What is the main impact of the Future Energy Jobs Bill on Exelon?

The Future Energy Jobs Bill establishes a Zero Emission Standard (ZES) that provides financial incentives, in the form of Zero Emission Credits (ZECs), for zero-emissions nuclear power plants. This legislation has led Exelon to revise its plans and expect its Clinton and Quad Cities nuclear plants to continue operating for at least another 10 years, reversing their previously announced closures.

Will Exelon reverse the charges it previously recorded for plant closures?

Yes, as a result of the expected continued operation of the Clinton and Quad Cities plants, Exelon will reverse approximately $120 million in one-time charges that were initially recorded in June 2016 related to their early retirement.

What are the expected ongoing financial impacts of keeping the plants open?

While specific amounts are still being assessed, Exelon expects changes to ongoing expenses such as depreciation and amortization related to the extended useful life of the plants. They anticipate lower accelerated depreciation and asset retirement obligation (ARO) accretion prospectively. The company is also evaluating the impact on Nuclear Regulatory Commission (NRC) minimum funding requirements for decommissioning.

How will the ZEC price be determined?

The ZEC price is initially established at $16.50 per MWh of production. This price is based on the current social cost of carbon as determined by the federal government and is subject to future adjustments through mechanisms designed to lower the ZEC price if underlying energy and capacity prices increase.

EXC 8-K: Financial Events

Summary

Exelon Corporation (EXC) announced on December 13, 2016, a significant development following the signing of the Future Energy Jobs Bill into law in Illinois. This legislation introduces a Zero Emission Standard (ZES) that provides compensation via Zero Emission Credits (ZECs) for eligible zero-emissions nuclear facilities. Consequently, Exelon Generation Company, LLC now expects its Clinton and Quad Cities nuclear plants, previously slated for closure, to continue operations for at least an additional 10 years, subject to selection in the Illinois Power Authority process. This development will lead to the reversal of approximately $120 million in previously recorded exit and disposal charges related to the planned retirements. While ongoing financial impacts from extending the useful life of these plants (primarily related to depreciation and amortization) are expected, Exelon anticipates lower accelerated depreciation and asset retirement obligation accretion prospectively. The company is also assessing the impact on Nuclear Regulatory Commission (NRC) minimum funding requirements for decommissioning trusts, expecting to meet or narrowly miss these requirements, potentially requiring parental guarantees in a shortfall scenario.

Key Highlights

1Illinois Future Energy Jobs Bill signed into law, creating a Zero Emission Standard (ZES).
2Exelon's Clinton and Quad Cities nuclear plants now expected to operate for at least 10 more years, reversing prior closure plans.
3Reversal of approximately $120 million in previously recorded exit and disposal charges.
4Zero Emission Credits (ZECs) will be provided, priced at an initial $16.50 per MWh, subject to adjustments.
5Ongoing financial impacts from extended plant life, including depreciation and amortization changes, are expected.
6Exelon expects to meet or narrowly miss NRC minimum decommissioning funding requirements, with potential for parental guarantees if a shortfall occurs.

EXELON CORP 8-K Report, Exit or Disposal Costs (Dec 13, 2016)

Summary

Key Highlights

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