Chicago Tribune: New Power Rules May Hike Chicago Electricity Bills, Bring Exelon Payday



July 28, 2015

New Power Rules Prompted by Polar Vortex May Hike Chicago Electricity Bills

By Cynthia Dizikes

Beginning next month, power plants in northern Illinois and other states will be able to make more money from consumers in order to shore up electricity in frigid weather and prevent the scramble to keep the lights on that occurred during the extreme winter of 2013-14.

But critics — including the head of the federal agency that analyzes such moves — argue that the electric grid, while stressed, did not actually fail during the polar vortex and that the approach may be misguided and flawed, potentially ballooning costs by several billion dollars over the next few years without stabilizing the electricity available to consumers in severe weather.

“Despite the potential multibillion dollar burden consumers will be asked to bear, there is no analysis, however rudimentary, indicating whether the benefits are at least roughly commensurate with the costs,” Norman Bay, chairman of the Federal Energy Regulatory Commission, wrote in a cutting opinion last month.

The PJM Interconnection, which manages the grid in 13 states, including the Chicago area, anticipates the change could add a couple of dollars a month to residential electricity bills.

The polar vortex brought one of the worst winters in decades to cities across the U.S., rendering nearly a quarter of power producers in Chicago’s regional electric grid inoperable on a particularly brutal January day that saw temperatures plummet to negative 12 degrees.

Some coal plants that had promised to provide electricity stopped working because their conveyor belts froze, while some natural gas plants could not obtain enough fuel because of increased demand for heating. Grid operators raced to keep electricity flowing to millions of people. Electricity prices in the wholesale market spiked, and grid operators contended they came close to using emergency tactics to keep the system from failing.

That spurred PJM to propose a “no excuses” policy that would financially reward power producers that continue to pump electrons onto the grid during such harsh weather while fining those that fail to come through.

The five-member Federal Energy Regulatory Commission approved the controversial new electric grid rules last month over Bay’s lone dissent, setting the stage in the coming weeks for prices to potentially be set higher.

“PJM raises serious and legitimate concerns,” according to the majority opinion. “Failure to act today … could cause reliability issues years from now, at realized cost levels potentially significantly higher to customers.”

PJM’s massive system stretches from Chicago to the Atlantic Ocean and covers about 61 million people and 1,400 electric generators.

PJM has predicted the new rules could cost electricity customers up to $5.4 billion over the next few years after accounting for potential savings that could result from generators performing better in bad weather. The organization has estimated that long-term costs could be up to $700 million a year, at the same time underscoring that the cost of power interruptions can reach tens of billions of dollars and endanger lives.

The changes will be implemented over the next few years with initial costs being made public in August.

The impact to residential customers, according to PJM, should be “relatively modest,” or about $2 to $3 more a month, with the possibility for all of that or more to be offset by lower energy prices in extreme weather years.

Using industry consensus estimates, the cost to an average Commonwealth Edison residential customer could be similar, or about $3.50 more a month in 2018, according to market experts. Some, however, have pointed out that the new rules could allow prices to reach about $12 more a month in 2018 for the average ComEd residential customer without triggering a review.

“PJM’s mission is to ensure reliable service at the lowest possible cost to the end-use customer,” said Stu Bresler, PJM’s senior vice president of market services, in a conference call with reporters this month. “Those old performance requirements simply were not enough to assure the kind of performance we needed.”

PJM is an organization whose members include power generators. Many of them lobbied hard for the new rules, including Chicago-based Exelon, which stands to make more money from the changes at a time when it is threatening to close some of its nuclear plants because of increased competition from wind- and natural gas-generated power.

The new rules specifically apply to PJM’s so-called capacity market. Capacity is an industry term that generally refers to a power producer’s ability to provide electricity to the grid.

In northern Illinois, power producers make money through energy markets, where they continually sell their electricity to the power grid, and through capacity markets, where they commit to be able to supply a certain amount of electricity to consumers three years in advance if needed.

Capacity markets provide a way for power producers to recover costs beyond the fuel they use, such as for land purchases, construction and maintenance. They also are intended to be a stabilizing force in the system, locking in commitments and prices and encouraging the construction of new plants if more electricity is needed.

Consumer advocates contend that in recent years power generators have pushed to make capacity markets even more lucrative as profits from energy markets have plummeted, driven down by cheap natural gas prices and decreased demand for electricity.

PJM argues that the potentially higher prices are necessary, billing the new capacity rules as an “insurance policy” consumers will be taking out to ward against the disruption and cost that a sudden drop in energy supply might cause. During the polar vortex, for instance, some consumers on variable rates saw prices spike to 35 cents per kilowatt-hour — more than four times the going utility rate, and six times ComEd’s rate during that time.

Others, however, have asserted that the capacity market is not necessarily tied to energy prices and simply serves as a dependable revenue stream from consumers to generators. They point out that even though energy prices jumped in the wholesale market during the polar vortex, most residential customers in northern Illinois did not get dinged because they were on fixed-rate plans.

