U.S. Nuclear Regulatory Commission – Asleep at the Switch

On July 19, 1989, United Airlines Flight 232, a DC-10, crash-landed on a runway at the Sioux City, Iowa airport.

According to the subsequent report by the National Transportation Safety Board, the accident was triggered by a titanium fan disc that was part of the plane’s No. 2 engine. That titanium disc, which of course spins at a very high speed, had a microscopic manufacturing defect that had, over time, created a hairline crack. That crack eventually caused the disc to break apart in mid-flight, and pieces of the disc spun out like shrapnel and cut through all three of the plane’s hydraulic systems, destroying them. On small planes, parts such as rudders, stabilizers and ailerons on the wings may be controlled by cables and mechanical connections directly to the pilot’s steering yoke, foot pedals, or other cockpit controls. But on a commercial jet like a DC-10, those surfaces are so large, and the forces exerted on them so great, that hydraulics are necessary to move them. When pieces of the fan disc cut through all the hydraulic lines, the pilots could no longer control the airplane by means of ailerons, rudder and stabilizers. Still, in a truly remarkable feat, the pilots, using only the engine throttles, managed to steer the crippled plane onto a runway at Sioux City airport. Of the 296 persons aboard, including the crew, 185 survived.

The Flight 232 disaster is an example of how the failure of one complex system (turbines) can interfere with or even completely disable one or more other complex systems (hydraulics) with catastrophic effect.

On February 9, 2022, the Inspector General of the Nuclear Regulatory Commission released a report (NRC Inspector General’s Special Inquiry Into Counterfeit Fraudulent and Suspect Items in Operating Nuclear Power Plants, or the “Report”) stating that:

• The NRC lowered its oversight standards for ensuring that counterfeit, fraudulent and suspect parts were not used in U.S. nuclear power plants;
• Fake parts are present in most, if not all, U.S. nuclear power plants;
• Persons within the industry informed the NRC about the use of these fake parts; and
• The NRC failed to appropriately address this problem.

The Report states that the IG is “aware that the NRC staff does not have a direct role in identifying counterfeit parts and preventing their use in a nuclear power plant.” (Report, pg. I). Well, if not the NRC, then who does that job?

But wait, it gets better (i.e., worse). Counterfeit parts are tracked only on a voluntary basis, if at all, and the NRC doesn’t require nuke plants to report use of counterfeit parts “…unless a situation rises to the level of being a significant condition adverse to quality, or a reportable issue” under applicable regulations. (Report, id.) Stated differently, don’t bother the NRC until something bad happens.

The Report also states that “[counterfeit parts are safety and security concerns that could have serious consequences in critical power plant equipment required to perform a safety function.” (Report, at ii).

Gee, do you really think so? That sentence could have been lifted out of the Chernobyl or Three Mile Island autopsies.

The NRC has an “Allegation Manual” and a process for reports about counterfeit parts through its Allegation Review Board.

According to the NRC’s own Management Directive (MD) 8.8, Management of Allegations, “anyone should feel free to communicate any safety concern to the U.S. Nuclear Regulatory Commission.” (Report, pg. 9). This manual contains procedures for handling such allegations.

Oh, well, that ought to do it, right?

Wrong. The Report goes on to state that although allegations about counterfeit parts in nuke stations had been made for the past ten (yes, 10) years, “…the NRC did not investigate or pursue any substantive actions regarding [the allegations about counterfeit parts],” and classified [these] concerns about counterfeit parts as “non-allegations.” (Report, id., pg. I , emphasis added).

Holy Terminology, Batman! What is a non-allegation? That’s a tough question, so let’s begin with an easier one. What is an “allegation”?

MD 8.8 defines an “allegation” as:

a declaration, statement, or assertion of impropriety or inadequacy associated with NRC-regulated activities, the validity of which has not been established. (Emphasis added.)

Report, pg. 9

That sounds more or less reasonable. But that’s not really how it works at the good ol’ NRC. What the alleger may have thought was an allegation doesn’t actually become an allegation until whatever was alleged goes through a multi-level initial consultation process by NRC staff to determine that whatever was alleged is the real McCoy, an allegation allegation.

If you think that’s confusing, try this tour de force of sanctimonious bureaucratic phraseology, drawn from the NRC’s Allegation Manual:

If, after this initial consultation, it is unclear whether information provided by the concerned individual constitutes an allegation, it is appropriate to discuss the information at an ARB [Allegation Review Board] to obtain a decision. If the ARB cannot reach a conclusion as to whether the concern in question should be processed as an allegation, the [agency allegation advisor] should be consulted. Some regions/offices assign an allegation number to such issues and then recode the item in the AMS [Allegation Management System] database as a non-allegation if the ARB determines that the issue is not an allegation. Some regions/offices document the issue on allegation process forms but withhold assigning an allegation number until the ARB has reached a conclusion. Either approach is acceptable.”

