Exelon Losing in its Own Backyard as New York Rescues Nukes

  • Cuomo backed nuclear bailout for two money-losing reactors
  • Illinois governor raised concerns over taxpayer subsidies

In the end, the fate of Exelon Corp.’s money-losing reactors in Illinois and New York may have come down to one governor who desperately wanted to rescue them and another who wasn’t so sure.

New York Governor Andrew Cuomo laid down his marker in December when he told the chairman of the state’s utility regulator that losing two upstate nuclear plants would gut a plan to cut global warming pollution and cost jobs. On Monday, the state agreed to a bailout and within hours, Exelon said it would invest $200 million in the two plants.

While Illinois Governor Bruce Rauner also worried about job losses, he said any rescue plan must protect ratepayers and taxpayers and that corporate bailouts raise red flags. In June, Chicago-based Exelon said it would close two Illinois plants after the state legislature balked at a measure to stem their financial losses.

“In New York, it was the governor’s support that did it,” Bloomberg Intelligence analyst Kit Konolige said by phone Wednesday. “In Illinois, from what the governor said in public, it appeared he wasn’t all in.”

Debates over nuclear policy come at a critical time for the industry as U.S. reactors face tough competition from power generators that burn cheap natural gas flooding out of shale formations and rising solar and wind production. As of the end of July, 11 nuclear power plants have closed or are slated to be shut, according to data compiled by Bloomberg Intelligence.

Cuomo’s Support

In New York, Exelon benefited from Cuomo’s support and his determination to help upstate reactors as part of a clean energy plan even as he calls for the retirement of Entergy Corp.’s Indian Point nuclear plant near New York City. The state Public Service Commission vote Monday may also save Entergy’s James A. FitzPatrick nuclear plant near Oswego. Exelon said it would consider buying FitzPatrick if subsidies were approved.

Cuomo had the advantage of being able to tap governor-appointed state regulators to weigh the nuclear bailout instead of the legislature, according to Christine Tezak, an analyst at ClearView Energy Partners in Washington.

When a regulator "has the flexibility to craft financial support based on an environmental attribute without needing to engage the legislature, it seems to be easier," Tezak said in an e-mailed response to questions.

Exelon spokesman Paul Adams had no immediate comment on the governors’ roles.

Taxpayer Subsidy

In Illinois, Exelon struggled to gain high-profile support for legislation it backed that would have raised customer bills to keep its nuclear plants open, Konolige said. As the company’s May 31 deadline for the state government to act neared, Rauner raised philosophical concerns with corporate bailouts.

Rauner’s office didn’t immediately respond to a request for comment.

“I’m always concerned whenever a business says, ’oh I guess in order to stay in Illinois, we need a big taxpayer subsidy,”’ Rauner said in May according to National Public Radio. “So that’s like a red light..’danger.’ So the answer is we have to talk about it, figure out what makes sense. We’re going to look at that bill and figure out how to handle it.”

Illinois lawmakers were focused on a stop-gap compromise to erase the state’s budget deficit. The nuclear bill never "really had the real push to get it done," Konolige said.

"Every state has its own political DNA," said Paul Patterson, an analyst at Glenrock Associates LLC. "The issues confronting Illinois right now on the budget and pensions are taking up a lot of time and New York doesn’t have that."

Exelon rose 0.1 percent to $36.82 at 11:39 a.m. in New York. The shares are up 33 percent this year.

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