Customers protest fund switch by Constellation suitor Exelon

The dismantling of Exelon Corp.'s Zion Station nuclear power plant near Chicago is setting several remarkable precedents.

It's the biggest-ever nuclear decommissioning job in the United States, says Exelon, which is seeking permission to buy Constellation Energy and Baltimore Gas & Electric. The enterprise will take a decade, employing hundreds. Instead of separating the radioactive debris from the nonradioactive, the usual method, workers will ship most of the rubble to Utah and dump it in the desert. (Spent fuel will be encased in concrete and stay in Illinois.)

The project also looks like a radical new way for unregulated energy companies to siphon quasi-public money into private pockets.

In September, Exelon transferred almost all of Zion Station's assets — including a decommissioning trust fund worth about $800 million, collected from utility customers — to an unregulated nuclear-waste company in Utah.

That company, EnergySolutions, is tapping the fund to dismantle the plant and award itself profits of between 15 percent and 20 percent, according to what it has told investors. Profits could eventually reach $200 million or more, the company has said.

Illinois electricity customers have filed a lawsuit in U.S. District Court in Chicago to contest the deal.

They allege that the arrangement not only violates the law that restricts how the funds can be distributed but also leaves nobody looking after the interests of the ratepayers who put up the huge pot of money.

Whatever remains from the trust fund after decommissioning is supposed to be credited to customers of Commonwealth Edison, the Exelon-owned utility that once operated Zion Station. But the way things are going, you could pardon them for doubting that anything will be left.

"It belongs to us. We paid the money in the first place," said Nancy J. Thorner, a blogger and ComEd customer who is a plaintiff in the suit, said in an interview. "They're claiming 15 or 20 percent profit out of it. They're not supposed to get profit out of the decommissioning money we paid."

The plaintiffs, who seek class-action status, want to block improper trust fund payments to EnergySolutions and ensure that ComEd consumers get what they're due.

Exelon and EnergySolutions reject suggestions of impropriety. By using the Utah company's nuclear dump, they say, the deal will cost less and be completed sooner than if Exelon had managed the work itself.

"They have the tools, the resources, the waste facilities — everything they need to do it," Exelon spokeswoman Krista Lopykinski told me. "We would have waited until the decommissioning fund grew before we started the process."

EnergySolutions spokesman Mark Walker said the project "is good for the citizens of Illinois" and "subject to ongoing oversight by the United State Nuclear Regulatory Commission."

Before deregulation, the decommissioning of Zion Station and its two reactors would have been comparatively simple. ComEd would have hired contractors to dismantle the place, which was built in the 1970s and stopped operating in the 1990s. An independent trustee would have paid workers from the decommissioning fund. The Illinois Commerce Commission, which regulates utilities in that state, would have made sure consumers didn't get abused.

But parent Exelon took over Zion Station and other ComEd plants years ago. Now Exelon has given EnergySolutions not just the Zion Station trust fund but the plant's ownership title and operating license, too. It's the first time a nuclear-plant license has ever been transferred to a non-utility.

Who's protecting consumers' interest in the trust fund now?

Not us, says the Illinois Commerce Commission.

"I don't think we have any jurisdiction at all," said ICC spokeswoman Beth Bosch. "All those plants were spun off to an Exelon affiliate" after deregulation, she added, which put them beyond the ICC's reach. "And I don't know that we're even monitoring that case."

Not us, says the Nuclear Regulatory Commission.

"From our standpoint, the fund is there to clean up the site and that is what is being done," said NRC spokesman Scott Burnell. "When you start slicing up the pie and figuring out where the money goes, that starts to go outside our jurisdiction."

Not us, says BNY Mellon, which became trustee for the decommissioning fund when EnergySolutions took over. The trust agreement says BNY has "no duty to inquire into the correctness or accuracy" of EnergySolutions' requests for money from the fund.

Electricity deregulation in the late 1990s and early 2000s allowed valuable assets in many states to slip from the control of utility commissions into private hands.

The best-known Maryland example is Constellation Energy's takeover of BGE's Calvert Cliffs nuclear plant for far less than it was worth. Deregulation also allowed Exelon to acquire nuclear plants in Pennsylvania and Illinois at screaming bargains.

Whereas once regulators would have made the companies pass the low-cost nuclear energy to customers, Exelon and Constellation now charge what the market will bear.

Seeking profits from a decommissioning trust fund, however, seems to be something new.

The deal's appeal to EnergySolutions is obvious. If the company dismantles Zion Station for substantially less than what's in the trust fund, which is invested in stocks and bonds, it could make a lot of money without much regulatory oversight.

"This structure gives us direct access to the decommissioning trust funds, avoiding several expensive and time consuming levels of administrative processing," is how EnergySolutions describes the Zion deal in its annual report.

For its part, Exelon gets to continue operating the good ComEd nuclear plants while transferring the decommissioning risk from the defunct one onto a much smaller and less well-capitalized company.

What's going on at Zion Station bears no direct relevance for Maryland. If it buys Constellation, Exelon and co-owner EDF Group, not BGE ratepayers, must pay to eventually decommission Calvert Cliffs, under a settlement signed three years ago.

But the deal shows how Chicago-based Exelon does business. Maryland may be trading a company that's merely good at dancing in the deregulated void — Constellation — for a Jedi master.