(Report, pgs. 9-10; emphasis added).

So even though an “allegation” is still an “allegation” if its validity has not been established, the NRC’s own procedures describe how it sweeps uninvestigated allegations under the rug.

The Report goes on to describe one case in which an alleger notified NRC staff about counterfeit part concerns at a specific nuke plant (Seabrook Station in New Hampshire) by letters, emails, phone calls, and even discussions at public meetings, all over the course of ten (10) years.

The NRC determined that the alleger’s allegations were not really “allegations.” It classified the allegations as “non-allegations” and did nothing.

So, if you think that the NRC is supposed to be protecting the public by ensuring the safe operation of nuclear plants, you might be surprised to find that it has borrowed its policy toward fake and counterfeit equipment in U.S. nuclear plants from Alfred E. Neuman of Mad Magazine fame: “What, me worry?”

NRC Chairman Alfred E. Neuman

A nuclear generating station has millions of parts that make up different complex systems that enable it to function as designed. An accident caused by a counterfeit part in one system at that station might be confined to that system, and it could be something from which a fast recovery is possible. For example, if the pieces of the disintegrating fan disc on United Airlines Flight 232 had been contained within the cowl of Engine No. 2, its own system, the hydraulics would not have been cut and the airplane might well have landed safely and without any loss of life.

But an accident due to a counterfeit part in one system at a nuke station could affect one or more other systems, a cascading effect that results in a grave disaster. Given that an accident at a nuke station could render a populated area in the U.S. uninhabitable by humans for more than 10,000 years, one might be forgiven for thinking that the NRC should take counterfeit part allegations more seriously.

For starters, the NRC might want to re-read the story about United Airlines Flight 232.

Electricity, Nuclear

Electricity, Nuclear

Electricity, Nuclear

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2017 Electricity Prices Hit Record Low in ISO-New England

On Tuesday, ISO New England, which operates the electric grid for certain states in that region (other than New York), issued a report that New England’s average annual real time wholesale electricity price for 2017 at $33.94 per megawatt-hour was the second-lowest price in fifteen (15) years. ISO New England stated that these low prices were driven chiefly by low prices for natural gas, the principal fuel used for generation at the margin, as well as reduced demand levels.

As earlier stated on the Sparkspread, for several years Exelon CEO Chris Crane has played the role of Peter the Hermit in the electric utility industry’s Crusade to rescue nuclear generation fleets from the infidels of the wholesale market. That is, he wants to make sure that electricity consumers make Exelon and other nuke operators whole for any losses they suffer because, contrary to their expectations, electricity prices have been hitting record lows in a number of markets, mainly due to low natural gas prices. When prices fell, Crane and his cohort lost no time in complaining about the “flawed market” for wholesale electricity.

If things had gone the other way – if electricity prices had risen to record highs instead of fallen to record lows – you can bet that Mr. Crane and his fellow nuke CEOs would be saying that electricity consumers must simply accept the results of the perfectly self-regulating free market in electricity, and if prices rise, that’s just, as they say in Brooklyn, T.S., Elliott.

 

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Chicago Energy Attorneys Patrick N. Giordano and Paul G. Neilan Announce Filing of Federal Lawsuit Against Illinois Power Agency Director Anthony Star

Exelon CEO Chris Crane

Chicago, IL February 14, 2017:  Chicago energy attorneys, Patrick N. Giordano and Paul G. Neilan, announced they filed a lawsuit in the U.S. District Court Northern District of Illinois today against Anthony Star in his Official Capacity as Director of the Illinois Power Agency.  Village of Old Mill Creek, et al. v. Anthony Star was filed on Tuesday, February 14, 2017 at the U.S. District Court Northern District of Illinois.

Attorneys Giordano and Neilan represent Plaintiffs that are governmental, residential, commercial, and industrial electricity consumers located throughout the State of Illinois. Plaintiffs claim that P.A. 99-0906, executed by Governor Rauner on December 7, 2016, violates the U.S. Constitution’s Supremacy Clause, Commerce Clause, and 14^th Amendment Equal Protection Clause. The underlying basis for the constitutional claims is that the prices charged by electricity generating plants are subject to federal rather than state regulation. A similar case has already been filed in federal court in New York challenging that state’s subsidy of Exelon nuclear plants by the law firm Boies, Schiller & Flexner, LLP, which is headed by preeminent attorney David Boies.

