Exelon Moves to Pull Plug on Three Mile Island Nuclear Power Plant -- 3rd Update

By FeaturesDow Jones Newswires

Exelon Corp. warned Tuesday that it will close the Three Mile Island nuclear power plant in Pennsylvania in 2019 unless it receives government aid, the latest sign of how the sector is in danger of shrinking as it faces intense competition in the U.S.

A global symbol of the potential perils of nuclear power after suffering a partial meltdown in 1979, the plant has been losing money for years. Last week, it failed to sell its electricity in advance in a regional power auction for 2020 and 2021, the third year in a row it did not find a buyer.

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As a result, Exelon said it was accelerating its retirement unless it receives assistance from the federal government or the state, which has been reluctant to subsidize it as some states have done to keep their nuclear facilities running. Three Mile Island has a federal license to operate until 2034.

"Like New York and Illinois before it, [Pennsylvania] has an opportunity to take a leadership role by implementing a policy solution to preserve its nuclear energy facilities," said Exelon Chief Executive Chris Crane. The company said it was taking one-time charges of up to $110 million for 2017 in connection with the planned closure.

Utilities have been closing U.S. nuclear-power plants at a rapid clip due to political pressure from critics and growing competition from other electricity sources, notably the increasing number of plants fired by natural gas as horizontal drilling and hydraulic fracturing unlock mass quantities of the fuel.

Power demand in the U.S. has been flat for nearly a decade, creating a battle for market share. Last year, natural gas generated 34% of the electricity in the U.S., according to federal data. Nuclear power generated 20%, and coal 30%. The rest came from renewable sources, including hydroelectric dams.

Three Mile Island would be at least the fifth U.S. nuclear facility set to close by 2025, including PG&E Corp.'s Diablo Canyon plant in California, and Entergy Corp.'s Palisades unit in Michigan and the Indian Point plant in New York.

Four other facilities have already closed in the past four years, including Dominion Resources Inc.'s Kewaunee plant in Wisconsin. The retirements would leave about 60 nuclear plants in the U.S.

A little more than a decade ago, the U.S. nuclear industry was talking about a rebirth. But the first new nuclear units being built in the country in years, facilities in Georgia and South Carolina, are years behind schedule and billions over budget.

Southern Co. and Scana Corp., the utilities behind the new plants, are now scrambling to determine how much it will cost to finish them after their builder, Westinghouse Electric Co., declared bankruptcy in March.

The fate of the new plants could help determine the future of U.S. nuclear power. Late last year, the Tennessee Valley Authority sold two unfinished nuclear units in northern Alabama for $111 million after spending billions since the 1970s on the project.

"We have to find a way to build these reactors in the U.S.," Jose Gutierrez, Westinghouse's interim chief executive, said last week. "Otherwise, the future is going to be compromised."

Even if the nukes get built, their hardships underscore the fact that nuclear power remains a complex business full of booby traps, analysts say.

"The nuclear renaissance is dead for the foreseeable future," said Steve Fleishman, managing director at Wolfe Research.

Exelon and other operators have sought state subsidies to keep plants running, arguing that they create high-paying jobs and do not emit air pollution or greenhouse gases.

Three Mile Island employs 675 people and contracts with another 1,500 workers. Exelon said Tuesday that it provides roughly 93% of the emissions-free electricity in Pennsylvania.

Exelon has succeeded in persuading some states to provide new financial incentives. Last year, Illinois lawmakers voted to allow Exelon to collect as much as $235 million annually from customers in exchange for keeping two nuclear power plants open.

But the deals have been controversial due to opposition from critics of nuclear power and from such independent power producers as Dynegy Inc. and NRG Energy Inc. that own coal-fired power plants and other sources of electricity.

Pennsylvania lawmakers in March formed a bipartisan caucus to discuss possible funding. State Rep. Dave Hickernell, who represents the area where Three Mile Island is located and is a member of the caucus, said he hopes Exelon's decision can be reversed.

A spokesman for Pennsylvania Gov. Tom Wolf said the Democrat was concerned about potential layoffs from a Three Mile Island closure and was open to a conversation with state lawmakers about the future of nuclear power in the state.

Three Mile Island drew international attention in 1979 when a partial core meltdown in one of its two reactors led to five days of panic. The reactor involved was permanently shut down and the incident was followed by 14 years of expensive cleanup, heightening awareness of the potential safety problems of nuclear plants.

Shares of Exelon were up 0.5% at $36 around 3:30 p.m. EDT Tuesday.

--Miguel Bustillo contributed to this article.

Write to Ezequiel Minaya at ezequiel.minaya@wsj.com and Russell Gold at russell.gold@wsj.com

(END) Dow Jones Newswires

May 30, 2017 15:42 ET (19:42 GMT)