U of Chicago professor: IL Zero Emissions Credit Exelon bailout 'short-sighted,' despite challenge dismissal

By Kacie Whaley | Aug 7, 2017

CHICAGO — Following the dismissal of lawsuits brought against the State of Illinois by power generators and electricity consumers who claimed the Future Energy Jobs Act deceptively supplies markets in favor of energy company Exelon, Steve Cicala, an assistant professor at the University of Chicago Harris School of Public Policy, says the state's policy is short-sighted and will be problematic for taxpayers.

On July 14, U.S. District Judge Manish S. Shah dismissed the lawsuits, which had sought to invalidate parts of the Future Energy Jobs Act. 

The legislation, which was signed into a law in December, updated the state's energy efficiency programs and focused on using renewable energy sources like wind and solar power. It also allows the Illinois Power Agency to obtain zero emissions credits (ZEC) for two Exelon nuclear plants for the next 10 years.

Cicala, who specializes in environmental and energy policy, told the Cook County Record that the new legislation is a "short-sighted policy" that will "have the effect of subsidizing generation by causing lower electricity prices at the cost of the taxpayer."

"First, capacity markets are designed to ensure that economical plants continue operating even when wholesale prices are too low," he said. "The fact that Exelon demanded subsidies on top of the capacity market price reflects that they were trying to game the capacity market by bidding low, then demanding the state make up the shortfall. If the plants can't break even with the combination of renewable energy credits and capacity payments, that's a signal that the state can both meet its [renewable energy] goals and maintain a reliable grid at a lower cost."

The plaintiffs in the lawsuits argued the new law would increase annual costs for manufacturers by tens of thousands of dollars each. The suits also claimed the ZEC system is unconstitutional, and would guarantee price premiums for two Exelon plants of over 70 percent,  paid for by Illinois consumers. The suits also alleged these premiums would ultimately harm consumers and market competition to allow a multi-million-dollar bailout of Exelon.

The federal court, however, sided with the state of Illinois, ruling the law can be considered “both environmental legislation and job-saving legislation.”

Cicala said the state is engaging in faulty planning when it comes to energy generation.

"Part of the reason the plants were making so little money in the wholesale market is that Illinois has an inadequate electrical grid," Cicala said. "The growth of renewables without transmission capacity to deliver that generation to market has the effect of depressing the wholesale prices in the relatively unpopulated areas where these plants were located. So Illinois has a problem of too much supply in places where it's not needed."

Cicala said he foresees the state's new legislation failing in the long run.

"Their solution was to throw money at the problem, preserving too much supply where it's not needed, rather than investing in infrastructure to deliver the power to [the] market," he said. "They'll find themselves in the same situation all over again once the subsidies have expired."

The plaintiffs filed a notice of appeal on July 17, according to federal records. The plaintiffs' lead attorney was unavailable for comment.

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Exelon Corporation State of Illinois The University of Chicago

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