Among other things, P.A. 99-0906 is designed to subsidize Exelon Corp.’s Quad Cities and Clinton nuclear plants. This subsidy will be charged to all Illinois electricity consumers beginning June 1, 2017 regardless of what company supplies the consumer’s electricity. The lawsuit specifically asks that the U.S. District Court grant a permanent injunction blocking the charges from going into effect as scheduled on June 1, 2017. According to Mr. Giordano: “These additional charges will reverse twenty years of deregulation in Illinois which have given us perhaps the one advantage we have over neighboring states: relatively low electricity charges due to an effectively functioning competitive market.” Mr. Giordano also said: “We’re challenging the nuclear bailout provision of the legislation because the prices charged by electricity generators have already been established by the competitive wholesale electricity market subject to federal jurisdiction and cannot be increased by the State of Illinois.”

The estimated impact to all Illinois consumers will be about $3.3 billion over the ten years of the nuclear bailout. Mr. Neilan points out that: “This nuclear bailout is one of four rate increases to Illinois consumers this year, including increased delivery charges, increased renewable energy subsidies, increased energy efficiency subsidies, and these nuclear energy subsidies.” When the nuclear subsidies go into effect on June 1, 2017, Illinois residents and businesses can expect to see an average 3% increase in their electricity bills due to the nuclear subsidies alone.”

Giordano & Associates, Ltd. is Chicago’s first law firm devoted to energy issues. We provide clients with experienced counsel on regulatory, litigation, transactional, and legislative matters in the areas of electricity and natural gas. Pat Giordano can be reached at pgiordano@dereglaw.com.

The Law Offices of Paul G. Neilan, P.C. represents commercial, industrial and governmental energy users in disputes against public utilities, as well as in litigation and transactional matters with non-utility competitive energy suppliers.

FACT SHEET

1. Village of Old Mill Creek, et al. v. Anthony Star was filed in the United States District Court for the Northern District of Illinois on February 14, 2007.
2. The Plaintiffs are: Village of Old Mill Creek, Ferrite International Company, Got it Maid, Inc., Nafisca Zotos, Robert Dillon,Richard Owens, and Robin Hawkins, both individually and d/b/a Robin’s Nest.
3. The Defendant is Anthony Star in his official capacity as Director of the Illinois Power Agency.
4. This case arises from unlawful Illinois legislation that invades the exclusive jurisdiction of the Federal Energy Regulatory Commission (“FERC”) over “the sale of electric energy at wholesale in interstate commerce” pursuant to the Federal Power Act. 16 U.S.C. 824(b)(1).
5. The unlawful legislation is contained in subsection (d-5) Zero Emission Standard of Illinois Public Act 99-0906 (“P.A. 99-0906”), which was enacted on December 7, 2016 and is available at http://www.ilga.gov/legislation/99/HB/09900HB65761v.htm.
6. Subsection (d-5) Zero Emission Standard of P.A. 99-0906 requires the Illinois Power Agency to procure contracts for Illinois utilities Commonwealth Edison Company, which serves northern Illinois, and Ameren Illinois Company, which services central and southern Illinois, for purchases of Zero Emission Credits (“ZECs”) from nuclear-fueled generating plants.
7. The ZEC payments will be passed through by the utilities to all Illinois consumers through automatic adjustment tariffs.
8. A. 99-0906 is designed to provide additional revenues to the Illinois-based Quad Cities and Clinton nuclear plants.
9. Exelon Corp. owns both the utility ComEd and Exelon Generation, which owns the Quad Cities and Clinton nuclear plants that will sell the ZECs to the utilities.
10. Although P.A. 99-0906 has many other provisions, this case concerns only subsection (d – 5) Zero emission standard.
11. Plaintiffs are not challenging any other provisions of P.A. 99-0906. Section 97 of P.A. 99-0906 provides that the provisions of the Act are severable under Section 1.31 of the Illinois Statute on Statutes. 5 ILCS 70/1.31.
12. In New York, ZEC payments to Exelon nuclear plants in that state are being challenged on the same grounds set forth by Plaintiffs in Illinois. Coalition for Competitive Electricity, et al. v. Audrey Zibelman, et al. was filed in the U.S. District Court Southern District of New York on October 19, 2016.
13. A typical residential customer using 1 mWh (1,000 kWh) per month would pay an additional $2.64 per month beginning June 1, 2017 based on the initial ZEC price established in P.A. 99-0906.
14. A manufacturing company using 10,000 mWh per month would pay an additional $26,400 per month beginning June 1, 2017 based on the initial ZEC price established in P.A. 99-0906.

