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The Illinois Future Jobs Act: Missing the Mark?

July 11, 2017

Customers in Illinois will see higher bills from their local electric utility (Ameren or Commonwealth Edison) in the near future after the implementation of the Future Energy Jobs Act on June 1st, 2017. The bill creates a new subsidy called Zero Emissions Credits (ZECs) that consumers must buy and only Exelon’s failing nuclear generators get to sell. The State’s Illinois Power Authority (IPA) is responsible as a “middleman” for buying the ZECs from Exelon and the cost will be allocated back to all ratepayers in Illinois through ComEd and Ameren bills. This new ZEC purchase mandate will increase electricity rates in the state of Illinois and is a wealth transfer from Illinois ratepayers to the shareholders of Exelon.

The bill specifically subsidizes Exelon’s Clinton and Quad Cities nuclear facilities. These facilities have been under financial pressure due to an extended period of low prices in competitive power markets. The bill provides subsidies in the form of ZECs for 13 years. The ZEC program guarantees Exelon a minimum level of revenue above which they would otherwise earn by selling the plant output into the competitive wholesale power market.   The cost of the ZEC program is then passed down to Illinois consumers.  It should be noted that Exelon did not offer to return excess profits to Illinois consumers. The bill has certain caps on ZEC prices to protect consumers against Exelon earning windfall profits should wholesale power markets recover. Small residential users might not notice the dollar amount, but large users will certainly notice the increased bill.

Proponents of the bill believe it gives nuclear power the benefit it deserves for being a clean renewable electricity source. It has also been touted as a job saver, saving around 4,200 jobs in the state. Opponents of the bill say it is a corporate bailout for Exelon. Opponents also feel this makes markets less competitive as the facilities are subsidized by Illinois consumers. Independent generators have recently filed a lawsuit against the law, stating that Illinois does not have the jurisdiction to regulate wholesale power markets which is the purview of the Federal Energy Regulatory Commission. Nuclear generators in other states are also pushing to get ZECs, claiming they will shut down if they do not receive subsidies.  New York has already done so exclusively for Exelon facilities in that state.  Legislative proposals in Connecticut and Ohio have been introduced by Dominion and FirstEnergy respectively but have to date not been enacted. Exelon has publicly commented that Pennsylvania should also subsidize its nuclear facilities as has PSEG in New Jersey. Exelon is the parent company of Constellation, a competitive energy supplier in Illinois that will benefit from the ZEC subsidy at the expense of their customers.

ENGIE’s position regarding the implementation of the ZECs is somewhat different.  Traditionally, nuclear generation owners have justified continued costly investment in generation and transmission infrastructure by arguing that nuclear base load generation is critical to ensuring reliability, helps to mitigate rate spikes, and that it is an environmentally-friendly alternative to fossil fuels.  In this vision, customers are passive, often simply referred to as ratepayers, and have little to no control over how or when they use electricity.  ENGIE believes that we are undergoing a paradigm shift we refer to as the Energy Revolution in which technological innovation as it relates to consumers’ electricity usage becomes increasingly empowering.  Partnering with an electricity supplier like ENGIE Resources – which has the market knowledge, resources and tools, and industry experience – places power in the hands of the consumer and enables them to reduce their electricity usage, more effectively manage both price and consumption risk, and do so in an environmentally-friendly way. 

An additional point, although unrelated to the ZECs, but of note to both consumers and retail suppliers: The Law also transitions the responsibility for compliance with the Illinois Renewable Portfolio Standards away from Competitive Retail Electricity Suppliers (CRES) to the IPA, and creates RECs for Renewable Electricity Generation which will be awarded for large scale projects completed by AIC, ComEd, and MIC between June 1, 2019 and June 1, 2021.