The Exelon Bailout
June 29, 2015
Over the past year, the Exelon Corporation, which owns ComEd, the largest provider of electricity in Illinois, has been pushing state legislators to create a "low carbon portfolio standard" (LCPS). LCPS would mandate electric utilities purchase low-carbon energy credits to match 70 percent of the electricity used in their distribution systems from qualified sources, including solar, wind, hydro, nuclear, tidal, wave and clean coal. This bill would benefit Exelon, but not those who use electric power.
- Crain's Chicago Business noted the mandate would charge ratepayers $300 million annually, while making it both technologically and financially difficult for other wind and solar bidders to compete. Illinois currently has a renewable portfolio standard (RPS) mandating 25 percent of power distribution be composed of renewable energy (not including nuclear) by 2025. The new mandate would include nuclear energy as a qualifying power source.
- Under the new mandate, utilities falling short of the 70 percent mark would be required to buy credits to bridge the difference. Price increases would also be capped at 2.015 percent per year compared to 2009 rates.
The ideal policy approach for Illinois would be to repeal the RPS altogether. Short of that, the state could take smaller steps to help make its electricity less expensive and more competitive.
- Illinois should broaden the RPS standard to include all next-generation energy technologies, including nuclear, combined cycle natural gas, and geothermal. This is part of what Exelon wants - to include nuclear power in the renewable standard - but does not give the company a subsidy at the expense of other power sources, such as coal.
- The state should make the program more flexible by adjusting the targets and deadlines to reflect the real potential for renewable energy in Illinois and available technology. Finally, the state should make the program voluntary. These reforms would allow utilities and consumers to adapt to new technologies.
The proposed mandate would benefit one energy company at the expense of others. The government should not decide winners and losers in any market.
Source: Matthew Glans, "Research & Commentary: The Exelon Bailout," Heritage Foundation, June 26, 2015.
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