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Rauner & IL General Assembly: Exelon Too Big To Fail

Clinton Nuclear Plant

The history of the Big Bank Bailouts of 2008-09 is now repeating itself as farce. The 2016 tsunami of crony capitalist entitlement is scheduled to hit Illinois tomorrow in Clinton, where according to news reports Gov. Rauner will sign the Exelon Dividend Protection Act. We’ll have to more to say on the legislation, but one may read the story here.

 

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The Exelon Almost-Bailout: Chris Crane’s Blazing Saddles Moment

Exelon CEO Chris Crane

A week or so ago, the Illinois General Assembly failed to pass Senate Bill 1585, the Exelon Bailout Bill. The bill failed despite a series of full-page newspaper ads and a robocall campaign touting how great the Exelon bailout would be for consumers. Exelon CEO Chris Crane even went so far as to set a deadline for the Illinois Legislature: Unless you pass the bailout bill by May 31, we’ll close two nuclear generating stations (Clinton and  Quad Cities).

Mr. Crane apparently remains unaware how much his threat to kill off two of his own nuclear plants resembles the threat made by Cleavon Little, playing the unforgettable role of new Sheriff Bart in Mel Brooks’s Blazing Saddles (1974).  Just after new Sheriff Bart arrives, the townspeople (nearly all of whom are surnamed Johnson) threaten to shoot him because he’s not quite who they expected. Bart then draws his pistol, holds the muzzle to his own head and threatens to shoot the sheriff (i.e., himself) if the townspeople don’t back off:

Sheriff Bart (as gunman): Hold it! The next man makes a move, the #$%^& gets it!

Olson Johnson: Hold it, men. He’s not bluffing.

Howard Johnson: Listen to him, men. He’s just crazy enough to do it.

Sheriff Bart (as gunman): Drop it! Or I swear I’ll blow this #$%^&’s head all over this town!

Sheriff Bart (as hostage): Oh, Lordy, Lord, he’s desperate! Do what he say! Do what he say!

[SHERIFF BART, STILL HOLDING THE GUN TO HIS OWN HEAD, DESCENDS FROM THE PLATFORM AND MOVES TOWARD THE SHERIFF’S OFFICE]

Harriet Johnson: Isn’t anybody going to help that poor man?

Howard Johnson: Hush, Harriet. That’s a sure way to get him killed.

Sheriff Bart (as hostage): Help me, help me……somebody help me!

Sheriff Bart (as gunman): Shut up!

Just as Sheriff Bart managed to escape unscathed, so we learned the next day that Exelon and the legislature are working on a “new compromise” that would prop up Exelon’s two troubled nuclear plants. Expect to see Mr. Crane reprise his role as Sheriff Bart, with a renewed threat to euthanize the Clinton and Quad Cities stations, in the weeks leading up to the next legislative session.

In earlier posts, The Sparkspread explained how, more than a decade ago, the top management of Exelon embarked on a grand plan: strip the generating assets (i.e., nukes) out of the stodgy, old, regulated utility and transfer them to a shiny, new generation subsidiary called Exelon Generation. After all, it wasn’t as if the regulated utility was going to open up new markets. Its service territory was fixed. It was much better to have the generation assets in an entity that wasn’t regulated, that could make profits in a competitive wholesale market, and keep those profits without a regulatory say-so.

Once Exelon had the nukes in a separate subsidiary, it stood to earn some hefty profits because its generation costs were very stable. Sure, it had to refuel periodically, and operations and maintenance are not cheap, but on a relative basis the cost of nuclear generation was very low relative to natural gas-fired generation, and the latter sets the electricity price at the margin in this market. All of this was planned before the advent of fracking, when the price projections for natural gas all looked like hockey sticks. Well-informed market players feared that the U.S. wouldn’t have enough natural gas, and they predicted that we’d have to import it. So Exelon placed its bets. One could almost see Adam Smith smiling down from above. What could go wrong?

A couple of things, it turns out. First, the fracking revolution in natural gas turned lots of assumptions about the U.S. energy picture upside down. The U.S. with a natural gas shortage? Not now. We’ve got more than a century’s worth of supply at current consumption rates, enough to export it with the right facilities and markets. Between 2005 and 2012, natural gas production increased almost 30%, a rate of increase that triggers comparisons with the Golden Age of American Industrialization between the end of the Civil War and the turn of the 20th century. Heady stuff, but the cloud in this silver lining is that decreasing natural gas prices translate to decreasing wholesale electricity market prices.