Cara Hendrickson, chief of the public interest division for Illinois Attorney General Lisa Madigan, said that the rules are likely to cost consumers more, yet “they do not guarantee that the money will be used to make the system more reliable.”

‘Verge of collapse’
In PJM, capacity prices are established three years in advance through a main annual auction. Power generators bid capacity into the auction at a certain price, and PJM chooses the lowest bids that will meet the demand for electricity it expects in the future. Power generators whose bids get picked are paid for that promised electricity three years later.

The cost is spread out to customers across the system through capacity payments embedded in individual electricity bills.

In exchange, power generators are expected to provide the electricity they promised if PJM determines it is needed.
Traditionally the capacity market was designed to make sure PJM had enough electricity to meet demand during peak summer hours, but the new rules create an additional focus on severe winter weather.

The capacity auction for 2018-19, which will almost fully implement the new rules, will occur next month. The results will be made public Aug. 21. In the weeks that follow, PJM also expects to hold two smaller supplemental auctions for next year and 2017-18.

Under the new rules, power generators will be able to bid higher, but will also face greater fines for not providing their promised electricity to the system if they are called upon. Money from the fines will go to those that do perform.

The thinking, according to PJM, is that the possibility of fines will encourage power plant operators to make investments to prevent weather-related shutdowns. For example, coal plants could choose to cover coal piles so they don’t freeze and natural gas plants could buy pipeline capacity in advance.

“Really, for the first time, generators’ revenue is more than ever dependent upon how well they perform during system emergencies,” Bresler said.

The biggest beneficiaries would be generators like Exelon, whose nuclear plants continued running during the polar vortex. Nuclear plants have fuel on hand and equipment that doesn’t need to be weatherized to operate, so they’re unlikely to suffer weather-related outages.

Exelon, which operates six nuclear plants in Illinois, is the nation’s largest owner of nuclear power plants.

If consensus price estimates hold and all of Exelon’s northern Illinois nuclear plants are picked in the main auction, some industry experts predict the new rules could bring the company about $618 million.

Exelon executive Joseph Dominguez declined to speculate how much Exelon could make but said the company anticipates that the benefits of avoiding price spikes and blackouts will outweigh the increased costs.

Exelon spends about $1 billion a year on maintaining and upgrading its nuclear plants and anticipates it will spend up to $360 million more to improve facilities that are picked in the auction, Dominguez said.

“When we saw a system that was on the verge of collapse during the polar vortex, we believed that PJM needed to act,” Dominguez said. “Every company, every supplier, is going to have to make changes to their power plants in order to ensure performance.”

‘Serious design flaw’
But consumer advocates have maintained that the system actually worked during the polar vortex. They have questioned the need for such sweeping changes, arguing that power generators have already begun to make improvements and actually performed better last winter despite increased demand on the system.

Howard Learner, executive director of the Environmental Law & Policy Center in Chicago, said that the old rules also allowed entities to make money by promising to decrease their electricity demand on the system when called upon, which drove down prices and made the grid more efficient.

The new rules will likely make that harder to do, said Learner, adding that smaller tweaks should have been made before PJM attempted to restructure the entire system.

“What they did is like trying to kill a fly with a howitzer rather than a fly swatter,” Learner said.

In his terse, six-page dissent, Bay also pointed to a “serious design flaw” in the new rules that could leave the penalties substantively lower than what generators could make with higher prices in the auction, raising the possibility that power producers could still turn a profit without actually performing as promised.
“In short, PJM has purchased little certainty for what may be a lot of money,” Bay wrote.

The new rules will fully take effect in 2020.


E&E: Former Exelon CEO Rowe: Shutting down struggling nukes is ‘the proper market-driven answer’

CHICAGO — Even three years removed from running Exelon Corp., John Rowe is still among the few people who needs no name badge or introduction at electric industry events.
Rowe, who grew up on a Wisconsin farm and attended a one-room schoolhouse, spent more than three decades as a utility chief executive. He’s best known for taking over troubled Commonwealth Edison Co. in the late 1990s and overseeing the transformation into Exelon, the nation’s largest utility owner and operator of the largest fleet of nuclear plants.

The former executive still lives in Chicago and keeps the title of chairman emeritus at Exelon, but is pursuing a different passion these days — education. He teaches a high school history class at a Chicago-area charter school that he co-founded. However, he hasn’t given up his fondness for nuclear power and free markets and his belief in a carbon tax to help combat climate change.

The former Exelon CEO sat down with EnergyWire last week during the Energy Thought Summit in Chicago to discuss the state of the nuclear industry, U.S. EPA’s Clean Power Plan and other changes confronting the utility industry. What follows is an edited transcript of the conversation.

EnergyWire: Why are certain nuclear plants having trouble competing right now? Is it just natural gas and wind?

