The nation’s largest nuclear power plant operator, Exelon Corp., is strong-arming state legislators in its home state of Illinois. The utility is unreasonably demanding “taxpayer bailouts,” state subsidies, and new regulatory restrictions on its lower-cost electricity generating competitors. If these shrill ultimatums are not met, Exelon threatens to shutter three of its six nuclear power plants in Illinois.
Since the utility has business activities in 47 U.S. states, and the District of Columbia and Canada, analysts expect this shakedown to be a preview of the company’s new business strategy across the U.S.
As America’s largest competitive power generator with approximately 35,000 megawatts of owned capacity, Exelon posted a $2 billion profit on revenues of more than $24 billion in 2014. So CEO Christopher M. Crane is hardly hurting for expansion capital. This is the kind of a strategy one would expect from a purely rent-seeking activity, like solar power, rather than the established nuclear energy industry.
Although the company, and its nuclear power plants, are very profitable as a whole, executives like Crane complain three of its six Illinois nuclear power plants are not “independently profitable” and are therefore deserving of taxpayer bailouts and protection from competition.
Just how unsuccessful are the three nuclear power plants? Well, nobody really knows because Exelon refuses to open up its books to support its claims. Exelon asserts it should not be required to prove its three nuclear power plants are unprofitable as a condition of demanding sharp rate increases or stifling new restrictions on its rivals. Exelon prefers that customers and Illinois legislators merely take Exelon’s word for it and then hand over the money.
Exelon’s first proposal was a rate increase of $300 million per year. When that proposal took off like a lead balloon Exelon shifted gears and proposed low-carbon electricity mandates that would accomplish the same thing. By forcing people to give up affordable coal and natural gas power and purchase expensive nuclear power from Exelon’s fleet instead, Exelon would get an influx of new revenue without having to call it a “rate hike.”
Regardless of whether Exelon pushes for a rate hike or a law forcing people to buy more power from its expensive nuclear power fleet, there is no justification for either costly proposal. The owners of almost any large, profitable business can point to individual divisions or departments within their business that are not independently profitable. Exelon turns a multi-billion dollar profit, already, with substantial assistance from government. There are many divisions and departments within Exelon that must be extremely profitable – one might even say exorbitantly profitable –for the company to post a $2 billion profit last year. Is Exelon planning on returning to the people these exorbitant profits from most of its power plant operations at the same time it demands reparations for what it claims – but refuses to document – is a very small subset of underperforming nuclear power plants? Of course not.
Taking Exelon at its word that its three nuclear power plants cannot turn a profit, why should captive electricity consumers be forced to reward Exelon for its failed business decisions by forking over bailout money? Rather than propping up and rewarding Exelon for its poor decisions and extortionist threats, Illinois legislators, and legislators in any other U.S. state where Exelon tries this shady tactic, should look to reward the company’s competitors who are not demanding such subsidies and market-share mandates under the threat of retribution. And by “rewarding” Exelon’s competitors, all the competitors are asking for is the opportunity to compete without government giving the Fortune 500 firm special treatment. That sounds like a win-win for everybody from electricity customers to taxpayers to every electricity supplier that is not trying to rig the system in its own favor.