Then the Great Recession Double Whammy hit, and the economy tanked. Production, and therefore energy demand, went down. Nowadays the Federal Reserve issues its monthly Panglossian pronouncements that the recession is over, unemployment is down, and everything is fine. The 2016 presidential primary season showed that neither the Fed nor anyone else in D.C. has a clue about anything outside the Beltway. The American voter has seen enough bogus economic data swallowed without question and regurgitated by bogus financial news media. The continuation of low market electricity prices says it all.

Make no mistake, Exelon’s fighting a war on two fronts: low energy market prices in the east and sluggish economic recovery in the west. But Exelon, its management, and its shareholders assumed that risk. They wanted to be entrepreneurs, and the Illinois General Assembly granted their wish with the necessary amendments to the Illinois Public Utilities Act.

Exelon played the market, and it lost. In Donald-Trumpese, Exelon is a “LOOZER,” just like all those poor slobs who keep demanding an increase in the minimum wage. (The nerve!!!)

When the energy market was high and Exelon Generation was making money, Crane was pleased to talk about the glories of the free market, private enterprise, shareholder value and the privatization of profits. But now that the market has turned against Crane all that shareholder value malarkey has to be swept under the rug like something unmentionable that you don’t want your dinner guests to see.

To everything there’s a season, and the time for privatizing profits is over. Now is the time for socializing losses. Crane has to talk about how “the market is flawed,” how the Exelon Generation nuclear fleet is imbued with a vast public interest, and how the citizens of Illinois are no longer just chumbolones (to borrow a John Kass-ism). Now, they’ve been elevated to the rank of “stakeholders.” Funny how that works. Crane’s worshipful attitude towards ratepayers increases in direct proportion to the magnitude of the public subsidy he’s looking for. To bail out Exelon, the Illinois General Assembly needs to hit ratepayers with a new charge called a zero emission credit. He didn’t get it this time around.

The Exelon Bailout Bill perfectly exemplifies the type of crony capitalism (or, more appropriately, Craney Capitalism) in which Exelon’s sycophants in the General Assembly are only too happy to use the state’s power to subsidize Exelon and protect its privatized profit model from the perils of a free market whose virtues it extolled when the market was high.

No wonder Trump’s popular.

 

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Exelon Shocked (Shocked!) at First Energy’s Ohio Bailout

Rick and Inspector Louis Renault, at the Cafe Americain, Casablanca, ca. 1942.

Who can forget that scene in Casablanca when Inspector Louis Renault (Claude Rains) shuts down Rick’s (Humphrey Bogart) Café Americain because he’s shocked (shocked!) to find that gambling is going on in Rick’s establishment. Just then, a croupier hands a thick wad of bills to Inspector Renault: “Your winnings, sir.” Ever the gentleman, the Inspector thanks him very much.

Exelon has now assumed the role of Inspector Renault before the Ohio Public Utilities Commission, where it is shocked (shocked!) that First Energy, one of the nation’s largest merchant generators, may get a bailout in the form of revenue guarantees that will, supposedly, enable it to keep its generating stations open. (Ohio P.U.C. Docket No. 14-1297-EL-SSO, Second Supplemental Testimony of L. Campbell on behalf of Constellation and Exelon Generation).

Yes, that’s right, Exelon, the parent of Exelon Generation: the same Illinois-based nuclear generation giant that tally-ho’d down to Springfield last year to seek its own economic protectionism measure (Illinois General Assembly, H.B. 3293) in the form of a new “low carbon emission standard,” a standard so narrowly tailored that Exelon Generation was its only conceivable beneficiary. Exelon had, and still has, its hands full trying to polish its own Illinois bailout with high-gloss “market-based” varnish.

In Ohio, First Energy confronts the same issue that Exelon and others have been complaining about for several years now: market electricity prices are so low that First Energy, like Exelon, is threatening to shutter some of its generating stations unless the state bails it out.

As The Sparkspread previously explained, in the early 2000s Exelon, First Energy and many other large electric utilities, like so many itinerant free market monks, preached a pure, Ayn-Randian gospel to state legislatures and regulators: the salvation lower consumer electricity prices could be attained only through faith in unfettered (well, almost unfettered) retail competition.

Utility executives urging state legislators to adopt retail electric competition, ca. 2004.

Illinois, Ohio and a number of other states joined this crusade and opened their electricity markets to competition. They spun off their generation assets to new genco subsidiaries, leaving just the delivery services (wires) under the traditional regime of cost-of-service rate regulation. They were betting on a future of increasing natural gas prices, which ordinarily set electricity prices at the margin. Visions of dollar signs danced in their CEOs’ heads.