Rowe: Yeah, wind and gas and energy efficiency. The combination of the recession and energy efficiency — and no one knows the percentages — has caused demand for electricity to stay below ’07 levels through today and probably for another seven or eight years in the Northeast. In a supply-and-demand market, reduced demand hurts. That’s the first factor. The second factor is much of the time a nuclear plant is competing against natural gas in the market, so cheap gas really hurts. The third factor is the subsidized wind — which you really pay for, and it runs whether it’s economic or not — that hurts. The wind really annoys utility people because it runs at night. At night, you have more than enough electricity, and wind just ruins the price.

EW: It has been said that preserving existing nuclear plants is key to helping the U.S. achieve climate goals. So, what’s the right policy solution to keep existing nuclear viable, such as the three Exelon plants in Illinois that are said to be losing money?

Rowe: I’m living in a fairy world because I don’t have the numbers and I’m not responsible for them anymore. But in my opinion, you shut those three plants down. You say they have become uneconomic just like some old coal plants are uneconomic. And in a world that’s driven by unfriendly market prices and unfriendly public policy, you shut them down. That’s what I think the answer is, which is a setback for our low-carbon goals and a setback for the high-paying industrial jobs that people want to keep. But it is the proper market-driven answer.

EW: That would be unpopular with your former colleagues.

Rowe: I don’t know. I can ask, but I don’t want to ask. They have to figure this out for themselves. I love nuclear power plants. For [current Exelon CEO] Chris Crane, it’s his life. He would probably go further to keep a plant running than I would go. I don’t believe there’s anything divine about markets, but I believe they’re pretty important. Chris has only seen the sour side of the markets. I don’t believe you can run a good utility letting public policy push you toward something but not pay you for it.

In some ways, I believe the only way a utility has credibility in saying that something isn’t making any money is if it’s actually willing to shut it down. If I were there, I think I’d have shut the New Jersey plant [Oyster Creek] down first. It’s the oldest, it’s the smallest, and it would have given credibility to what Exelon is saying about the other four. Nuclear power plants have been shut down before around the country. Am I saying that’s the desirable answer? No, I’m not. What I’m saying is if the real reason to keep them running is a public policy reason, then the public has to help bear the cost of doing that.

EW: What do you think about the way EPA treats nuclear power in the Clean Power Plan draft rule?

Rowe: I think EPA is right in pursuing a low-carbon world. I think they’re complying with the law. I think they’re doing their best, but they have very crude tools. The Clean Air Act is not an adequate tool for this. We needed a carbon tax or cap and trade. We still do. We won’t be rational until we have one, and we may never have one. But short of that, I don’t think it’s EPA’s job to encourage a new nuclear world. I think that would be one of the most expensive solutions it could pursue. I think its job is to pursue a low-carbon world at the lowest possible cost. And that would mean preserving the existing plants but not building new ones.

EW: What do you see as the outcome if the EPA Clean Power Plan rule is promulgated as it was proposed?

Rowe: It’s not going to be a national disaster. Period. At the same time, it’s not going to have optimal or efficient results. Because they just don’t have the tools. I have suggested to several people, including NRDC [Natural Resources Defense Council] and a couple of [Illinois] Gov. [Bruce] Rauner’s people that I think the Illinois means for compliance ought to be a carbon tax. I don’t think he’s going to buy it, but I made the suggestion. I do know that trying to do it by piecemeal reductions will be very expensive.

EW: So you think the rule should be written to help existing nuclear plants that are struggling?

Rowe: We’re writing rules all the time to help wind and solar. One of my old friends in the utility industry said a long time ago that renewable standards were like Gresham’s law: Its bad power drives out good power. Needless to say, the environmental groups would say Gresham’s law worked the other way, but the point is still the same.

EW: Well, your successor at Exelon took a lot of heat for his views on the PTC [production tax credit] and wind.

Rowe: I agree with his position, but I have the thought that as a nuclear company, environmental support was so important to Exelon that I would have tried harder to work something out with them, I think. But he had a different problem to deal with than I had during my years, so judge not.

EW: When you were running the company, did you see the wind build-out being a real threat to the economic competitiveness of nuclear?

Rowe: Yes. What we didn’t see, even as late as ’08, we just didn’t see what shale gas was going to do to gas prices. Some of our downside scenarios were at $4 gas. We did not see below $3 gas. … Boone Pickens, who does not always tell the whole truth, told Rahm Emanuel about shale gas before my own fuel people told me about it. I shouldn’t learn things like that from the president’s chief of staff. I have a wound on my neck from that one. There were a few people that saw it, but unfortunately it wasn’t the prevailing view.

EW: You made a comment during your presentation: “Utilities are good at saying no and good at saying yes and not doing anything.” Can you explain?

Rowe: You have to have regulatory systems that give them a chance to profit from doing it. They need to have an upside like everybody else. It’s not that a utility is going to turn into a Google. You can attach wings to an ox, but it still won’t fly very well. You can’t make a utility do everything as a public service duty and expect it to be imaginative and creative about it. Give it some incentive and all the sudden you change the quality of people they put on it.

