Bill for massive coal, nuclear bailout, residential demand charges introduced in Illinois

When Exelon, the nation’s largest operator of nuclear power plants, goes to the Illinois State House to ask for favors, it doesn’t ask for small ones. Today a bill which has been a subject of great controversy for months has finally been introduced to the Illinois General Assembly, which would impose mandatory demand charges on residential customers and provide a blank check for bailing out aging nuclear and coal plants – all while claiming to support “future energy”.

The latest version of a bill backed by Exelon and subsidiary Commonwealth Edison, the  “Future Energy Jobs Act” (SB 2814) has been introduced in a special six-day session of the Illinois General Assembly originally intended to allow for the legislature to over-ride gubernatorial vetoes. However, those active in Illinois politics know this as the place where very complicated pieces of legislation are rammed through without much debate.

And SB 2814 is nothing if not complex. At 446 pages, the bill has multiple layers, including a makeover of the state’s renewable portfolio standard and energy efficiency programs. However, a much more profound portion of the bill involves nuclear and coal generation.

SB 2814 would create a system of “zero emissions credits” (ZECs) for nuclear power plants in Illinois, which is related to the mechanism as established in New York and which the bill opponents say would total around $6 billion through 2040. Additionally, the bill proposes a Fixed Resource Adequacy Plan (FRAP), which would require utility Amaren to enter into above-market capacity contracts with Illinois on an ongoing basis, which is estimated to cost around $6.8 billion over the same time period.

Together the cap for the two programs would total $265 million annually.

The bill would also introduce four procurement events for renewable power. However, David Lundy of the Better Utility Solutions for Tomorrow (BEST) Coalition says that these would be drowned out by artificially cheap coal and nuclear power plants. “You would never get past the first (procurement)” Lundy told pv magazine.

This proposed bailout comes at a time when Illinois does not actually need the power. According to Lundy, Illinois generates 41% more power than it consumes, with demand contracting 3.8% in the last four years.

“You are looking at subsidizing six gigawatts of power plants that are not needed, that are uneconomic to operate,” notes Lundy. “You are destroying the market.”

Demand charges

These are not even the most controversial parts of this bill. SB 2814 would introduce demand charges for residential customers, as the second time this has been done by any utility in the United States. Such demand charges have been identified as one of the rate mechanisms most unfavorable to residential solar, and when introduced by Arizona utility Salt River Project demand charges wiped out the solar market in its service territory overnight.

Solar advocates and the solar industry additionally take issue with these being introduced through legislation and not a regulatory proceeding. SunRun Director of Public Policy Amy Heart notes that SB 2814 would bring in demand charges “with no evaluation, no reasoning for it and no stakeholder process”.

“They are trying to legislate it because they no the numbers won’t work out for customers in Illinois,” Heart told pv magazine.

Demand charges also make it extremely difficult for residential customers to predict how much their bills will cost, particularly under SB 2814, given that Illinois customers would be charged for their peak demand – not peak demand on the overall system. As a result, the bill has inspired opposition by a large and diverse assortment of groups. Joining the solar industry and the dozens of companies and organizations in the BEST Coalition is the Fair Economy Illinois Coalition, which counts among its members the more than 37 million-strong American Association of Retired Persons (AARP).

Fair Economy Illinois Coalition members are particularly incensed about the demand charges. “It’s unprecedented, it’s egregious and it’s confusing,” stated Reverend Tony Pierce of Illinois Peoples’ Action and Fair Economy at a press conference.

Given such staunch opposition, it remains to be seen if SB 2184 can actually pass. Because it has been introduced in the “veto session”, the bill needs a 2/3 majority in both houses.

However, the political power of Exelon, which owns Illinois utility Commonwealth Edison, should not be underestimated. Exelon reported $34 billion in revenues in 2015, and became the nation’s largest utility holding company after acquiring Washington DC utility Pepco.

Lundy of BEST Coalition notes that this is the third time that Exelon has tried to get a bailout of its aging Illinois nuclear reactors in two years, and that the last time the mechanism introduced was nearly identical to the ZECs that are proposed in SB 2814.

“The reason that Exelon is so determined to get this, is that their top priority is getting this subsidy framework, because once they have it they can tweak it and play with it and expand it,” notes Lundy.

The next step for SB 2814 is a hearing in the Illinois House Energy Committee to take place tomorrow at 2 PM.

Correction: This article was corrected at 4 PM EST on November 15. The original article and teaser stated that the demand charges proposed under SB 2814 would be the first such charges for residential customers in the nation. This is incorrect, as Arizona utility Salt River Project has implemented demand charges for its residential customers. We have changed the article and teaser to reflect this and we regret the error.

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