Unfortunately, things didn’t quite work out. Caught between the expansion of natural gas supply obtained by fracking and a glacially-paced economic recovery, the real shock (shock!) to Exelon and First Energy is that the market went against them, as free markets have been known to do. That’s why they’re called “free” markets.

In Ohio, Exelon claims that the bailout of First Energy will hurt consumers to the tune of $2.0 billion. Besides, the holy canons of the free market prohibit bailouts of risk-taking, private, for profit enterprises like merchant generators. (Of course, those same holy market canons likewise forbid Exelon’s Illinois bailout, but they deserve a dispensation, right?)

Consistency is merely the hobgoblin of little electric consumers.
But in Ohio, the Public Utilities Commission might allow a bailout of First Energy’s merchant generation fleet, which is one of Exelon’s competitors in the PJM market. In a precise reversal of the tone Exelon adopted in the fight for its own Illinois bailout, in Ohio it finds horrifying the prospect of precisely the same type of bailout for First Energy.

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Dynegy CEO: Springfield Should Not Hand Exelon a $300 Million Per Year Subsidy

The following OpEd by Dynegy CEO Bob Flexon is available at:

http://www.illinoisobserver.net/2015/04/14/op-ed-lawmakers-rush-hand-exelon-300-million-subsidy/

(Chicago) – OP-ED: Today, Illinois consumers enjoy a competitive electricity market that has provided choice and low-cost electricity. Illinois is at the forefront of the national energy industry as a net exporter of electricity and a hub for electric transmission lines and gas pipelines.

However, despite the benefits of a free, competitive market which Exelon supported and prospered under, the parent company of ComEd, which serves customers in northern Illinois, is asking Springfield to raise electric rates for consumers, local governments and small businesses across Illinois. It’s armed with legislation (SB 1585/HB 3293) and threats to close three of its six Illinois nuclear plants in northern Illinois if it doesn’t get its way.

Though Exelon posted a substantial corporate operating profit in 2014, it claims its three plants can’t compete. Exelon claims that its costs are too high and has threatened to close the plants unless electricity customers throughout Illinois pay higher bills through a monthly surcharge designed to create a windfall for this $27 billion company.

The Exelon subsidy comes in a package that creates a $300 million “annual revenue stream” for low-carbon energy sources including wind, solar, hydro, clean coal and, of course, nuclear.

As Crain’s Steve Daniels writes, “the bill’s language is so restrictive on which sources could bid for the cash that Exelon’s nukes are virtually certain to get the lion’s share.”

Exelon cannot unilaterally shut down a plant. Grid system operator safeguards exist to ensure reliability and protect Illinois residential, small business and commercial/industrial customers. Plants needed for reliability must remain open, and if Exelon’s plants are needed they would be compensated under the existing protocols.

There’s no problem.

Shouldn’t we allow the existing process to address any concerns before customers send an annual $300 million check to this Fortune 500 company? It doesn’t make sense that Illinois consumers and employers should be expected to subsidize plants that they already have paid for nor should central and southern Illinois have to subsidize Northern Illinois.

Now’s not the time for this.

We need to consider the U.S. Environmental Protection Agency’s national Clean Power Plan, which won’t set final rules on existing power plants until this summer. The state can submit its final compliance plan as late as 2018. We should wait until Illinois has its plan in place in order to avoid unnecessary costs for citizens and businesses in Illinois.

The state’s comprehensive energy plan also should consider Illinois’ diverse fuel mix and resources including coal, which produces 43 percent of Illinois’ energy needs—and renewables and energy efficiency measures.

Prematurely raising utility bills when it just may not be needed is not in the best interest of Illinois consumers and employers.

Bob Flexon is president and CEO of Dynegy, which owns 13 power stations in Illinois.

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The Exelon Bailout Bill and the Triumph of Newspeak

Redheaded stepchild: Exelon’s Byron nuclear plant

Listening to Exelon CEO Chris Crane extol the virtues of the free market and claim that his nuclear plant bailout bill is “market-based” is like listening to heavy metal/punk rock music performed by Pat Boone. The inauthenticity and cognitive dissonance are so fundamental as to cause revulsion at the cellular level.

Exelon introduced its bail-out legislation in the Illinois House of Representatives (HB3293) a few weeks ago. When we say Exelon introduced it, we mean exactly that. The notion that any of the bill’s sponsors in the House could understand the legislation, much less write it, is something only employees of Exelon and its public relations firm could say with a straight face.