We found back at New England Electric, when we got an incentive that basically gave us 10 percent of savings calculated by environmental groups and 1 percent of gross on energy efficiency programs, overnight they became the most profitable work the utility did. The person I put on it was Cheryl LaFleur, who has just been chairman of the FERC. I put that level of talent on it because it was not only public service, but because it was profitable work.

EW: When did you first begin advocating for a carbon market?

Rowe: I believe it was ’92, and that was at New England Electric, which was mostly a coal-burning utility.

EW: But the science then wasn’t as undisputed as it is now.

Rowe: Correct, but it was getting pretty strong. If you paid attention to those kind of people, which I always did. I think it’s almost overwhelming now. My Republican friends disagree with that. The reason the Republicans disagree with it is because they don’t enjoy the consequences. There’s a whole strand of the environmental movement that would really like to have us in an English garden driving those bicycles with those little flower baskets. That isn’t how Republicans see the world. Ninety percent of the climate scientists are would-be socialists. It’s not too shocking that even if you respect their vast analytical ability, a conservative is skeptical of some of their science when the science leads to an end state that they want and you don’t.

John Holdren, the president’s science adviser, is a friend. And he and I want very different worlds. But he’s still a friend, and he knows far more about this than I ever will. And I believe him. But once you believe it’s a real problem, if you believe in things like property and markets, then you want to identify a solution that is the most policy neutral that you can. Carbon taxes do that. Cap and trade does that. Renewable standards don’t. At the same time, Congress was rejecting Waxman-Markey at a $25 cap, California was adopting renewable standards with an estimated cost of $180 a ton. We just threw money at these preferred things. It’s like saying, “Oh, there’s a tree, let’s pick the apples from the top of the tree first.”

EW: How would a carbon tax, a market-based approach, have changed the generation portfolio? How would it be different now?

Rowe: If we had adopted a cap and trade or carbon tax, and if you had a ratcheted cap on the carbon price, a lot of the thing is how the carbon price grows. $25 or $10 or $15 won’t change it that much tomorrow, but it will change every investment decision going forward , and particularly if you have to include in your cost model the fact that you’ve got a carbon price that’s ratcheting at the general rate of inflation. You don’t put any more money into coal plants. And you try to burn natural gas as quickly as you can. I think with a carbon tax you’d see a faster move to more natural gas in the supply system. I don’t think it would be big enough to accelerate the renewables. But it would accelerate the coal conversion.


Victory! First $5M of $30M Solar Procurement Allocated in Illinois

In 2014, ELPC played an instrumental role in passing legislation that create a program to kick-start the Illinois rooftop solar market. The legislation will allow the Illinois Power Agency (IPA) to run a series of procurements for Solar Renewable Energy Credits (SRECs) from new, Illinois-based rooftop solar systems. The IPA will spend $30 million over three different procurements, the first of which happened in late June 2015 when the IPA contracted for $5 million of SRECs that will result in about 6 MW of solar development. One SREC represents the generation of one megawatt-hour of solar-powered electricity. We expect that once these procurements are fully implemented, the resulting new rooftop solar projects will more than double the amount of DG solar in Illinois. This is a great win for Illinois and for ELPC’s policy advocacy.

Learn more about the $30 million solar procurement program in Illinois.

Press Release: Thank You Sen. Grassley for Leading Charge On Wind Energy

July 21, 2015

Environmental Law & Policy Center Thanks Iowa’s Sen. Grassley for Leading Charge to Extend Federal Wind Energy Production Tax Credit

DES MOINES, Iowa – The Environmental Law & Policy Center thanks Sen. Charles Grassley (R-Iowa) for leading the charge to include the Wind Energy Production Tax Credit in the Federal Tax Extenders Package Bill, which passed out of the Senate Finance Committee today on Capitol Hill.

“Senator Grassley played a key role in Congress extending the federal wind energy production tax credit, which is helping to spur wind power growth in Iowa,” said Steven Falck, ELPC’s Senior Policy Advocate in Des Moines.

The wind energy production tax credit first passed in 1992, which has fostered growth of the Iowa wind energy supply chain and created more than 6,000 jobs. Through the last quarter of 2014, the U.S. installed wind energy capacity was at 65,879 megawatts, which also created more than 73,000 jobs.

“The Environmental Law & Policy Center urges the full Iowa Congressional delegation to support Sen. Grassley’s lead in extending the Federal Wind Energy Production Tax Credit,” said Falck.

Midwest Energy News: Net Metering Policies Drive Solar Growth

Turns out, solar energy is good for rate payers, good for the grid and good for the environment.

ELPC’s Brad Klein spoke with Midwest Energy News about what a new Environment America study on the value of solar  means for the on-going discussion about the role of solar in the energy future of the Midwest.

From that story:

“…In the Midwest, many feel like solar is under attack. In states including Iowa, Wisconsin, Ohio and Michigan, utilities are seeking — or state regulators have adopted — policies that impede net metering or solar more generally. Clean-energy advocates lament that these decisions have generally been made without referencing data, hence they hope evidence like that presented in Environment America’s report will help shape future decisions.

