward to shut down the Clinton and Quad Cities plants on June 1, 2017, and June 1, 2018, respectively. The current Nuclear Regulatory Commission (NRC) licenses for Clinton and Quad Cities expire in 2026 and 2032, respectively. Exelon Generation is proceeding with the market and regulatory notifications that must be made to shut down the plants, including notification to the NRC on June 20, and filing of a deactivation notice with PJM for Quad Cities on July 6. Exelon Generation will formally notify MISO of its plans to close Clinton later this year.

The Quad Cities plant is built on 765-acre site along the Mississippi River. Units 1 and 2 began commercial operation in 1973. Exelon operates the plant, which is co-owned by Exelon (75%) and MidAmerican Energy (25%). Unit 1 is capable of producing 934 net MW and Unit 2 is capable of producing 937​ net MW.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.