The fiction that the Exelon bailout bill provides a “market-based” remedy is embarrassingly unconvincing, but, as Illinois’ long history shows, embarrassment is an emotion unknown to either Exelon or Springfield.

The key to HB3293 is Exelon’s Newspeak definition of “low carbon energy resources.” The Exelon lawyers who drafted HB3293 have cleverly sought to superimpose the imagery of the free market on a mechanism engineered to ensure that Exelon will have a monopolistic stranglehold on the sale of LCE credits. Exelon has tailored the term “low carbon energy resources” like a bespoke suit: it includes its own nuclear plants but excludes virtually all other generation that the average ratepayer might reasonably consider “low carbon.”

Exelon modeled HB3293 after the Illinois renewable portfolio standard. The bill amends the Illinois Power Agency Act by establishing a new “low carbon energy (LCE) credit” portfolio standard.

Beginning January 1, 2016 all electric utilities (such as ComEd, which, like the General Assembly, is one of Exelon’s wholly-owned subsidiaries) must purchase sufficient LCE credits to satisfy the LCE credit standard. The trick, of course, is that the bill authorizes electric utilities to recover all costs of purchasing the LCE credits from ratepayers. Thus, ComEd would once again serve as the tube through which Exelon hoovers up cash from ratepayers’ wallets for the benefit of its corporate treasury. (Headline: “Illinois legislation frees Exelon shareholders from fear of dividend cut.”)

Exelon’s definition of “low carbon” generation stipulates that no low carbon generation resource may have a power purchase agreement longer than 5 years. The effect of this unassuming little statutory quirk is to exclude virtually all wind, and much solar energy from the “low carbon” category. It would also exclude solar energy participating in the IPA’s supplemental procurement, which requires purchase contracts of at least five years.

The quantity of LCE credits that each utility must obtain is set at 70% of annual retail electricity sales. Taking 2012 as a sample year, total retail sales of electricity were approximately 143,540,000 megawatt-hours. http://www.eia.gov/electricity/state/illinois/ . (This figure would need to be adjusted by subtracting sales by electric cooperatives and municipalities that run their own systems, but it’s a serviceable proxy for our purposes.) This means that if HB3293 had been in effect for 2012, utilities would have had to acquire roughly 100,000,000 megawatt-hours of LCE credits. That’s a lot of LCE credits.

Exelon’s bailout bill then provides that the LCE credits must be procured from generating resources that are consistent with the “Minimum Internal Resource Requirements” (sic) for capacity established by the applicable regional transmission organization. HB3293 does not define this capitalized term, and a search of PJM (including the PJM manual on capacity markets) and MISO websites did not yield any defined term to match it. However, the term is likely another way to exclude wind, solar and perhaps other renewables from the LCE credit market because the concept of a minimum internal generation resource requirement applies in the context of assessing reliability across a given territory based on generation within it. Reliability, in turn, depends on dispatchable resources. Wind and solar are generation resources, not dispatch resources. Thus, if a particular wind or solar generator made it past HB3293’s first trench because it had a PPA with a term less than five years, it would still get caught on the barbed wire of Exelon’s “Minimum Internal Resource Requirements” criterion. Drafting a statute with a term that is both capitalized and in quotation marks without defining it may strike one as odd, but it’s not so by Exelon’s standards. Like Humpty Dumpty, when Exelon uses a term, it means exactly what Exelon wants it to mean, neither more nor less.

The first procurement of LCE credits will be under a five-year contract beginning January 1, 2016 to May 31, 2021. Just like Exelon’s Electric Infrastructure Modernization Act of 2011, the Exelon bailout bill gives the Illinois Commerce Commission a ridiculously short time period to review the LCE credit procurement plan: it must either approve the plan or approve it with modifications by November 1, 2015. The ICC has no power to disapprove the plan. Exelon wants to make sure that no one has a realistic opportunity to derail its bailout by asking annoying questions during pesky public hearings.

Although Exelon’s bailout bill will ensure that it can use ratepayer wallets as its own private ATM, it tries to camouflage this by providing that the LCE credit procurements must be “cost effective,” meaning that the incremental costs to consumers may not exceed certain limits (an annual average net increase in total costs per kilowatt-hour of no more than 2.015% of the amount paid by eligible retail customers for the planning year ending May 31, 2009).