“When [utilities] argue about the cost of solar they never use any specifics, they’re generalized arguments that don’t reflect the level of solar penetration and don’t reflect any benefits that solar brings to the grid,” said Brad Klein, senior attorney for the Environmental Law & Policy Center (ELPC).

“And the more systemic issue is those arguments completely fail to recognize the benefits of solar, all the things this report lays out. When you study distributed solar on the grid, you learn there are a whole host of benefits utilities are ignoring when they claim net metering is unfair.”

Read the whole story here:


News: ELPC Leads Letter Calling for Petcoke Standards

The following is re-posted from Midwest Energy News.

Advocates Blast Illinois EPA For Passing On Petcoke Oversight

by Kari Lydersen

Petroleum coke, or “petcoke,” is still a problem in Chicago despite city regulations, and it could quickly become a problem in other parts of the state if there are no limits or rules on storage of the toxic powdery byproduct of oil refining.

That’s the message of groups that sent a letter to the Illinois Environmental Protection Agency (IEPA) on June 11, decrying the agency’s decision not to pursue making such statewide rules.

In January 2014, the IEPA had asked the Illinois Pollution Control Board for permission to make emergency rules regarding the storage of petcoke and other bulk materials in the state.

The move was sparked by controversy over petcoke storage on Chicago’s Southeast Side, including by the Koch Industries subsidiary KCBX Terminals. In asking for rules the IEPA cited fugitive particulate matter air emissions and run-off from petcoke storage piles into water.

At the time the Illinois Pollution Control Board denied the IEPA the authority to make an emergency rule, but said “the rules governing bulk terminal operations for petcoke and coal could be improved,” and urged the IEPA to go ahead with a standard rule-making procedure.

A docket was opened and over the following months the IEPA told the pollution control board it was conducting outreach and meetings with stakeholders. But, as the pollution control board indicated in its April 16 final opinion, the IEPA repeatedly asked for stays of the proceedings and appeared to be making little progress. In January the board warned the IEPA that the docket could be closed if a rule wasn’t proposed within 90 days.

In April, the IEPA informed the board that it would not pursue new rules on bulk storage, stating simply that: “The Agency has updated the new administration regarding this matter. Further, the Agency has considered the effect of the City of Chicago’s recent promulgation of an ordinance addressing petcoke-related operations in the City, as well as pending litigation related to petcoke activity in the City.”

The groups called the IEPA’s decision “unreasonable and contrary to the public interest.” The letter indicated that Chicago’s regulations do not do enough to curb petcoke pollution, and that Chicago regulations do nothing to protect residents outside the city. The letter also said they do not consider the new administration of Gov. Bruce Rauner to be “an excuse” not to move forward with the rules.

“This is a health problem, regardless of who’s sitting in Springfield,” said Rachel Granneman, associate attorney at the Environmental Law & Policy Center, the lead signers of the letter. “IEPA has the responsibility to communities to protect them from this health threat. We don’t think that’s changed in any way.”

The IEPA did not respond to a request for comment.

Calling for prevention
While petcoke so far has not been an issue in Illinois outside Chicago, environmental and health advocates note that extensive petcoke storage could easily happen in other parts of the state. That’s especially likely given the city regulations prohibiting new petcoke storage and placing limits on existing facilities.

“It’s just unconscionable to think Illinois EPA had enough concern to call for emergency rules last year but now is essentially saying the city took care of the problem for the entire state?” said Brian Urbaszewski, director of environmental health programs for the Respiratory Health Association of Metropolitan Chicago, which signed the letter. “That just doesn’t make any sense at all. I just don’t understand why the Illinois EPA now thinks that the rest of the state doesn’t deserve the same protections people in Chicago are getting.”

Chicago-area industrial waterways, including the Calumet River, which is the artery for the KCBX facility, also run outside Chicago city limits. There are also locations along rail lines or rivers including the Mississippi River that could be convenient for storing petcoke.

Advocates say state rules are imperative to pre-empt situations like that which played out in Chicago. Granneman said it is ironic that the IEPA cited lawsuits by Illinois Attorney General Lisa Madigan regarding petcoke as a reason state rules are not needed. Rather, the lawsuits are evidence that rules are needed to prevent such situations elsewhere in the future, she said.

“You can have lawsuits, but that’s after the fact, just dealing with that specific issue at that specific location,” said Granneman. “You really need very specific prescriptive regulations dealing with how wet the coke has to be, what to do to shut it down if the wind picks up. There aren’t these types of regulation in place [statewide]. We don’t want to have the whack-a-mole situation” dealing with problems once they arise.

KCBX spokesman Jake Reint said state rules are not necessary.

“For the products we handle at KCBX, we continue to believe further regulation isn’t necessary given what we know about the effectiveness of the existing requirements and our own bulk material handling practices,” he said.

Other companies and trade associations representing coal, oil, shipping, chemicals and manufacturing also opposed state rules on bulk storage, which would affect other commodities along with petcoke.

