Exelon: Three of its nuclear plants failed to clear power grid's auction

Exelon Corp. announced Monday that three of its aging nuclear stations did not clear the regional power grid's capacity auction on Friday, calling the plants' long-term financial viability into question.

The plants include Pennsylvania's Three Mile Island Unit 1 outside Harrisburg, which faces growing competition from low-cost natural-gas power producers, and Oyster Creek Generating Station in New Jersey, which is already scheduled for retirement in 2019.

Friday's auction by PJM Interconnection, the Valley Forge operator of the power grid serving 13 states, was aimed at securing more reliable electricity supplies during emergencies in 2018-19. With new rules intended to penalize non-performers, this year's auction fetched $10.9 billion in capacity payments across PJM, up from $7.5 billion for 2017-18.

Plants that fail to clear the auction can continue to produce and sell power into competitive electricity markets, but they won't receive the capacity payments, which amount to kind of a bonus for promising to be on standby during emergencies.

"Although capacity revenue in a single year is an important consideration in a plant's long-term viability, it is just one of several factors Exelon will use to make decisions about its plants' future operations," Exelon, parent company of Peco Energy Co., said in a statement.

The three reactors include Quad Cities Generating Station, a 1,819-megawatt two-unit complex in Illinois that Exelon says may face closure unless it gets rate support from Illinois legislators.

Despite the failure of three plants to clear, Exelon fared well in the auction. It has 28,000 megawatts of capacity in the PJM system, most of it located in PJM's eastern and western zones, where the auction price settled at about 30 percent above the $165 a megawatt-day that prevailed over most of the system. The price at last year's auction was $120 a megawatt-day.

On Monday, Bloomberg Intelligence estimated that Exelon boosted revenue by $1 billion from the auction.

Chris Crane, Exelon's chief executive, called the auction "encouraging" and said the company would factor the results into any decisions about the future of the plants.

Exelon, the nation's largest nuclear operator, owns and operates 22 reactors at 13 locations, including two units at the Limerick Generating Station in Montgomery County and two Peach Bottom reactors in Delta, York County.

Three Mile Island Unit 1, an 852-megawatt reactor in Middletown, Dauphin County, that operated at 99.4 percent capacity last year, began operation in 1974. Exelon acquired the operating license and 100 percent ownership in 2008.

Oyster Creek, a 637-megawatt reactor in Ocean County that began operations in 1969, is scheduled to be shut down at the end of 2019.