Then, in a true Newspeak flourish, the Exelon bailout bill provides that “to ensure benefit to consumers,” winning LCE suppliers (note the plural noun; let’s pretend along with everyone in Springfield that there might be more than one) must commit to reimburse the cost of LCE credits for each planning year that the “forecasted average revenue” of the LCE resource that produced those LCE credits exceeds a set price per megawatt-hour. Note that this limitation applies only to the specific nuclear plant that generated the LCE credits in question. That means that if Exelon as a whole is doing just fine revenue-wise, but the three redheaded stepchildren (Byron, Clinton and Quad Cities) aren’t, ratepayers would still have to pay into Exelon’s corporate treasury. This is single-issue ratemaking writ large; that is, allowing a utility to single out specific cost or revenue components in order to recover them separately from ratepayers, without regard to the utility’s costs or revenues as a whole.

Yep, the Illinois Commerce Commission will hardly need any time to review Exelon’s procurement plan.

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Exelon: Public Subsidy for Private Enterprise

Exelon CEO Chris Crane

Don’t let the yesterday’s Crain’s headline (Rauner wants to seize utility funds for the poor to help balance budget) lead you to believe that the state government is the only one looking to pick ratepayers’ pockets.

There’s a reason that Exelon is running full-page ads in the Chicago Tribune (e.g., 1/28/2015, pg 8) proclaiming all the great things their nuclear plants do for Illinois. If electricity prices continue to fall, expect baseball and apple pie to make their way onto that list. Exelon does make electricity, of course, but what Chris Crane, Exelon’s CEO, hopes to achieve through this public relations blitzkrieg is that you’ll confuse Exelon Generation, owner of the nukes and a private enterprise, with Commonwealth Edison, its affiliate and a regulated public utility.  If he can convince Illinois that Exelon Generation is almost, but not quite, a public utility, then he’ll have a better chance of getting money from ratepayers to plug the alleged hole in the budgets of the Byron, Clinton and Quad Cities nuclear stations.

Mr. Crane’s game becomes easier to understand if you put the shoe on the other foot. If his Byron, Clinton and Quad Cities nuclear plants were going gangbusters on profits, all those profits would be upstreamed to Exelon Corp. and either paid out as dividends, spent on stock buybacks, paid out in rich officers’ salaries and bonuses or put back into the business. Mr. Crane wouldn’t need to run full page ads in the Tribune burnishing Exelon Generation’s reputation as a corporate citizen, nor would he consider Exelon Generation obligated to rebate a penny of those profits to ComEd ratepayers.

In fact, if Byron, Clinton and Quad Cities were making fat profits, that would mean electricity prices would be higher. If ratepayers dared to complain, Mr. Crane could tell them that that’s just the result of a free, competitive market in electricity, and that’s what Illinois signed on for back in 1997 with the Electric Service Customer Choice and Rate Relief Act (220 ILCS 5/16-101 et seq.). That’s capitalism, and if the public doesn’t like it, then the public be damned.

Exelon executive in easy chair, ca. 2015

But that’s not how things worked out. Electricity prices are down. When Exelon Generation loses money, in Mr. Crane’s world it’s the responsibility of the ratepayers to make up the difference. And that would include those low-income ratepayers who might otherwise have benefited from the LIHEAP funds Governor Rauner would like to apply to the state’s budget deficit.

Mr. Crane’s first tack was to blame renewable energy, and wind energy in particular, for compelling his nuke plants to take low or even negative prices. That argument didn’t hold water for very long. His next tack was to blame “flawed markets,” which was also unconvincing given that Exelon is the biggest dog in the PJM regional transmission organization, and was the principal architect of the wholesale market about which it was complaining. Mr. Crane’s current ploy is to emphasize nuclear power’s freedom from carbon emissions, and to complain that the electricity market doesn’t appreciate that.

Yes, Exelon is complaining that they’re just not appreciated. Perhaps help other than the monetary kind would be more appropriate:

Unappreciated Exelon Generation executive at right.

These days Mr. Crane’s lobbyists are oozing all over Springfield, prodigating Exelon’s cash into the pockets of quisling legislators who will enact an Exelon-drafted bill that will ensure a pipeline of dollars from ratepayer wallets to Exelon shareholders. That’s crony capitalism. Or maybe it’s “Craney capitalism.”

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Ukraine constructs Central Storage Facility for spent nuclear fuel | Nuclear Energy Insider

Spent Nuke Fuel (No Swimming Allowed)

Nuclear Energy Insider reports that Ukraine has begun building a central storage facility for spent nuke fuel:

Ukraine constructs Central Storage Facility for spent nuclear fuel | Nuclear Energy Insider.

How embarrassing would it be for the United States if, on the competent handling and storage of spent nuclear fuel, Ukraine makes more progress in two years than we’ve made in the last fifty.

Of course, Ukraine also has an incentive to become more energy independent. His name is Vladimir Putin.

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