Chicago regulations not enough
Local residents and advocacy groups say state rules on petcoke are also needed for Chicago, because they don’t believe the city’s regulations are strict enough or being enforced enough to adequately protect residents.

KCBX was granted some variances to rules issued by the city health department. And company officials have repeatedly said they cannot meet a city deadline of June 2016 for enclosing petcoke piles. The company had essentially been in a standoff with city officials over the matter until just before February elections where petcoke was a campaign issue; then KCBX promised to remove petcoke piles by the deadline.

Reint said that is still the plan.

“By next summer there will be no petroleum coke or coal piles at either of our terminals, as the city’s rules require,” he said.

But given the company’s statements and record in the past, residents are not convinced KCBX will keep its promise. Meanwhile they are also worried that even if KCBX eventually builds an enclosure, serious air pollution could still occur if high volumes are delivered on barges and rail cars, which do not have to be covered. The letter also points to problems in recent months, despite KCBX’s investments in dust suppression.

“Even with the City of Chicago regulations in effect, facilities in Chicago are still failing to comply with national air pollution standards that US EPA set to protect public health,” said the June 11 letter, whose signers included the Southeast Chicago Coalition to Ban Petcoke, State Representative Barbara Flynn-Curie, the Sierra Club Illinois, the Natural Resources Defense Council, the Southeast Environmental Task Force, Blacks in Green, the National Nurses United labor union and other community and regional organizations.

The letter noted:

“As recently as February 14, 2015, the 24-hour average concentration of particulate matter less than ten micrometers in diameter (PM10) at the southeast monitoring site at KCBX’s North Terminal was 175 micrograms per cubic meter, while the National Ambient Air Quality Standard for PM10 is 154 micrograms per cubic meter.2 The City of Chicago regulations are unable to ensure compliance with national standards; they certainly provide no acceptable basis to forgo state regulations.”

Reint countered that the company’s monitoring and soil testing show that the company is not causing pollution.

In January, the City Council passed an ordinance ordering the Department of Planning and Development to set limits on how much petcoke or coal can be passed through a facility. The ordinance included a deadline of March 31 for the limits, but so far none have been set. A Department of Planning and Development spokesman did not respond to requests for comment or information.

Residents say this apparently missed deadline is among the reasons they don’t trust the city administration to effectively regulate petcoke, despite tough talk from Mayor Rahm Emanuel and other officials. And if powerful politicians like Emanuel don’t do enough to crack down on companies that store petcoke, they ask how residents in low-income and/or rural areas without such political clout will fare.

“Other smaller local governments where petcoke is or might be stored may be bamboozled or threatened into forgoing local health protections by the powerful corporations in this business,” said Urbaszewski. “Some may not even have the ability to set strong local rules to protect their own residents. People living in Illinois should be protected from corporate actions that put their health at risk, no matter where they live in the state.”

ELPC, NRDC and other signers of the letter to the IEPA are members of RE-AMP, which publishes Midwest Energy News.

Crain’s Chicago Business: Exelon’s nuke partner is also a rival

Exelon has a frenemy in Warren Buffett.

The billionaire chairman of Berkshire Hathaway, which owns Des Moines, Iowa-based utility MidAmerican Energy, is playing an outsized role in Illinois’ energy future. MidAmerican is co-owner with Exelon of the Quad Cities nuclear plant, which Exelon has threatened to close unless lawmakers vote to hike electricity rates on most state residents to provide more revenue to the company’s six Illinois nukes, including Quad Cities.

But MidAmerican is arguably a major contributor to Quad Cities’ woes.

Exelon consistently has blamed the sale of wind power from Iowa into Illinois for driving wholesale energy prices down to levels that make it impossible for some Exelon nukes—in particular Quad Cities, which sits along the Mississippi River—to make money.

Who’s building all that wind power? Since 2004, MidAmerican has developed more than 2,800 megawatts, about half the wind capacity in Iowa, according to the American Wind Energy Association, and significantly more than the 1,819-megawatt capacity of the Quad Cities nuke.

On May 1, MidAmerican announced plans to invest $900 million in the construction of two wind farms next year that will add 552 megawatts. Buffett is an enthusiastic supporter of renewable energy, saying last year that he would be happy to invest $15 billion in green energy over coming years. For his company, investing in Iowa wind farms comes virtually without risk because they’re approved by the state’s utilities board and ratepayers cover their cost. But the operations generate more power than can be sold exclusively in Iowa, so excess output is sold into Illinois and elsewhere.

While Exelon says Quad Cities is losing money, those losses are borne solely by Exelon, not MidAmerican. That’s because MidAmerican, which owns 25 percent of the plant, sells its portion of the output to its own ratepayers in Illinois, Iowa and South Dakota at regulated rates, ensuring it’s profitable. Exelon, operator and 75 percent owner of Quad Cities, sells its share at market prices, with no guarantee those rates will cover its costs.

