Climate change bill to boost nuclear plants

Nearly half of the nation’s nuclear power plants stand to earn a windfall if the climate-change bill passed by the House becomes law.

The legislation, which passed by a narrow vote in June, would open the way for nuclear plants operating in states that have unregulated electricity markets to charge much higher prices than they currently do. The price increases would translate directly into higher profits for nuclear-plant operators - reaching into the billions of dollars a year.

“There’s an incentive to raise prices, because competing fuels would become more expensive under the bill,” said Tyson Slocum, director of the energy program at Public Citizen, a D.C.-based advocacy group. “If you move up prices, you’ll move up your profits.”

Under the House-passed bill, power facilities that run on fossil fuels such as coal would have to pay for the right to pollute, specifically to emit carbon dioxide, raising their operating costs, perhaps significantly. The “pay-to-pollute” system would result in higher electricity prices on the open market.

Because operating costs for nuclear plants would be unaffected by the House bill, nuclear plant operators would see higher prices for their product - at least in some markets - while their production costs remain flat, resulting in big profits to the bottom line.

The bill will cause an “increase in revenues to carbon-free power sources like nuclear, and this is exactly what is supposed to happen,” said John Shelk, president of the Electric Power Supply Association (EPSA).

Lawmakers see the price rise as a market-based way to deter the use of fossil fuels, notably coal and crude oil. The House bill, however, still faces an uphill fight in the Senate.

The average U.S. price for electricity could rise by an additional 13 percent by 2020, according to the Environmental Protection Agency. The American Public Power Association estimates that the price of electricity could jump an extra 20 percent in the bill’s early years.

Nuclear power plants give off no carbon emissions and would not be hit with increased operating costs under the House-passed bill. Any market increase in the price of electricity, therefore, would produce a big boost in the profits of nuclear facilities operating in states with unregulated markets.

Forty-six of the 104 nuclear power plants in the U.S. operate in states with unregulated electricity markets, according to the Nuclear Energy Institute (NEI), the main lobby for nuclear energy. In these markets, there is no control on profits that power generators can collect. The other 58 nuclear plants operate in regulated markets, where power generators’ profits are controlled.

Power generators that use coal, the dirtiest and cheapest source of energy, would have to raise their electricity rates to recoup the cost of their carbon dioxide emissions under the bill. Generators of nuclear energy and hydroelectric power, however, would not.

The amount of money that nuclear companies collect from higher electricity prices, in excess of their operating costs, would be profit. Generators of hydroelectric power - electricity from moving water - also stand to reap big profits under the House measure.

Electricity generators such as Exelon, Constellation Energy Group and PSEG, which have large nuclear holdings, could earn an extra $2.6 billion a year each if the bill becomes law, according to Synapse Energy Economics Inc., a consulting firm.

EPSA, the trade group for suppliers that sell electricity in open markets, said the legislation is designed to reward carbon-free power generators.

“The money isn’t really a ‘windfall profit,’ ” Mr. Shelk said. “Instead, it is money for businesses that produce low-carbon electricity for them to reinvest and expand their operations.”

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