State should pull plug on Constellation-Exelon deal

October 08, 2011|Jay Hancock

On Feb. 21, 1997, an employee improperly shut down and then restarted a reactor at the Zion Station nuclear power plant in Illinois, badly damaging the steam generators.

It was a costly, embarrassing mistake, but everybody expected owner Commonwealth Edison to reopen the facility. The repair estimate was far less than the many billions it would take to build a new nuclear generator.

But ComEd and parent Exelon Corp. decided to let the plant collect dust, even though it had decades of useful life left. Last year, Exelon began the process of dismantling and decommissioning Zion Station. It'll be gone within a few years.

Why, in a world that needs all the cheap, carbon-free nuclear energy it can get, did Exelon put its own facility out of business?

Maryland regulators should ponder the answer as they convene hearings this month on Exelon's proposal to buy Constellation Energy and Baltimore Gas and Electric: Exelon shut down Zion Station, knowledgeable people believe, to create scarcity in the electricity market and to drive up the prices it was able to charge at its remaining Illinois generation plants.

Exelon denies this. But allegations about the Zion closure fit a troubling pattern of behavior that should make the Maryland Public Service Commission reject Exelon's takeover attempt in the absence of extraordinary benefits and assurances for the state and consumers.

Do we really want BGE and Constellation to be owned by a company that:

• Mothballed Zion Station just as deregulation was giving power companies the ability to inflate electricity prices by withholding megawatts from the grid?

• Agreed in 2007 to consumer rebates of $800 million to settle allegations that it manipulated a wholesale electricity auction, charged unjustified price markups and accomplished a "massive transfer of money from ComEd's captive customers to the stockholders of Exelon Corp.," according to the Illinois attorney general?

• Financed a fake consumer group called Citizens Organized for Reliable Energy that lobbied for higher electricity prices? ComEd admitted it was behind the group after news reports and complaints filed with regulators forced it to come clean.

• Could dominate the regional electricity supply even more than Constellation, which took over the former BGE plants? A report filed three weeks ago by the independent market monitor for the Mid-Atlantic grid found that an Exelon-Constellation marriage "would significantly increase concentration" of generator ownership and potentially give the companies the ability to drive up electricity prices.

Years ago, Enron became notorious for temporarily shutting down generators to decrease the supply and raise the price of electricity on the deregulated grid. Exelon and ComEd's permanent closure of Zion Station, according to the companies' critics, is the Enron gambit on a breathtaking scale.

David Hollein was a nuclear engineer with Westinghouse, which built Zion Station. He worked closely with ComEd for years when Zion was generating megawatts for the Chicago area.

"There is obviously no technical reason why these plants can't restart," Hollein said in an interview about Zion's twin reactors. Exelon, he added, "decided to pull this off the grid so they can say, 'Oh, our cost of generating electricity is high because we have these other plants that are less efficient' — so they can keep prices up. If you put a nuclear plant on, it decreases prices immediately."

Exelon closed Zion for "economic reasons," said company spokeswoman Krista Lopykinski. The plant's operating license would expire in 2013, and Exelon wasn't sure it could get a renewal, she said. "At that time, the investment in Zion" required for a restart "was greater than the investments needed for ComEd's other plants," she said.

Repairing Zion would have cost $2 billion, she said. In 1997, however, ComEd told the Chicago Tribune that it would have cost $415 million. Whatever the case, a new facility that size would cost much more — in the $10 billion neighborhood.

"They could have renewed the license," Hollein said. "There's nothing wrong with the plant. By normal maintenance, you could keep these plants running for 100 years."

Another nuclear engineer close to Exelon made a similar argument last year. James Hopf works for Energy Solutions, the contractor Exelon hired to decommission Zion Station.

Any notion that the plant was obsolete is "ridiculous," Hopf posted on Atomic Insights, a website aimed at nuclear power pros. But keeping Zion Station open, he said, "would push down the market price for power in the region," thus cutting Exelon's profits.

In Illinois' deregulated market, Hopf explained, Exelon makes out best when its mix of nuclear- and gas-fired generation is just right. That, he said, "results in Exelon making a huge profit on its remaining nuclear generation."

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