MidAmerican says it supports Exelon’s proposed legislation in Illinois, which would impose a surcharge on customers of Commonwealth Edison, which serves northern Illinois, and Ameren Illinois, which delivers power downstate. The fee would support “low-carbon” forms of power and is crafted so that Exelon’s Illinois nukes would get the vast majority of the $300 million in revenue it would generate.

The bill wouldn’t impose that charge on MidAmerican’s 85,000 customers in the Quad Cities region of Illinois. That’s despite the fact that one of Exelon’s arguments for subsidizing its nukes is to preserve their high-paying union jobs and the tax base in affected communities.

So, MidAmerican’s support for its business partner is qualified. “Exelon has described the legislation as not negatively impacting MidAmerican Energy’s Illinois customers, which is critical to the company’s support,” MidAmerican spokeswoman Ashton Newman says in an email. “If future versions of the legislation impose additional costs that harm our customers, MidAmerican Energy will need to re-evaluate the measure.” MidAmerican says it wouldn’t be fair to charge its Illinois customers when they pay for MidAmerican’s part of the plant in their rates.

Yet MidAmerican has raised rates in Illinois just once since 1992. As a result, Illinoisans in the Quad Cities pay 11 cents per kilowatt-hour, 17 percent less than the 13.3 cents ComEd households pay. An average household using 653 kilowatt-hours per month pays $87 to ComEd and $72 to MidAmerican. Exelon says its proposed surcharge would add about $2 a month to the average residential bill.

“Many businesses are willing to support Exelon getting more money for its nuclear plants as long as someone else is paying for it,” says Howard Learner, executive director of the Environmental Law and Policy Center in Chicago and a frequent Exelon critic.

For its part, Exelon says it has no position on whether MidAmerican customers should pay the surcharge. It wrote the bill to exclude them because past state laws to aid specific forms of energy have affected only ComEd and Ameren customers.

Regarding MidAmerican’s role in harming the economics of Quad Cities, Exelon spokesman Paul Elsberg says in an email, “We cannot fault any company for taking advantage of governmental support available to them.”

Exelon continues to lobby Congress to end federal tax credits for new wind farms that it says distort the energy markets. In the meantime, Elsberg says, “If Illinois’ nuclear plants were permitted to compete on an equal footing with other low-carbon energy sources through (Exelon’s surcharge), we believe the plants would return to a modest level of profitability.”

So far, Exelon hasn’t persuaded state lawmakers to act despite threats that it will start the process of closing Quad Cities and two other nukes without immediate action. CEO Chris Crane said at an investor conference on May 28 that Exelon would move in September to start the process of closing Quad Cities without financial relief. If so, Exelon won’t be able to do so unilaterally.

Exelon will need its frenemy’s acquiescence. “It is a legal issue that would need to be worked out between MidAmerican Energy and Exelon,” says Newman, adding the company “hopes the plant will continue to operate for a number of years.”

Progress Illinois: Chicago High Schoolers Rally For Climate Action, Illinois Clean Jobs Bill (VIDEO)

Chicago high schoolers held a climate action rally at the Thompson Center late Thursday afternoon to show their support for the Illinois Clean Jobs bill. The pending legislation is designed to strengthen statewide standards around energy efficiency and renewable energy.

Maria Sanchez, a Northside College Prep junior, was one of about a dozen students from various Chicago high schools at the rally.

“We think the clean energy jobs bill is something that will benefit our communities,” she said. “In general, clean energy is the future, and if Illinois is able to become a leader in that, it’s a step in the right direction.”

Sanchez said it is important for young people to get organized around climate issues.

“Climate change knows no boundaries, no language, no race. It affects everyone,” she said. “We think that youth have been the driving force of many different movements, and this is no exception. Taking climate action, especially now, is important, because we are going to be affected by the effects of not taking climate action.”

Here’s more from the rally, including comments from Quincy Hirt, a sophomore at Whitney M. Young Magnet High School:

WBEZ: Chicago youth organize rally for climate change

Chicago Public School students from all over the city organized Thursday at the Thompson Center to send a message to Illinois lawmakers about climate change. But before the rally kicked off, we spoke to two youth activists: Eve Robinson is a student at Whitney Young, and Maria Sanchez is from Northside College Prep.

Post-Dispatch: Ameren Illinois customers could pay for Exelon’s nuclear plants

Ameren Illinois customers could pay more to keep three nuclear power plants outside of Southern Illinois profitable for Chicago-based Exelon Corp.

Illinois legislation backed by the nuclear power giant that also runs Chicago utility ComEd could add about $2 per month to the bills of utility customers — even Ameren Illinois customers who buy much of their power from coal power plants downstate.

The measure is one of several energy-related bills bouncing around Springfield as the legislative session winds to a close this month. Another bill, the so-called “Clean Jobs Bill,” is backed by a large coalition of clean-energy and efficiency advocates, and there’s also smart-meter legislation for the Chicago area and the possibility of new rules requiring power plants to use more Illinois coal.

Observers say a large energy package could come out of the Legislature before the end of the year, if not this session. A recent Illinois Supreme Court ruling invalidating a pension reform measure has lawmakers scrambling to plug a giant hole in the budget by the end of the month, but many expect an energy package to be negotiated during the fall veto session.

