Report Shows PA’s Nuclear Industry Benefited from $9 Billion Ratepayer Bailout; Decades Later, It’s Back For Another
A study released this week shows that, after Pennsylvania electric customers paid nearly $9 billion to help the state’s nuclear industry transition to competitive energy markets, the industry went on to earn significantly more than forecast over the past two decades. Yet it is poised to ask customers for another ratepayer bailout after not preparing for a changing electricity marketplace.
The study comes on the heels of the announcement by Exelon that it will close the Three Mile Island nuclear power plant in 2019 unless the state enacts “policy changes” — essentially another ratepayer bailout from Pennsylvania electricity customers, who have benefited from competitive energy markets.
In states that have enacted ratepayer bailouts to failing nuclear facilities, the costs are substantial. Illinois approved a 10-year, $2.35 billion ratepayer bailout of Exelon Corp. to save 1,500 jobs at two money-losing nuclear power plants. That will cost Illinois electric customers $156,666 per job annually to save them.
“It is unfathomable how the nuclear industry, having already received billions of extra dollars from Pennsylvania’s ratepayers to prepare for competitive energy markets, is completely flat-footed,” said David Taylor, president of the Pennsylvania Manufacturers’ Association. “The transition to competitive markets is where the nuclear industry should have prepared to compete.
“It’s ridiculous that there should be a ratepayer-funded bailout for one sector of our energy market just because it didn’t prepare for the challenges of competition.”
The deregulation of Pennsylvania’s electricity markets in the late 1990s allowed the nuclear industry to receive billions of dollars from ratepayers to recover “stranded costs” related to investments in the state’s nuclear plants. These costs were negotiated amounts based on settlements with Pennsylvania’s Public Utility Commission to allow the nuclear industry to prepare and transition to competitive electricity markets.
Commissioned by Citizens Against Nuclear Bailouts — a diverse coalition of Pennsylvania citizens’ groups, power generators, and energy, business and manufacturing associations — the report by Daymark Energy Advisors of Boston shows that, over the past 20 years, the actual revenues of companies that own five nuclear power plants operating in Pennsylvania far exceed the revenues predicted when stranded costs were determined. These stranded costs are those associated with infrastructure investment that a utility operator cannot recover after deregulation. Electric ratepayers in Pennsylvania have covered nearly $9 billion in stranded costs.
The Daymark Energy Advisors study shows that the net present value (NPV) of Exelon’s forecasted revenues in 1999 was $9.464 billion. However, the NPV of its actual revenues from 1999 until 2015 was $14.877 billion. Exelon’s revenues represented the largest discrepancy between forecasted and actual numbers of the four companies the study investigated, although all of the utilities had higher NPVs of actual revenues than forecasted revenues.
In addition to Exelon, the study found: PSEG’s NPV of forecasted revenues was $2.287 billion and its NPV of actual revenues was $3.723 billion; and Talen’s NPV of forecasted revenues was $4.474 billion and its NPV of actual revenues was $6.7 billion. Using 2001 dollars, First Energy’s NPV of forecasted revenues was $3.18 billion and its NPV of actual revenues was $4.673 billion.
Click here to read the executive summary, which outlines the methodology, facts and statistics used to determine stranded costs and the present value of forecasted and actual market revenues for the current owners of Pennsylvania’s nuclear facilities.
More information on the ratepayer bailout and its personal and economic costs is available at http://nonukebailoutpa.com/bailoutpa.htm