“It’s very typical when we have competing bills that they all will come together for a common resolution,” said Senate President Pro Tem Don Harmon, D-Oak Park, the chief sponsor of the Clean Jobs Bill.

The Exelon bill pending in Springfield would require the state’s utilities — ComEd in northern Illinois and Ameren Illinois downstate — to deliver 70 percent of their power from “low-carbon” sources. They could offset that cost with a surcharge on customer bills, capped at around 2 percent.

Exelon says its nuclear plants, which emit no carbon dioxide, would have to compete with other sources, such as wind and solar. The company argues that renewable energy prices are distorted by federal tax policies and other initiatives that have led to a boom in wind generation. Exelon warns it may close three nuclear power plants it says are no longer profitable.

“All we are seeking through this legislation is a level playing field where nuclear energy can compete on an equal footing with other forms of low carbon energy,” Exelon spokesman Paul Elsberg said.

But critics contend the bill is crafted to ensure Exelon has an edge over renewables and is essentially a subsidy now that its nuclear plants are struggling to compete with natural gas, wind and solar.

Exelon advocated for a deregulated electricity market in Illinois and reaped profits for years when power prices were higher, said David Kolata, head of Illinois utility customer advocacy group the Citizens Utility Board.

But now that prices are down, the company’s no longer interested in the open market and is pushing a bill that by CUB’s estimate would divert $300 million a year to the nuclear plant owner, he said.

“Exelon wants to have its cake and eat it too, and have proposed a situation where they win either way,” Kolata said. “They profited when natural gas prices were high. That’s how markets work. What Exelon seems to be saying is markets are great when prices are high but markets are bad when prices are low.”

Only one of the three plants Exelon says it may close is in Ameren Illinois territory — Exelon’s Clinton nuclear plant, 30 miles north of Decatur. While Ameren Illinois customers can buy power from plants outside the utility’s territory, a large portion of the downstate Illinois electricity comes from Houston-based Dynegy, which acquired Ameren’s Illinois coal plants.

But Exelon and some legislators warn that electricity prices across the state would rise and thousands of jobs would be lost if the plants shut down.

“These are benefits for everyone in the state,” Exelon’s Elsberg said. “These aren’t jobs only located at the plants. These plants are massive spenders on in-state businesses.”

An analysis from the Illinois Department of Commerce and Economic Opportunity estimated that 7,000 jobs and labor income of $620 million would be lost if the three plants shut down.

But Dynegy, whose coal power plants would be disadvantaged by the law because of their carbon emissions, said Southern Illinois customers would see little benefit from paying more to make sure Exelon’s plants keep operating.

“We believe it is a bailout if they give it to them,” said Dynegy spokesman Micah Hirschfield. “You have downstate and Southern Illinois customers paying for a problem that is northern Illinois in nature.”

An analysis from northern Illinois grid operator PJM Interconnection estimated that if the Clinton plant closed, energy costs would rise between 1.2 percent and 2.7 percent in Southern Illinois. If the northern Illinois plants closed but Clinton didn’t, some scenarios actually predict a decrease in prices for downstate customers.

In ComEd’s territory, PJM found that any plant closure would lead to a price increase.

Rep. Jay Hoffman, D-Belleville and a sponsor of the Clean Jobs Bill, said the Exelon legislation appears to put too much of a burden on downstate customers, who won’t see as much of a benefit from keeping the plants open.

“I do understand that we need to make sure that these plants remain viable,” he said. “They’re important to our power grid. But I think whatever comes out of that needs to be more equitable to us.”


Kolata said the state should pursue the Clean Jobs Bill to offset any impact from a nuclear plant closure. The increase of energy efficiency alone could save consumers about $100 per year, he said.

“There’s likely to be a comprehensive energy bill at some point and we would hope the concepts in the Clean Jobs Bill would become law because that’s the best way to keep rates low,” he said.

The Clean Jobs Bill includes provisions that make it easier for residents to fund community solar projects and a fix for the state’s renewable energy credit market that environmental groups have long pushed for.

Advocates hope that will spur more renewable projects from companies hesitant to invest because of the flaw in the market, said Sarah Wochos, co-legislative director of the Chicago-based Environmental Law and Policy Center.

“If we lose another year, I think a lot of companies will look at Illinois and say it’s not worth our time,” she said.

Harmon, the Clean Jobs Bill sponsor, said the prospect of Exelon closing plants was “very worrisome” to those communities, but he said he thinks there “are better ways to address the situation than to simply subsidize a very profitable corporation.”

Before moving forward with a legislative response, Harmon said he wants to wait for an electricity price auction Exelon will participate in this summer to learn “about the true nature of Exelon’s situation.”

In the meantime, the Clean Jobs Bill is the only one that has the potential to lower electricity prices, he said.

“A clean energy infrastructure is going to be built in America, the only question is who gets to build it and who gets the jobs.”

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